With a new system needed to help fund roads and transportation, reduce emissions and manage congestion when fuel taxes decline, John Thornton asked a group of industry leaders and experts: is road pricing inevitable?
Alistair Hunter, highways business leader for UK, India, Middle East and Asia, Arup
The economics are undeniable: the UK Treasury faces losing between £35 and £37bn by 2050 in vehicle excise duty and road tax, as fleet operators and private motorists increasingly switch to zero-emission vehicles. Much of this revenue isn’t used to maintain and build roads, but instead funds wider public spending such as health, education and social care.
The need to replace this revenue is clear and the recent report from the UK Transport Select Committee promotes national road user charging at no net increase in tax to the road user. However, officials will be concerned about the cost of implementing road pricing schemes, which contrast to historically very efficient methods of collecting receipts from fuel duty and vehicle ownership.
Road charging only really makes sense if coupled with the wider social and transport benefits it can deliver – supporting the decarbonisation agenda, encouraging modal shift to active travel and public transport, changing user behaviour, reducing congestion and helping achieve greater social equity. So, while road pricing is arguably already on its way through various urban charging schemes, a national scheme is probably a good decade or more in the future.
Andy Marchant, traffic expert, TomTom
Is road pricing inevitable? In one word – no. To create road-based pricing, the government would need to review the current ways that drivers are taxed to ensure it works fairly for all drivers. No two people drive the same amount, so someone who drives a lot might be unfairly impacted by road pricing schemes if current tax policies remain.If road pricing is introduced without reducing fuel or vehicle taxes, then drivers will simply find alternative routes, leading to higher congestion levels on roads that are incapable of handling such traffic. Vehicle tax-per-mile could work if it focuses on the heaviest road users and therefore those that emit the most pollutants. However, as electric vehicles (EVs) become more popular, this becomes void as the number of cars being taxed will reduce significantly – unless the plan is to tax EVs too, which would be cause for much debate.
What’s more likely is that city zones will become more common, where drivers are charged to drive within a city’s limits to reduce the volume of cars and therefore emissions. This could be seen as an attack on local trade because of reducing visitor numbers, but improvements to public transport and EV charging infrastructure could mean the same amount of people visiting, just with less impact overall on the environment.
Duncan Buchanan, policy director – England, Road Haulage Association
Road Pricing is not inevitable. It is too expensive, too slow, too damaging and needs to be abandoned as an option for at least 10 years. We need to recognise that mobility is a good thing for people and goods. It is our high mobility society that underpins our economy and the welfare of us all within it. Many promote road pricing as tool to suppress motorised road transport. Suppressing mobility, pricing people off our roads, will be bad for society and our economy. High charges based on time and location are manifestly unfair on those who have no choice on when or where they travel, workers and commercial users being particularly hurt.
Many promote road pricing to deal with the tax loss from falling fuel duty as we switch to EVs. But there is no way a national system can be in place in time to deal with the government’s financial black hole. It’s impossible, there are too many vehicles to retrofit and too much infrastructure is needed. Road pricing also raises ethical questions on how personal data from such schemes is gathered and used. So, what’s the alternative? Charge vehicle excise duty for all new vehicles including EVs. Then we charge ‘fuel duty’ and VAT on the electricity used to externally charge EVs. This is deliverable quickly as only EVs will need modification for this to work.
Siân Berry, former leader, Green Party
Speaking as a Green Party member of the London Assembly, [the Greens and the Liberal Democrats] are quite frustrated that further steps haven’t been taken on [road pricing] so far by the Mayor of London. We’re talking about smarter road charging here, which is per kilometre, rather than having someone pay once and drive around for the whole day, which we’re starting to see with schemes with area-based charges. These aren’t having quite the deterrent effect it ought to.Certain groups are also being unfairly affected by area-based charges. People who live outside the charging area who are obliged to come in for doctor’s appointments or sessions related to health in other ways are having to pay for this. I think a per-kilometre charge would make more sense and be fairer. With a more sophisticated system you could vary the charges to create extra incentives for travelling at different times of the day and avoiding particular areas of the city. You could also do more to change the charges for different kinds of vehicles and how to exempt people.
So, yes, I believe road pricing is inevitable – even the current Conservative government is looking at bringing something like this in. London could be world-leading and really set the set the standard for how to do it.
