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Abstract
We discuss decentralisation in the domain of transport infrastructure financing policy. We propose an
institutional approach, mixing political science and economy, mostly based on situations typical of the
recent French evolution. We describe first the budgetary evolution of EU member states over the recent
years. We discuss the relations between local decision-making and earmarking; we then propose some
considerations about the principle of subsidiarity among political levels and its implications for the
decision-making process. We examine functional and juridical questions related to so-called
denationalisation. We will have there to discuss the problem of risk transfer. Next, we evoke some
relevant recent innovations relating to money management (financing, paying, funding). In conclusion, we
develop some considerations about what could be a decomposition of the state in the context of the
expression of local concerns in transport policy, and a discussion of some remarks by Seabright about the
applicability of the London congestion charge in France. Finally, we propose some remarks on some
ongoing recomposition of the state at the EU level.
TABLE OF CONTENTS
INTRODUCTION:FORECASTINGANDINVESTING.............................................................3
1.1
INVESTMENTS,DEFICITSANDAGROWINGDEMAND...................................................................4
1.2
PROBLEMSADRESSEDANDUSEFULDEFINITIONS.....................................................................11
PUBLICINTERESTANDPARTICULARDEMANDS.............................................................13
2.1
EARMARKINGANDBUDGETING:CLASSICALPOSITIONS............................................................14
2.2
LOCALRESPONSIBILITIESANDNATIONALINTEREST................................................................17
RISKTRANSFERANDRISKREPARTITION..........................................................................20
3.1
INTEGRATINGOPERATIVEANDSPECULATIVERISKS.................................................................21
3.2
PUBLICDEBTANDFINANCIALMARKET....................................................................................24
CONCLUSIONS...............................................................................................................................25
4.1
DECOMPOSITIONOFTHESTATEANDLOCALCONCERNS...........................................................25
4.2
RECOMPOSITIONOFTHESTATEATVARIOUSLEVELS...............................................................27
ANNEXES.........................................................................................................................................31
5.1
REFERENCES..............................................................................................................................31
5.2
ABBREVIATIONS,ACRONYMSANDCONVENTIONS...................................................................34
contractors on the other hand, are specially visible in a country with a strong centralized
governance tradition1. Nevertheless, we will refer to significant developments in other
large countries2.
This paper may be read as a mix of political science and economics, as it will refer,
somewhat heavily perhaps, to descriptions of processes well-known to economists in
terms that are perhaps less familiar to them as institutional and legal constraints. We
here hope only to show how this subject is worth of our attention; our somewhat
sketchy style will perhaps stimulate the readers imagination.
The reader would perhaps remember here an old series of jokes where France was figuring as
the most advanced of Europe eastern democratic republics. There are few historical studies
about transport in Europe and its societal and political correlates; we owe to the interest for
social sciences manifest in the research program designed since the 1930s by the Ecole des
annales the existence of an excellent book by Livet (2003).
2
The reader may consult the recent and well-informed description by Ghnemann et al. (2006)
for european comparison; more generally, see the exercise by Humplick and Moini-Araghi
(1996), which proposes some interesting definitions. A good discussion of the literature about
the Decentralisation Theorem proposed in 1972 by Oates and its applicability for international
comparison is given in Cerniglia (2003). Our discussion will follow some balanced views
presented by de Palma, Lindsey and Proost (2007a). We will also rely on some observations by
Raux, Mercier and Souche (2007).
3
See the description of this evolution by Ghnemann et al. (2006). Let us mention here the
concerns expressed in a report to the French Senate (Oudin 2003): the part of public investments
in the GDP dropped from 8% to 3% over the period 1978-2002 (p. 25). The most severe
questions are posed in this report about the railway investments at the beginning of the new
century.
Let us consider briefly the present state of French transportation demand. Everybody
knows that various events had negatively affected the growth of transport demand after
2000-2001. But the global trend remains clear for all sectors: the growth of demand
resumed its pace since 2004 (MT 2007). This evolution has to be contrasted according
to the various modes of transportation.
Let us first mention the exceptional, negative evolution of fret transport by train since
1997, which is related to management: in a different context, the SNCF could benefit
from a more aggressive policy in fret transport, as it does in the case of high-speed lines
a French parliamentary commission concluded that the charging of railway fret
transportation made this mode less attractive over the recent years4.
The case of roads is quite contrasted. For private cars, we are perhaps on the verge of a
new era, marked by a correction of gas prices: the number of cars is still growing, but
the km per vehicle is slightly lower (MT 2007). The elasticity of car transport to gas
prices has for long been low; but this parameter could perhaps change over the years.
On the other hand, the international transit fret by trucks on highways is growing
steadily (MT 2007, p. 23) and is a major factor for the investment policy we are
speaking about.
Inland Water Transport is growing enough to justify more attention from the authorities:
much remains to be done is this mode is to enter in effective competition/cooperation
with the road and the rail: professionalisation of the operators, regulation of the market.
Air transportation industry presents a healthy evolution with 4% growth expected for
2008; 150 airports were transferred from the national state to territorial collectivities,
and the new airport companies created in 2005 are replacing the chambres de
commerce et dindustrie. But the fiscal pressure remains quite heavy, and the low cost
companies have only a share of 17% of the French market (the average value for EU is
25%), due to blocking strategy by the French authorities5.
See Oudin 2003; in these times of multimodal transport policy, this simple indicator shows
how actual policy diverges from the themes debated among decision-makers and their
counselors
5
Assemble nationale, Comptes-rendus de la Commission des finances, de lconomie gnrale
et du plan,10 october 2007.
