[Ringo]

Economist Fred Harrison's Wheels of Fortune Self-funding infrastructure for transport

Wheels of Fortune - click here

Don Riley:

Then, as the millennium was dawning, a miracle happened.
The government returned every penny that I had paid in taxes
over the previous 40 years. So for four decades I had lived
taxfree – and I had not dodged the taxman! How was this possible?
I ‘confessed’ in Taken for a Ride. Taxpayers generously funded the
extension to the Jubilee Line, one of London’s Underground lines.
Two of the stations were located close to office properties that I own.
Those two stations raised the value of my properties by more
than all the taxes that I had paid into the public’s coffers over the
previous 40 years.
A nice windfall for this colonial boy.
Did it make sense for Britain’s taxpayers?
It did not. And that set me wondering. It was symptomatic of
the perverse taxes that governments use to fund the capital
infrastructure of systems such as the transport network.

The findings for Britain may be interpreted with reference to
land values, which ultimately reflect most of the externalised costs
and benefits. London’s Jubilee Line Extension increased adjoining
land values, according to Don Riley (2001: 23−5), by something
close to £14 billion. The Jubilee Line Extension cost £3.4 billion to build.
Landowners got rich in their sleep.

Infrastructure projects almost always bring about a large
increase in the value of adjoining land. For example, Transport
for London estimate that the extension of the Jubilee Line of the
London Underground that opened in 1999 increased land values
by £2 billion in Canary Wharf and £800 million in Southwark.
When such infrastructure projects are funded by government they
therefore almost always involve a substantial transfer of wealth
from a large number of taxpayers to a small number of property
owners.

Harrison argues that a fairer and more efficient means to fund
infrastructure projects is to capture and use the increases in land
values that they bring. Indeed, Harrison describes how the initial
proposal for the Jubilee Line extension made by property owners
at Canary Wharf involved funding the project with private finance
put up against anticipated rises in property values. Had this
option been pursued the entire project could have been completed
at no cost to the public purse.

The experience of other countries shows that more efficient
and fairer regimes for funding infrastructure projects can be
developed. Hong Kong, Japan and Singapore have utilised
the value of land to fund the construction and maintenance
of extremely efficient, modern transport systems that now
operate successfully without taxpayers’ money: modern,
efficient transport systems do not necessarily require public
subsidy.