Private sector urged to build for the future with a new 'Victorian spirit'

When Margaret Thatcher cut the ribbon on the final section of the M25 in 1986, she simultaneously announced the first of the many upgrades designed to cope with the South-east's unstoppable traffic growth.

By the time she left office she had presided over 42 privatisations and in one of her final acts, decided to award the building of what was then known as the North Birmingham relief road (now the M6 Toll) to a private company.

It was the resurrection of an idea not popular in Britain since the heyday of the turnpike trusts 200 years earlier, when venture capitalists were called on to unclog the nation's vital arteries turned into quagmires by the advent of the cartwheel.

But while the cause of Britain's current £7bn annual congestion problem is more complex, the current Government's solution is surprisingly familiar. Yesterday the Prime Minister called on private investors to step in to help improve the "decades-long" degradation of the nation's road network.

Alongside potential tolls which could be introduced when new lanes are added, he urged the private sector – including pension and sovereign wealth funds – to build for a future with a new "Victorian spirit".

His invitation was immediately welcomed by a group of pension funds with assets of £65bn which pledged to invest in a host of new schemes.

But the prospect of privatising the road network was criticised by Labour, environmentalists, some motoring and transport campaigners despite Mr Cameron's insistence that there would be no "mass tolling".

He said he would fight "vested interests" to force through improvements to the transport network. Mr Cameron compared his vision for roads to another privatisation – that of water in 1989 under Mrs Thatcher.

Jonathan Portes, director of the National Institute of Economic and Social Research, who worked on the water selloff as a junior Treasury official in the 1980s, said that while road privatisation could offer economic and environmental benefits water was "exactly the wrong model" to pursue.

He said: "Consumers ultimately benefited from increased efficiency and from greater capital investment... However, at the same time, the industry was privatised under an excessively lenient regulatory framework that clearly led to shareholders making very large excess profits at the expense of consumers."