What about investing under such constraints? Many recent discussions and studies
explore already alternative ways of financing transport infrastructures 6. Whatever the
structure of the national economy, every government is under pressure: it is true that the
member states are managing less and less money. We will have to examine some
implications of this withdrawal of a classical carrier of modernity, namely the national
state. There are many reasons for this negative evolution, a major one being the high
level of international traffic as compared to domestic traffic: as we are reminded by the
authors of the EU FUNDING research program (Dunkerley, Mackie and Proost, p. 7):
if the share of foreign users is important and the share of user charging limited, some
interesting projects may never be undertaken by the member states. In many cases,
when they try to face their mission, it would seem that the state governments seek to
debutgetize transport investments. For example, they allow regional authorities,
national agencies or private companies to collect money for these large investments. In
some cases this leads to complex financial engineering designed in order to impute to
such institutional instances the debts related to major national transportation
investments, in order to be able to invest and face the demand. We have to mention here
the creation of the French AFITF (which follows the suppression of the FITTVN), with
a stable financing coming from the highways responsible for toll highways (see the
remarks by Raux, Mercier and Souche 2007).
This agency will be responsible for major infrastructure investments over the coming
years; we will discuss the perspectives in our conclusions: it could happen that with this
decomposition of some crucial lines of the national budget, the possibility of political
discussion would be exposed to institutional attrition.
Is there some optimal share of national authorities in the management of financial
resources? Every country has its own history here. For example, it may be said that US
decision-makers have a specific political culture. To give a relevant example, let us note
that while discussing his Decentralisation theorem thirty years after it was first
proposed, Oates (2006, p. 22) mentions a historical remark by Inman (2003): in 1840,
6
We refer here to academic work: see the recent FUNDING research papers
(www.econ.kuleuven.be/funding/), which do mention and discuss the literature. But the theme is
politically sensible enough to deserve discussions among decision-makers; see for example the
review formulated from the point of view of the OECD/ECMT JTRC (Joint Transport research
centre) by C. Stacey (2007).
nine local states were in a difficult situation resulting from large public investments in
transportation projects. The federal government and the US Congress rejected any
prospect of bailout. Oates concludes The point here is that a refusal to provide such
assistance can build upon itself and create a setting where expectations of bailouts no
longer have much foundation. History, in short, matters.
In these times of general dedication to efficiency, it is rather tempting to speak about
transport investments as useless programs: after all, almost new, such projects are often
already considered as decadent things of the past and more so because there is often
not enough budgeting for their maintenance.
The very idea of a justified investment is not all technical. Let us propose some
introductory remarks on this problem. Indeed, for any large transport infrastructure we
could find experts explaining that it would be more efficient not to build it, at least at
the time it is planned. The truth is, such projects need financing just because they cannot
become self-financed some day without firstly receiving an extra shot of investment;
and the various uncertainties of the financial dimension can make a sound project
irrational according to the indicators and the time scale used for the computation. As
says Seabright (2007, p. 227) about urban traffic tarification: it is not a technical answer
to some societal problem: it is a political solution that requires political dedication, and
political know-how if it is to succeed. The political decision-making process is still
largely national; this is why up till now large transportation infrastructure projects
coordinated by the CEC are better considered as juxtapositions of voluntaristic national
projects, later imputed to international programs in a less than transparent way. Public,
contradictory cost-benefit analysis is difficult with such variation in the scale of
assessment criteria, as we will see in our conclusions.
A well-known case of a recent very large investment is the Channel Tunnel under the
Strait of Dover7. Let us remember that losses related to overcosts in building and
overestimation of demand have open the way to bankruptcy (forecasting mistakes were
in this case imputable to private entrepreneurship). Solutions were designed, of course,
The American Society of Civil Engineers has declared the chunnel to be one of the Seven
Wonders of the modern world. During our discussion, we shall be led to consider the part of
dream in large transportation projects.
and we all know that this situation is not exceptional 8: optimistic (some observers would
say: too voluntaristic) estimations of the cost (almost always underestimated) and of
future traffic (almost always overestimated) seem to be the rule, a fact we have to
remember.
But in order to think about things to come, we must refer to the Trans European
NetworksTransport (TEN-T) priority projects (for a general presentation of the
philosophy of this policy, see CEC 2005).
Many projects relate to highways, and are interesting for our discussion. As they are
open to local lobbying, highways projects are the place for confronting different local
interests. We will discuss this point later when presenting the Logic of collective action
analysed by Olson (1965). Also, the ill-famed problem of highways congestion is open
to the discussion about implementability of a multimodal transport policy.
As everybody knows, five major railway axes were chosen in TEN-T: One large NorthSouth (Berlin-Palermo); two East-West connections, going North and South of the Alps
(Paris-Bratislava and Lyon-Budapest)9; the high-speed southwest Europe axis
(connecting the Iberian Peninsula); and the Nordic connection Rail Baltica (HelsinkiWarsaw).
We have also the upgrades to waterways, for example the Rhine/Meuse, Main,
Danube connection, from the North Sea to the Black Sea; and the Seine-Escaut
connection; the so-called motorways of the sea, a new open way to bypass land
bottlenecks., etc. Moreover, in the hinterland of large ports (due to technical progress in
the use of containers, and more generally in logistics), Inland water transport (IWT) has
already conquered a significant modal share (in the Netherlands, more than 40%).
Let us also mention the demands formulated by the air industry. They are not very much
represented in the TEN-T projects (presently only 5% of the TEN-T budget). But they
constitute a very active and sensible sector, and they are surely considered as such by
the public certainly more than IWT. According to their representatives, more has been
8
The somewhat robust answer of sea ferries and low-cost air companies, formulated in terms of
prices, is naturally also part of the explanation of the accounting crisis. It remains remarkable
that investmentors had proposed an evaluation of demand which eventually turned out to be
false by a factor three. We shall discuss the structural optimism of investors in our section 3.
9
A positive evolution is the current development of the AFA project (autoroutes ferroviaires
alpines), which is currently approaching real-world scale.
done to overcome air control problems and to enhance air traffic liberalisation than to
develop airport facilities. Also, they say that the EC commission should abandon its bias
towards railways, in order to build a more global, coherent legal framework for
transport in Europe. What about the future of this industry? As we know that a large part
of all air transport trips is currently related to leisure 10, predictions are becoming very
difficult, with the strong elasticity implied by this characteristic. One could naturally
think that an environment-conscious EU would perhaps put a ban on the polluting
development of air industry ; but actually it is currently an active part of economy
and it is also such stuff as dreams are made off: namely an industry driven by strong
demand11.
