Economic Policy and Infrastructure

Infrastructure policy

In 2014, traffic jams in Germany on the autobahn network alone added up to 830,000 kilometers in length. Measurements of the carriageway status reveal, according to the Federal Ministry of Transport, that almost 17 percent of the autobahn network at least exceeds the warning value.

Transport infrastructure

The need for investments in federal highways alone is estimated by the Institute for Economic Research at about 8.4 billion euros annually. In fact, investments have averaged only 5.3 billion euros over the past 10 years. There has been a decline in value of the German autobahn network over years. Net invested assets have been declining continuously because less is being invested than has to be written off. This inadequate financing is apparent everywhere throughout the network of federal highways.

In 2014, traffic jams in Germany on the autobahn network alone added up to 830,000 kilometers in length. Measurements of the carriageway status reveal, according to the Federal Ministry of Transport, that almost 17 percent of the autobahn network at least exceeds the warning value. This means its status is such that refurbishment measures must be planned; 8 percent is even above the threshold value. These roads are regarded as in urgent need of repair, and construction measures must be initiated without delay.

As far as federal highways are concerned, as much as 35 percent of the network is in excess of the warning value while 20 percent of this is already in urgent need of repair. The bridges are the cause of greatest concern: At 47 percent, almost half of the bridges in Germany are over the warning value. Poor carriageway conditions are also a problem for the environment: unevenness of the carriageway leads to weaker and irregular contact between the tire and road surface, thereby increasing fuel consumption and reducing road safety. Last but not least, traffic restrictions imposed because of the poor state of repair have led to significant losses of time.

One example: The detours that vehicles of more than 3.5 tonnes have to drive in order to avoid the bridge over the Rhine at Leverkusen, which is blocked for this category of vehicle, are leading to economic losses amounting to 350 million euros annually. In North Rhine Westphalia alone, there are now 31 bridges with load restrictions. This is producing palpable additional costs for the companies affected. According to a survey by the Institute for Economic Research, more than 60 percent of companies in Germany feel they are disadvantaged in their business by the quality of roads. This is problematic not least because, according to an investigation by Kreditanstalt für Wiederaufbau (the German reconstruction loan corporation), the transport infrastructure is the second most important location factor – only behind the availability of skilled personnel.

The infrastructure offensive by the Federal Government is only a first step

Politicians have now recognized the problem of inadequate financing for the transport infrastructure. The grand coalition has agreed to increase the volume of investments in transport routes by about 1.3 million euros annually during this legislative period. However, the level of investment going into federal highways will only increase to 5.5 billion euros on average during the years from 2014 to 2017, meaning that it will continue to remain well short of actual requirements even over the next few years.

As part of increasing debate concerning the ongoing infrastructure deficiencies and criticism from abroad regarding the general lack of investment in Germany, the Federal Ministry of Finance announced a further investment offensive in November 2014. According to this, the government will provide a total of 10 billion euros of funding for additional investments during the years 2016 to 2018. Of this, 3 billion euros has been earmarked for avoiding a planned global underspend that was previously in place; 7 billion euros of the amount will be available for “future investments, especially in public infrastructure and energy efficiency.” it is to be hoped that an adequate share of this will be allocated to financing the network of federal highways. At any rate, this concerns the very same transport network on which 80 percent of passenger transport and more than 70 percent of goods transport are carried.

New priorities instead of new cash cows

The Federal Government intends to identify new sources of revenue to pay for some of the additional investments. These include introducing a car toll, charging for air pollution costs by trucks, expanding the truck toll to additional federal highways as well as applying the toll to trucks between 7.5 and 12 tonnes gross vehicle weight from October 1, 2015, onwards. However, it is unnecessary and unjust for road users to be burdened with new charges. Even today, the government receives 51 billion euros annually in the form of mineral oil tax, value added tax on mineral oil tax, motor vehicle tax and truck tolls, of which only 19.6 billion euros is returned to the roads. The other 31 billion euros is used for purposes other than transport. As a result, sufficient money ought to be available for an infrastructure policy in line with requirements. Politicians should use the significant revenues first and foremost for financing a road network that meets requirements.

A sensible approach to financing federal highways would be for politicians to ring fence the necessary 8.4 billion euros annually from this revenue. This would include the entire revenue from the truck toll less the system costs (approx. 3.1 billion euros) as well as the remaining 5.3 billion euros as 13 percent, and thus a mere fraction, of the revenue from the mineral oil tax. Ideally, this amount would be earmarked as an annually fixed value for a federal highways company – such as in the form of a service and financing agreement. Such a reliable financing commitment would avoid the efficiencies of discontinuities over the course of construction projects spanning several years. These result because the available funding only extends up to the end of each particular budgetary year. The discontinuities always result in inefficiency and additional costs. Measured according to this yardstick, the ongoing organizational development of the transport infrastructure finance company (VIFG) is a mere trifle. In future, all payment streams in the long-distance road segment should be combined in this. As a result, from 2016 onwards it will not only be in charge of managing the truck toll revenues, but also the tax revenues intended for federal highways during the particular budgetary year. As a result, the transparency and consistency of the data situation would increase for the ministry, for regional administrations and members of parliament. The main problem, namely that tax revenues are only allocated on a year-on-year basis and significantly below requirements, will remain however.

Dr. Michael Niedenthal
Dr. Michael Niedenthal Head of Department Transport policy

Tel: +49 30 897842-360 Fax: +49 30 897842-600
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