Keith Mortimer, director, Wyeval Consulting
Yes, road pricing is inevitable. Those who should know better might, dependent on their starting condition, learn to stop politicising, evangelising, demonising, or wilfully misrepresenting road pricing. The current but dwindling UK mishmash of fuel duty with VAT on top, vehicle tax, insurance tax, HGV Levy and any other national tariff has nothing whatever to do with roads or vehicles. It’s a precariously evolved scheme to build a cash mountain for the almighty Treasury, whose stewards determine which recipients deserve its largesse. Even so, the proceeds of this £30bn-plus stack don’t come near the actual costs notched up by road users.
In many places people employ road-user charging to fund mobility options and reinforce behaviour change. It works. Cities, choked by individual mobility choices, deserve enough resources and funding so they can offer people better ways to travel. Driving cars in towns, electric or not, isn’t the greenest thing to do and will always make congestion worse. And when a tipping point is reached, it’s not just one thing that changes. Given good choices, citizens themselves have the responsibility to decide well. Urban and regional authorities together with industry can furnish the insight to recognise local challenges while contributing to the global good.
Martin McTague, national chair, Federation of Small Businesses
Small firms based in places where public transport is inadequate or even functionally non-existent already face logistical barriers to moving staff and goods, and any road pricing plan must not unfairly burden them with extra cost.Road pricing is closely linked to the UK’s efforts to reach net zero, with zero-emission vehicles likely to be exempted from charges, or to pay far lesser amounts. Small businesses understand and largely support this goal, but policymakers must keep in mind that smaller firms by and large simply don’t have the resources to invest in new vehicles – and new-to-them powertrains. We would support a scrappage scheme that helps small firms trade in fossil-fuelled vehicles in exchange for grants toward cleaner hybrids and zero-emission vehicles.
The government’s sudden withdrawal of the plug-in car grant in June is hard to justify in this context. We’d like to see a commission of industry experts consulted on any future road charging system, so that the revenue implications for the Treasury can be balanced by a fair deal for small firms.
Peter Ummenhofer, founder and managing director, Go Consulting
I believe more governments will introduce some sort of nationwide road pricing scheme in the future. While in the past the main purpose of road tolls has been highway financing and maintenance, the need for general road pricing is driven by the climate crisis. Globally, road traffic accounts for about 20% of CO2 emissions.
In Germany, the government set a goal to reduce CO2 emissions by 40% in 2030 compared to levels in 1990. While reductions targets in all other sectors are being met, the traffic sector still emits the same amount of carbon dioxide as it did at the beginning of the ‘90s! To have a chance of still achieving emissions targets, we need to drastically change how we travel from A to B. Governments will have to introduce road pricing to provide an incentive that helps change the ‘mobility behaviour’ of the people in their country. Of course, this will have to be done in a socially acceptable way, but I don’t see how else the transport sector can efficiently fight climate change. What’s more, road pricing provides additional benefits, such as generating funds for public transport.
Nina Elter, chair, RUC Committee, IRF Global
For too long we have allowed ourselves to think of roads as free goods. Of course, we pay for roads, but the reliance on fuel taxes and appropriations to fund them has meant that the average road user has been left largely unaware of the cost of their travel choices.In addition, important externalities, like congestion, or the fragmentation of urban spaces, the undermining of community amenity and the contribution to climate change, have rarely been explicitly factored into what is paid for through transportation funding, let alone the charges seen by road users.
Tolling is a form of road pricing that is already used, of course. People are often very aware of toll prices. But why people pay as much as they do is often unclear. Indeed, it has much to do with meeting the costs of financing as delivering an agreed customer level of service. However, some current tolling use cases also show us the ability of pricing to influence these externalities, be it through spreading peak demand, incentivising mode shift, or encouraging the uptake of cleaner fuels.
Paul Campion, CEO, TRL
Road pricing is a great tool to fairly spread the cost of public infrastructure and to reflect the nation’s legal obligation to decarbonise transport, across all vehicle types, without placing the bulk of the cost on gasoline or diesel vehicle owners. With road pricing, the collected costs are levied based on the number of miles travelled at rates that vary depending on the vehicle type.