We may mention here two cases of infrastructure investments from the monarchist,
centralised French 17th century. Indeed, some of these road or waterways projects
evoked here refer to such dreams that entrepreneurs had formulated many years ago.
When the French mathematician Pascal succeeded in building in 1662 his Parisian
"Carrosses 5 sous", (the first public transportation system in the modern sense), one
could call his project a dream, and actually it was eventually contradicted by the
established order of social privileges12. It is to be noted that the entrepreneur did not
wait for state money: Pascal and his wealthy associates asked privilege letters to the
King, and invested private money. Other people had naturally attempted to build
transportation systems for cities; but Pascal had his risk evaluations computed well13.
10
The other case from the same time (1681) is the Canal du Midi, or Canal des deux
mers: from the Atlantic Ocean to the Mediterranean sea, which required digging from
Toulouse on the Garonne to Agde on the mediterranean shore 14. The most difficult
problem was to ensure a stable water flux for this canal when summer fluctuations
menace the continuity of service; it was solved by injecting at the Naurouze threshold
water from a large dam15. Here also public money was not the only source. The
entrepreneur Riquet, was also collector of taxes for Languedoc, and he was able to
invest part of his as a supplement to the parts invested by the Trsor Royal and the tats
du Languedoc16. This waterway was only killed by the late competition of rail and road
transport.
In these two projects of our 17th century, the part of the daring spirit is large. The TEN-T
projects for the 21st century are presented in terms of rational necessity or costs-benefits
equilibrium: roads can simply not sustain the demand anymore. If we are to face this
necessity, we will have to be able to transform investment dreams into budgetary reality.
This is part of the mission of the Commission.
In 2004, the total cost of TEN-T to 2020 was estimated at 225 billion euros. This
investment represents about 0.16% of European GDP, whereas it is estimated that
completing these transport axes would bring additional economic growth of 0.23 % of
GDP. Some projects have benefited from financial support of the Community budget
(through the TEN-budget line as well as the Structural Funds and the Cohesion Fund);
the European Investment Bank (EIB) has contributed through important loans (about 36
billions euros for 2002-2006). But the actual political decision making process is, as
often, deceptive. It appears presently that the real expenditure on the trans-European
networks in the EU will perhaps be only 8 billion euros for the next step (2007-2013),
two thirds lower than the 20 billion euros the EC asked for when designing the project.
14
While discussing the idea, scholars of 17 th century evoked dreams considered by the Roman
army, Charlemagne and Franois 1er (let us also mention here that a Rhine-Danube connection
was evoked by Pytheas of Marseille at the time of Alexander the Great).
15
Other risks had to be managed, and they were: financial instabilites related to accidents of
relief (for example the Tunnel du Malpas); or to the manpower (Riquet paid well, and innovated
in including social security mechanisms in order to balance the fluctuations of manpower), etc.
See Blanchard and Adg (1985).
16
When discussing the tensions among local interest and the non-local character of all transport
industry, we will not forget that Riquet could not persuade his compatriots of Carcassonne to
pay their part of the bill in order to get the canal throught their city. This mistake was to be
corrected only many decades later.
10
This very short summary of EU projects reminds us how the eventual sanction of
money decides of the presumable rationality of transport projects. The constructive
answer to this situation is to design funding strategies, which are to combine
grants and loans.
11
given dam, bridge, or road could be the cost of building it, if this cost is known, and if
we know how to compute its depreciation rate, and the cost of the repairs it has
undergone. This value could also be the price to pay if we are to build it anew.
Let us now situate the decentralisation problem from this point of view. Before
comparing decentralisation schemes, we have indeed to formulate it. Let us consider it
first from the point of view of what is, for some authors, the solution: the blow-up of the
state advocated by anarchists and ultra-liberals. We could indeed conceive
transportation services as if no state were necessary for financing. Let us present the
blueprint of this utopia: a transport service or mode of transport is self-financing when
user charges cover all costs. Self-financing systems are defined on the basis of the user
pay principle. We also know that where charging users fail to cover these full costs, the
difference will eventually be paid by taxpayers or by various victims of external costs.
Transport pricing refers today not only to access charges, tolls and fares levied by the
transportation service provider, but also to taxes and additional levies or subsidies
introduced by some public authority. Taxes may be imposed to generate revenues for
maintaining and expanding the infrastructure. They may also be used to cover social
costs that are disregarded by the user and service provider, such as pollution and
congestion. The sum of all these costs is the Marginal Social Cost, which is often higher
than the Private Marginal Cost that the user is prepared to take into account when
assessing the advantages and the drawbacks of a trip. These definitions introduce the
Pigouvian idea of externalities: economic costs not taken into account in markets and in
the decisions made by market players, i.e. costs borne by others. Internalisation is the
incorporation of an externality into the market through various mechanisms: pricing,
taxation or regulatory intervention. For example, internalisation of pollution costs is
implemented by charging the polluters with the damage costs of the pollution generated
by them: this is the "polluter-payer" principle.
Now that we have reminded this doctrine, let us remark that the average transport
infrastructure user is often at odds when having to face this unexpected sum of costs
including infrastructure costs and external costs related to the service. How is she to
define a tax? From her point of view, a tax would be a levy that must be paid with either
no discernible service required from the government, or a service that is not in
12
proportion to the payments. Taxes include income taxes, property taxes, corporate taxes,
etc. To speak roughly, according to this perspective, a tax is a charge only a poorly
evaluated and assessed one. This is why we speak of pricing when we discuss MSC.
