Shadow tolls are payments made by government to the private sector operator of a road based, at least in part, on the number of vehicles using the road. First proposed by the K Government in 1993, they are currently in operation on some roads in the UK. The system of shadow tolling provides the revenue for privately-funded road schemes under the Private Finance Initiative known as the Design, Build, Finance and Operate (DBFO) programme. They have also been adopted in other countries.
A commonly claimed advantage of the shadow tolling system is that it eliminates the need for drivers to pay tolls directly, thus avoiding toll collection costs, but this claimed advantage ignores the traditional direct government funding option that would be dependent on neither direct tolling nor the additional cost of continuous vehicle counts and complex contract arrangements between parties.[1][2]
Disadvantages include the fact that because drivers typically pay for their road use through fuel taxes, vehicle registration fees, and other charges that are not based on time of road use, it is not possible to use this system to implement congestion pricing, which would give drivers an incentive to take alternate routes, carpool, or otherwise curtail their usage of their road during rush hour.
Another disadvantage of shadow tolls and other PFI schemes is that in the post economic collapse financial environment, the cost of private borrowing has increased dramatically in relation to the cost of direct government borrowing. In August 2011, the UK Parliamentary Treasury Select Committe announced that PFI deals were an "extremely inefficient method of financing [public infrastructure] projects" and that the rules needed to be reformed to prevent the promotion of PFI funding of infrastructure development though misleading cost calculations and perverse "off balance sheet" incentives.[3]
The UK is still the biggest user of shadow toll roads however several schemes have been developed across Europe (Belgium, Finland, Netherlands and Spain) and also in Canada. Shadow toll projects were also introduced in Portugal in 1999 but ended up being cancelled and replaced with the "real toll" model in 2004, after the Portuguese government found that "payment obligations in connection with the shadow toll system are not compatible with the need to spend on improving and maintaining the other national motorways".[4]
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