Phil Goodwin says:
So let us do a role-playing game. Suppose you are the investment manager for XYZ Pension Fund, considering whether to invest in the M999 bridge and motorway widening programme, vitally necessary, you are told, because it is already operating to capacity and the traffic will increase by 50% over the next 25 years. Sounds good, you think, and wonder whether to opt for a real charging scheme, taking in the fivers from a million motorists, or a shadow scheme, paid by the Government in relation to future traffic. So you look at the forecasts, and the forecasting record. Now correct me if you don???t agree with my next step, but I don???t think it is just my subjective judgement: anybody, just anybody, looking at this graph is going to think that there is a downside risk of the long term traffic flows being substantially less than the forecasts, as they have continually been for at least the last quarter of a century. In that case, an income depending on real charged prices is going to be less profitable than an income stream guaranteed by the Government based on the Government???s own forecasts. So you will ask for a guarantee. But that???s hardly attractive to the Treasury. The downside risk for Government is paying a lot of money, not underpinned by buoyant tax revenue, in respect of traffic flows which under-perform, for a project which for that reason turns out to be a lot less necessary anyway.