According to this approach, the state has to justify its existence by presenting the
accountable services he offers. Now, if the reasons for the intervention of the state are
always present, it could be an oversimplification to reduce it to external costs or market
failures only. But in the classical view we try to remember and discuss here, the state
has not to justify its existence by services that people could not afford to pay without its
intervention. As we shall see from the fuel taxes case, taxes are often related to the
sovereign functions of the state. One speaks of the leonine contract between the citizens
and the state: Quia ego nominor leo (just because I am the lion). In this sense, taxes are
not prices, even if we may compute their effects in the determination of prices for the
user.
As Dunn aptly says: Earmarking is more than just a finance mechanism. It is a political issue,
and for some a political credo. It has its roots in a Lockean sense of social contract between
the citizen as taxpayer and his government (Dunn 1978, 33).
13
and they were to deny their respective origins: money does not smell (pecunia non olet).
Earmarking is therefore often resisted by political scientists which are attached to the
transcendence of the state20.
Notwithstanding, there is little doubt that transportation policy is a good place to
observe deviations from the general fiscal principle of non-allocation of revenue. We
will here present very briefly a very clear example of the intolerance of traditional
politics to this direct way of allocating money. This standard example is the British
Development and Road Improvement Fund. As a rule, it was first (1909) posed that the
Treasury would not have access to the revenues produced by a new tax on motor
vehicles: all would be spent on roads21. It was not long before various political moves
intervened to upset plans for the Fund. The Finance Act of 1915 allowed the Chancellor
of the Exchequer to retain the whole tax revenue of the Road Fund for the war budget.
Later, Winston Churchill did raid the Fund twice (in 1926 and 1927); and eventually, the
Finance Act of 1936 wound it up 22. It is significative that during the 1936 debate,
Churchill pleaded for the abolition, arguing that continuation would lead car users to
pretend they had some ownership of the roads on the grounds that they had paid.
As we may see, the modern state does not like to mark the origin of money it collects in
order to reaffect it to the same sector or region. Nor does it want to share this revenue.
To the contrary, it allows grants to various entities. This model of despotic generosity is
now put into question.
Do we need states after all? is perhaps a silly question, as after all, states are not born
out of popular demand. One could ask why the state would have to have a budget, if
every of its functions could in principle be devoluted to private entities. What if there
had been no active state in our modern politics since about three centuries? We all know
it quite well: every twelve miles the very definition of your mileage might vary, and
20
Indeed, these scholars would maintain that the state is not an agent among others, with whom
anybody would be free to pass contractual relationship. Their model of the state poses a
substantial difference between the universe of social relations build on the base of private
contracts and such specifically political events as war, the law, or political decisions. In this
perspective, the state is not the representant of any particular interests, as it has to claim the
monopoly on violence, which is clearly no an economic function.
21
The Road Board did not actually undertake itself the construction or the maintenance of roads;
it only allowed grants to local authorities.
22
From then onwards, the Ministry of Transport was to bid for money from the Treasury just as
any other government department.
14
local authorities would compete to impose more and more non-standard units and
arbitrary fees for crossing any and every village. This is not a gothic allegory. These
practices are not far from us, as we can see everyday how committees for
standardisation cannot always hinder companies from imposing their own proprietary
norms in order to lock some niche market while pretending to free competition in the
mainstream market. To put it simply, the state is not required to justify its existence; but
it helped a lot to get modern societies out of feudal corporative dubious games. We
should think twice before concluding we do no more need one. Moreover, we have to
remember that this (positive) effect of the state was not negotiated by contract: the
classical state just does not like corporative law making, taxes managing by the
private, etc.
After all, whatever the excessive implications of some general declarations, nobody
thinks seriously about suppressing the state. As we are witnessing a period of fast,
irreversible transformation, it is essential to take notice of what actually happened to the
state in the domain of transport policy. Because the state, and only the state, is actually
able to impose arbitrary taxes.
It is possible to discuss local receipts of earmarking in this policy. This does not make
sense while very general principles are not settled on the table for discussion. The most
illustrative case (too big to be only an example) is the TIPP (taxe intrieure sur les
produits ptroliers). It was said that this tax would be used for railway investments;
actually almost all of this revenue was until recently in the hands of the Treasury. The
law of 2004 has transmitted a large part of the TIPP revenue to the regions, with
freedom to fix the level of the tax. Following this seemingly good reform, regions are
now in difficult situations, as the fluctuations of hydrocarbures use affects their
resources for public transportations systems.
In a paper that should have attracted more attention, Boiteux analyses the TIPP as a way
to charge the effective use of the road (Boiteux 2004). He evokes the critics who speak
of fiscal perversity, but concludes that the TIPP is a toll which can be
use to make the user pay better for the services he gets. He reminds
that currently, for interurban traffic, individual cars pay their share of
the cost they cause, while trucks pay about 2/3 of their share. In the
15
same vein, some political circles suggest to tax the client of truck
transportation, as they benefit of the under-pricing of road fret
transport23.
See Dunn (1978) and Walker (1956) for a historical and institutional analysis of political
decision-making with respect to earmarking in transport policy. The French case study
provides another story of a short-lived transport fund, the. There is an unwritten rule in
France that when a fund is liquidated, any extra taxes that are used to finance it are not
terminated; rather, the money is directed to the general Budget of the state. The socalled stable resources for the fund were gradually reduced to insignificant levels
through the influence of the Ministre des Finances.
The debate over hypothecation of transport revenue to specific expenditures is thus a
classical one, and it has a history in the field of transport. But curiously, it has not, until
very recently, received explicit treatment in EU-funded studies on transportation policy.
Current EU policy tends towards rather loose earmarking for the transport budget of
revenue from infrastructure charging. It allows revenue rose from one mode to be spent
on infrastructure associated with another mode, and also for revenue collected in one
region to be spent in another region. However, this hypothecation policy is only one
option regarding the use of revenue; other, more inclusive options are, for example,
using this revenue for general taxation purposes such as reducing labour taxes. One
could also consider more restrictive options such as directing revenue towards transport
projects within the specific region or the specific mode from which it was raised.
As a matter of fact, many recent EU projects on transport pricing have focused on the
optimal design of charging schemes24. More generally, existing cost benefit policy
guidelines for transport charging emphasize the importance of deriving accurate
estimates of costs and benefits of transport investments. In contrast, the REVENUE
research project focused on the role of interactions between the transport sector and the
rest of the economy, and the equity and acceptability aspects of user charges and
23
16
revenue use. This project originated from a growing realisation that the long-term
effects of any pricing reform would depend not only on price levels, but also on how the
revenues are used (Laird et al. 2004, 2).
We see how, by necessity, any discussion of transport revenue earmarking leads to
considerations of general policy problems, and that means: political problems, requiring
political competence in order to formulate in a suitable fashion questions requiring
political answer. If we are to loose this level of formulation, EU civil society could
perhaps enjoy, sooner than we may suppose, delicacies characteristic of the life of an
international society without diplomatic language, without diplomatic formulations and
without diplomatic solutions.
17
politicians are not all equally important for the politicians of central government.
Second, historical traditions of national state may affect the negotiations among local
and national politicians.
For this very structural reason, we can see that presently highways make distance
decrease among large centres, and do not the same, often to the contrary, among small
centres. If the EU has something to do in order to gain more acceptability for
transportation policy, here is an open opportunity. All things equal (which they are not),
problems of traditional politics remain: what about local demand for such-and-such
highway whose existence could boost local economy? As usual, state promises for large
projects favour more cross-border projects, which would boost already dynamical
sectors and regions of the national economy25.
Be it allowed to ask if real decision-making is sensitive to local interests, namely: do
non-affluent regions, which contribute less to national wealth, have better financial and
political control on stimulation of their economies through transport investments? The
answer is a flat no. The French government, in a colbertist tradition, keeps control of
moneymaking high-speed ways (roads and rail) and gives to the local authorities what
remains of the traditional tools of transport policy26.
It remains to be seen if regional trains for persons, fret transport or local interest roads
will benefit of these reforms. It would seem to the contrary that they would be treated as
remnants of optimistic investments of the affluent state of yesterday. Exporting, affluent
regions and sectors will benefit from this so-called decentralisation. The others will
loose what the arbitrary power of the state did ensure to them. This could ironically be
called responsibilisation. We may consider other options.
We should not be surprised to see local politicians taking attitudes so squarely opposed
to the standards of national policy. A regional politician is not a politician at another
scale: she has to consider variables that were taken into account on the wrong side of the
sheet27.
25
Didier and Prudhomme (2007, p. 31) insist of the fact that actually international frontiers are
generally, with well known exceptions, zones where the needs for transport infrastructure is not
very high. They add that there are no available cost-benefit analysis of TEN-T projects.
26
In this sense the story told by Raux, Mercier, and Souche (2007) is the tragedy of regional
development.
27
Regional interest may be represented by variables that are not even opposed to the one that
are maximized in the mainstream model. Sometimes they are only considered as variables in
18
Quite different is our other case, let us take a realistic one, namely the first elected
Mayor in UK (2000), re-elected in 2004, Livingstone, who introduced the London
congestion charging scheme in 2003. Nothing in common with a frustrated aristocrat, a
leftist urban politician, achieving during his first mandate a goal proposed during his
campaign: internalising the congestion externality using tarification means. As exposed
by Seabright (2007)28, both quantitative and qualitative results are interesting: the
composition of traffic changed, and not only its volume, including more bus and more
bicycle traffic; considerable investment in public transport system, and considerable
benefit to bus users and for businessmen (shorter trip times, delivering of goods easier).
Should the system be transposed as is to other cities? Four reasons, says Seabright,
suggest that no:
-Collecting money process is presently quite costly;
-Cost-benefit analysis is still difficult to assess;
-Flexible charging rates are yet to be defined29;
-The charging scheme is sensitive to the size of the charging area.
Finally, other criteria than time and value of time should be considered, including
welfare and urban environment quality. Seabright insists on the fact that redistributive
effects are also achieved: while some people say that the charging chases the poor from
using the road, we have actually a transfer from car drivers them to public transport
users.
There is no such thing as generally local interests. Some regions are not in a good
position to achieve their goals in the negotiation of resources transfer, while others are.
This dissymmetry is worth studying. This illustrate Olson thesis in his Logic of
collective action (1965): There are vast numbers who have a common interest in
preventing inflation and depression, but they have no organization to express that
interest. As we shall see, the discussion of public finance aspects of transport investing
another space. This is the process of alienation, where the provincial politician considers the
variables describing the life of metropolitan cities as devilish parameters of his own life. Hence
the fatal divergences of Tocqueville and Gobineau, all explicit and militant advocates of
decentralisation in 18th century France (see Dunoyer 1842).
28
He does thank our colleague G. Santos for discussions and advice.
29
Charging rates could be modulated according to the hours of use, and to the type of vehicle,
for example replacing the unique rate by two: 3 pounds for the cars, 9 or more for the HGV.
19
(Proost, De Borger and Koskenoja) invites us to read more attentively these prophetic
views on collective decision.
20
construction industry). The mark-up charge is defined as that which goes beyond
infrastructure costs. Deciding this supplementary charge is a sovereign function, typical
of the responsibilities of the state.
In EU countries, it often happens that the state takes a large part of fuel taxes, while in
other parts of the world this revenue is hypothecated to roads, so that it is spontaneously
considered as some user charge. We should perhaps try to compare these various
political traditions, an exercise that could lead to more conclusive reasoning than asking
which is the better.
30
The development of PFI received an explicit denomination in the UK during the 1990s: the
Major government had to follow the Maastricht rules and to continue the good practice
established by Thatcher. Following him, and in order to face huge financing needs in schools,
hospitals, transport and public buildings, the Blair Government used largely the PPP scheme. To
put it plainly, the problem was to put an end to chronic under-funding in public services after
two decades of Conservative policy.
31
The PFI (Public Finance Initiative) is a PPP where everything, from conception to
management through funding, is devoluted to a single operator (company or consortium). The
public authority is assumed to keep more direct regulatory control in a PPP; but the two
formula, PFI and PPP, are currently used equivalently by many people.
21
PPPs have to be discriminated according to two very different criteria: More or less
inclusive missions may be devoluted to some agency; and this agency may be more or
less independent from the state. The first criterion opens the way to the so-called
principal-agent problem: what incomplete and asymmetric information when a
principal hires an agent? The second criterion is more familiar to the average reader, as
it is more often discussed in the media.
The very nature of some transport infrastructures implies that they are not convenient
for material privatisation: a road is a non-rivalrous good (most often a public one).
The market characteristics of such goods do not attract private investors. Sometimes a
road may be excludable (a club good, such as a toll highway: some people may be
excluded from benefiting the service). But it also happens that a large transport
investment cannot be tolled. This type of investment is called a specific public good.
What about a decision whether to build a specific road or public transport investment
that cannot be tolled? This can be a bridge or a metro to a remote location: taxpayer will
finance a minority of users. The national state, via the Parliament where local politicians
are present, is exposed to minority efficient lobbying alla Olson (1965). As a
consequence of this weakness, as it has been observed material privatisation is almost
nil in the roads sector. To the contrary, it is often present in airports, seaports and
railways (Alfen and Barckhahn 2006, p. 8).
Let us add that the transport industry contains subsectors that are not always taken into
account, while they are efficient, large scale, and relevant for the present discussion.
Hydrocarbures and electric energy are transported through pipelines and high voltage
lines32. The value of transport infrastructures is open to various accounting revision
procedures, to the effect that the user thinks of arbitrary decisions. Local interests are
sometimes well represented in this industry through the control of agencies by various
political bodies. We have already mentioned the remarkable study by Raux, Mercier,
and Souche (2007), who show how this may correspond to the interest of right-wing
politicians, which are by position more sensitive to the objectives of regional
development.
32
We leave for the meditation of the reader the contrasted, paradoxical evolution of production
and distribution for energy: part of the production could be decentralized over the next decades,
if we develop some technologies that allow local production, while distribution is by function
global problem.
22
In France, the state has sold in 2005 his shares in the Socits autoroutires, in order to
mobilise financial resources, part of which was affected to the Agence de financement
des infrastructures de transport (AFITF). The remaining private groups managing the
operations on the highway network are presently very large companies (AREVA,
VINCI, EIFFAGE)33. This means that some part of the negotiation on transport policy
will take into account through the complex strategies of competing firms, and perhaps
escape the attention of Parliamentary commissions.
The list of profitable public infrastructures is short (water and energy production and
supply, rubbish collection, large waterports and airports) To the contrary, unprofitable
public infrastructure are numerous. Some charge the user for part of their cost (public
transport, libraries, higher education, old peoples homes, hospitals, sport and cultural
facilities). Some do not usually charge for the service (roads and bridges, public
buildings, elementary schools, social facilities, prisons).
Governments find in PPP a way to ensure long-term financing for programs they cannot
put into their annual budget procedures. Dozens of large public programs in the EU
member states are designed according to PPP schemes: urban public transport systems,
highways, hospitals, public buildings This new financial engineering opens the way
to relevant initiatives of educating public institutions about risk management (in the
domain of transport infrastructures or in other) in other countries.
As everybody knows, Bouygues was eventually not interested in 2005 by what it considered
as more a financial scheme than a work corresponding to its mtier.
23
report to the French Senate (Oudin 2003) showing that budgetary considerations affect
the setting of a coherent policy for the financing of transport investments. The same is
true for the management of the public debts. The educative role of the EU Commission
will perhaps over the next years help responsible circles to obtain better, simpler, safer
accounting procedures in the member states. The Oudin report evokes the now famous
case of the French Service annexe damortissement de la dette ferroviaire (SAAD) in
very remarkable terms: SAAD is, it has to be reminded, an Unidentified Financial
Object.
Why speak about an UFO? Indeed, this debt was not affiliated in the national budgets,
nor in those of SNCF and RFF. This opaque disposition was put to an end in 2007, when
Eurostat required that the French budget incorporate this sum (8 bn euros debt more for,
2006, a drop from -63,7% to -64,2% of the GNP 34. A good reason for this correction is
that the French state does pay every year for the reimbursement of this debt: as it must
be somebodys debts, it appears then to be his. This revision is only good news, but it
remains surprising that we need Eurostat to correct such distortions. The magnitude of
national budget and the expected transparency of democratic control at the parliament
level make uncomfortable when having to comment such practices of disguised
inflation. This is the place to mention a terse remark coined by Detuf: "There are three
kind of people speaking a mysterious language: most easy to understand are the fools,
then we have the polytechnicians, and last the accountants."35
4 CONCLUSIONS
4.1 Decomposition of the state and local concerns
Finally, we discuss the political concerns related to stakes that are locally defined; as a
matter of fact, environment and quality of life are local-related externalities36.
34
24
Is transport a local concern? For one part it appears that more transport infrastructure
contradicts the demand for environmental (always local by definition) preservation. Do
we really need more transport after all? This is a serious question. Even more seriously,
what transport are we supposed to speak about? Will our habits have to really change?
The current political landscape is rather chaotic. Speaking in terms of economic
rationality, experts are discussing ways to escape the huge bottlenecks of tomorrow. But
while they are discussing about less pressures, a seemingly demand-driven economics is
pushing vacation transport traffic on the highways, suburban residential traffic on the
penetration axes of large cities and fresh fruit and vegetables on the same two networks
flowing from seaports and airports. At the same time, our representative parliaments are
under populist pressures speaking of saving virtual bears and cutting actual transport
infrastructure budgets. There must be at least one mistake in the global plot. It is
conceivable that environment-conscious policy introduce more and more coercitive
measures in order to reduce the demand for transport. This supposes that we have
political discussions at the relevant level: the European Parliament.
It is too late to hinder the process of decentralizing in transport infrastructure
management. More than the effectiveness of German or Austrian transport agencies 37,
which manage money and projects, it will be interesting to see what happened in
France. The Raffarin government (2002-2005) gave practical content to the
decentralisation motto that was introduced since some decades 38. Before the law of
13/08/2004 relative aux liberts et responsabilits locales, the central state managed
38000 km of highways and national roads, to keep only 18000 km after the
implementation of the institutional aspects of this law, 28000 km being devoluted to
departments. This transfer of competences was sustained by transfer of revenue (for
example the TIPP on hydrocarbures), and of manpower to local authorities. In the same
direction, the French reform of 2002 disposes that regions are responsible for regional
railway services definition and organisation. The division of responsibilities among
37
Ghnemann et al. (2006) give a clear discussion of decentralisaton in Germany and UK,
providing a relevant and original comparative analysis. The role of German agencies and federal
government, and the critical discussion related to road management, is based on first-hand
knowledge.
38
The dispositions of the law of 2/3/1982 transferred some prerogatives of the prefect (the very
hand of the national state) to the regional presidence.
25
(Rseau ferr de France) (RFF) and the Socit nationale des chemins de fer (SNCF) is
at the same time defined.
Let us mention here some remarks by Didier and Prudhomme (2007, p. 34 sq.) Local
authorities have now the charge of urban transport (almost one half of all transport
industry in France, in terms of value), of local roads and regional railways. The
versement transport collected from private companies hiring more than 10 employees,
the transfers of managing state budget for communal and departmental roads and for
local railways are considered as too low. The state has still to open its purse if it is to
persuade local authorities that they share their part of the budget. The TIPP was, and
still is a very large part of public financing, and it is not shared with local authorities. It
would suffice to add that the money collected by other large EU member states is about
the same as in France: fuel taxes correspond to about 2/3 of the fuel price in Germany,
France and Germany.
Actually, we could argue, and we will see here, that local management of some transport
infrastructure albeit related to far-reaching journey is a rather traditional idea. We have
just to accept it and enjoy it. At the same time, if we are to put local subcontractors
operating with or for large companies where we had civil servants twenty years before,
why not? This decomposition of the state privileges is far from effective, as national
budget keeps control of large parts of resources collected from transport sector.
But we know that alternative schemes do exist. The private formula called Turnpike
trusts developed efficiently in the UK of 17th century, and became later a generalized
scheme for roads repairs and managing, charging tolls from the user for financing
needs. After all, we should not forget that it was everywhere a well established local
habit to try to make profit from large scale traffic 39, and that since the competition
among boat maintenance and bridge building (boats were cheap and under easy local
39
A toll is a special charge levied at a particular point where vehicles pass (e.g. tunnel,
motorway, etc.). It would be malevolent to evoke only the highwaymen here. The ferryman
did help in minimizing the risk of crossing. This transit operator is a classical figure of
mythology (see Hermes, Charon, or the touchy frontier runner by Lvi-Strauss 1968 p. 366
sq.). Budget is never locally balanced, requiring the intervention of some alien entrepreneurship,
able to raise money somewhere, as attested by the corpus of so-called Devil's Bridge
folktales, affine to Faustian Devils contract (Aarne-Thompson folkloristic classification
types 756B, 1005, 1191; see De Palma and Pahaut (to appear).
26
control, to the contrary of bridges), local and global interest do compete in transport
infrastructure design40. This political discussion is far from being over.
40
It would be a mistake to think that the French revolution did put an end to toll bridges. This
was only done by the law of juillet 1880.
41
I would also add that this kind of process remind me of the profound remarks proposed by my
teacher Ilya Prigogine about order out of chaos.
42
Avis n 80 (2006-2007) fait au nom de la commission des affaires conomiques, dpos le
23 novembre 2006.
27
It can never be overemphasized that the very nature of political discussion about the
financing of transport has been dramatically affected by the recent establishment of the
euro in almost all EU member states. In order to ensure a substantial stability for the
promised currency (ne ECU in the 70s, and christened euro under the auspices of the
Maastricht Treaty), convergence criteria were defined, according to which in every
member state the government debt should remain under 60% of the GDP, and yearly the
government deficit should be less than 3%43. It has to be reminded that as the keeper of
Treatises, the EU has a right to impose financial penalties to infractors. It has yet to be
established whether in so doing the member states have designed a new political entity
or a monetary zone, the so-called Eurozone.
Do we have an European transport policy? The fact that the rule of unanimity prevails
for transport decisions at the level of the Council of Ministers shows at best the
hesitations of the member states. And part of the public perception of the Commission
policy as being more interested in (de)regulation and liberalisation is related to the fact
that, after all, the Commission has few opportunities of effective intervention in the
sector of transport.
Let we propose some very brief remarks about some aspects of this policy44.
Regulation. Liberalisation is an ancient tradition in maritime transport, the sea being
open to all. The same approach was easy to propose for IWT as it was traditional on the
waters of the Rhine (more than half the volume of this sector in the EU). It was more
delicate for road transport, and more than delicate for air transport; and we all remember
that the open sky policy was introduced following pressures by the US government. It
remains quite difficult for railways companies, endowed with national traditions, and
budgets.
Investments. Europe will exist through its achievements. European politics, by the
magic of large numbers, introduces us to new problem. Transport infrastructure
management is actually a new problem. It has to be reminded here that the very term
infrastructure was scarcely used in the literature before the 1980s. Let us mention
some historical remarks by Prudhomme, who stresses the fact that after Adam Smith,
43
See the discussion of the management and financing of transport policies by Alfen and
Barckhahn (2006, p. 9).
44
See the summary of liberalisation policy by Oudin (2001).
28
who gave transport infrastructure a key role in development, economists did not take it
into account, preferring to discuss the respective roles of labour and capital as
production factors, leaving aside the large infrastructures build by 19 th century
governments. He concludes, Until the 1970s, infrastructure, even under a different
name, hardly existed as an analytic concept or category in economic theory and
policy45. The author mentions pioneers such as Rosenstein-Rodan, with a significant
quote of the former summarizing in 1984 his views during WWII: [a] new idea was
that before building consumer goods factories, a major indivisible block of social
overhead capital or infrastructure must be built and sponsored because private market
initiatives will not create it in time.46
The stubborn optimism of the Commission could give the impression that these
projects, giving a practical complement to the Green and White Books defining the
economic doctrine, constitute an European transport policy. Some day, perhaps, we will
have an European transport policy. After all, the Maastricht Treaty did explicitly ask for
trans-European transport projects. It is perhaps presumptuous to speak in terms of
network. Of course, all axes being de facto connected, we may for sure say that there do
exist European networks for trains, trucks, boats and airplanes. But actually, every
country has over the last decades attempted winning moves from the singular position
given to him by the providence, and to this date the EU discussions are not really
interfering with these national strategies47. As a matter of fact, the selection and an
often-decisive part of funding of such infrastructure projects have
been left to the individual member states (Didier and Prudhomme 2007).
European policy in the domain of transport infrastructure corresponds to a juxtaposition
of loosely defined projects, not assessed in terms of cost-benefit analysis, but
technically more or less mature. Let us be optimistic: this leaves wide highways open to
innovative EU assessment and decision-making initiatives.
45
Prudhomme 2005, p. 9; the different name was often social overhead capital.
In fact, Rosenstein-Rodan did not only advocate for infrastructure building; he also suggested
that the training of workers, being not necessarily of interest for the employeur, would be for the
state (Rosenstein-Rodan, in: Meiers and Seers 1984 p. 208; Rosenstein-Rodan 1944).
47
Indeed, would we have Europeans projects of heavy rail transportation with China, or
European high speed trains, or European management tools for regional airports negotiations
with low-cost air companies, the situation of transport policy would be totally different from
what is is presently. Nevertheless, the incitative and regulatory dimensions of EU policy are not
to be despised. Also, as the new member states are in strong need of European help, there is a
window of opportunity open for more affirmative EU commission initiatives.
46
29
5 ANNEXES
5.1 References
Aarne A. and Thompson S. (1964), The Types of the Folktale. 2d revision, Folklore
Fellows Communications 184, Helsinki.
Alfen H.W. and Barckhahn S. (2006), A systematic approach to the
comparison of Management and Financing models in the European
toll road sector, TU Infradays, Berlin.
Blanchard, A. and Adg, M. (1985) Les Ingnieurs du Roy et le Canal de
Communication des Mers, in Jean-Denis Bergasse (ed.) (19851986) Le Canal du
Midi (Vol. 3), pp. 18194, Cessenon: J.-D. Bergasse.
Boiteux M. (2004), Taxer lessence ou le kilomtre ?, Les Echos, 27 octobre 2004.
Bourguignon Fr. and Pleskovic B. (2005) Lessons of experience, World Bank and
Oxford University Press.
Brett C., Keen M. (2000), Political uncertainty and the earmarking of environmental
taxes, Journal of Public Economics, 75, p. 315-340.
Cerniglia F. (2003), Decentralization in the public sector: quantitative aspects in
federal and unitary countries, Journal of Policy Modeling 25 (2003) 749776.
CCE (2005), TEN-T priority axes and projects 2005, European Commission,
Directorate-General for Energy and Transport.
Coase, R. H. (1991), Nobel Prize lecture, December 9, 1991, http://nobelprize.org.
de Palma A., Lindsey R. and Proost St. (eds); (2007), Investment and the Use of Tax
and Toll Revenues in the Transport Sector, Elsevier.
de Palma A., Lindsey R. and Proost St. (eds); (2007a), Investment and the Use of
Tax and Toll Revenues in the Transport Sector: The Research Agenda, Chapter 1 in
de Palma, Lindsey and Proost 2007.
30
31
Olson, M. (1965) The Logic of Collective Action: Public Goods and the Theory of
Groups, Harvard University Press, 2nd ed. 1971.
Oudin J. (2001), Rapport dinformation fait au nom de la dlgation du Snat pour
lUnion europenne sur la politique commune des transports. Sance du 3 mai 2001,
Snat franais.
Oudin J. (2003), Rapport dinformation fait au nom de la commissions des finances,
du contrle budgtaire et des comptes conomiques de la nation sur le financement
des infrastructures de transport lhorizon 2020. Sance du 21 mai 2003, Snat
franais.
Pahaut S. (to appear), Regularity and Probability: some remarks on the prehistory of
probability, Mathematical Population Studies.
Proost St., De Borger Br. and Koskenoja P., (2007), Public Finance aspects of
transport charging and investments, chapter 3 in de Palma, Lindsey and Proost 2007.
Prudhomme R. (2005), Infrastructure and development, in: Bourguignon Fr. and
Pleskovic B. (2005) Lessons of experience, World Bank and Oxford University Press.
Raux, Ch., Mercier, A., and Souche, St., 2007, Case study multi-modal funds in
France, chapter 11 in de Palma, Lindsey and Proost 2007.
Rosenstein-Rodan P. N. (1944), "Problems of Industrialisation of Eastern and SouthEastern Europe, The Economic Journal, 53, No. 210/211, p. 202-211.
Seabright, Paul. 1996. Accountability and Decentralization in Government: An
Incomplete Contracts Model. European Economic Review 40: 61-89.
Seabright, P (2007), Le page urbain de Londres: des leons pour la France?
Complment D au rapport de Didier et Prudhomme (2007).
Walker G. (1956), Highway Finance, The Journal of Industrial Economics 4(3), 161178.
32
AFITF
DB
Deutsche Bahn
DfT
ECMT
EIB
FITTVN
FP
EU Framework Programme
IWT
JTRC
MSC
PFI
PPP
PT
Public Transport
RFF
SAAD
SNCF
TEN
TfL
WWII
World War II
33