Based on this reasoning, road pricing has advantages over the current tax regime. However, as well as requiring investment in a technical solution at a large scale, the biggest barrier to its implementation is political. People are, in normal circumstances, unwilling to vote for higher or additional taxes. Politicians know this and are, therefore, unwilling to propose anything that resembles a tax. Worse still for a political manifesto, road pricing does not just resemble a tax: it explicitly names an added charge for using something people are used to getting for no direct cost. Although roads are currently not free, calling it a ‘road pricing scheme’ suggests the introduction of a brand-new cost.
Owen Wilson, head of major roads, Transport for the North
In 2020 the UK government made a commitment to end the sale of new petrol and diesel cars and vans by 2030. The sale of new EVs has grown significantly as a result (60% June 21-22). The electrification of road vehicles means that the exchequer will lose revenues from fuel duty and road tax (c.£35bn/yr). Therefore, we need to do things differently, but future measures should not solely be about money, nor should we be considering road pricing alone.We must seize the opportunity to look at how the relative cost of motoring, bus travel and rail travel influences the choices we make. For only by looking at transport in the round will we be able to ensure that our investment choices are sustainable for the longer term. This requires using revenues raised to be invested in improving transport options across all modes.
New measures for mobility pricing need to be seen as fair, equitable and transparent. The care worker in Blackburn, teacher in Carlisle or logistics manager in Doncaster will need to see how any new form of mobility pricing benefits them and their communities. Public buy-in is critical, and now is the time for the transport sector to lead a conversation on developing a vision and delivery strategy which is seen as bringing tangible benefits to people’s lives.
Steve Gooding, director, RAC Foundation
It is the projected decline in fuel duty revenue, consequent on the moves we are making to get to a net zero carbon future, that is stoking the argument that road pricing in some form is inevitable. I do think it is inevitable that the chancellor will want to find some way of plugging the funding gap a fall in fuel duty income creates – the government has already said as much: “We will need to ensure that the tax system encourages the uptake of EVs and that revenue from motoring taxes keeps pace with this change”.
But there’s a stark difference between a scheme that is principally about making money and one with a more ambitious objective to achieve broader policy outcomes. So, is a road pricing system that varies the level of charges by distance, location and time of day inevitable? Whether we are talking about local schemes or a national initiative, I suspect the complexities involved will prove, if not insurmountable, then at least extremely daunting and hard to sell, especially during times of stretched household budgets. It’s claimed the only things inevitable in life are death and taxes. Is some simple form of revenue-raising road charge inevitable? Probably. Beyond that, I think not.
Trevor Ellis, owner, Trevor Ellis Consulting
There is an increasing consensus that the only solution to the falling fuel tax revenue is distance-based road pricing. The truth is, if not for voters, governments would have done this years ago. In addition to the revenue, for the first time, authorities would have a tool to manage demand,
address congestion and tackle pollution hotspots.With connected vehicles, ‘black boxes’ and smartphones, there are no significant technological barriers. This is an area where the technology and experience in Europe is way ahead of other countries, including the USA.
But what about the voters? We must recognise the serious concerns the public has with distance-based charging. People do not like being tracked and fear the government will use the data for speed enforcement or checking their tax return. They are also suspicious that this will be an additional charge rather than replacing existing taxation. Convincing the public is by far the biggest challenge, and it will need a consensus across the political parties. The public needs to be convinced that the user pays concept is fair and there are sufficient safeguards to ensure data is not misused.
So, the only question in my mind is “how much loss of fuel tax revenue is needed before governments take action?” It is definitely only a matter of time.
Stuart Dossett, senior policy adviser, Green Alliance
Yes, road pricing is inevitable, but it needs careful design and an open conversation with the public. Research conducted by Green Alliance and BritainThinks in 2021 showed more support than opposition for road pricing: 37% support it while 24% oppose it. Participants wanted taxation to be fair and easy to understand, two important principles for designing road pricing. Road pricing has many potential benefits, including a reduction in pollution, congestion and existing inequalities. But it must be designed so it does not slow down the switch to EVs or discourage public transport and active travel options.
There are multiple ways pricing can be applied. Should the charge be a flat rate per mile or based on time of day and location? Should it be the same for all vehicles or differ by vehicle weight and emission intensity? Should the charge apply to all vehicles or to EVs only, while maintaining fuel duty on petrol and diesel vehicles? Being clearer about the purpose of road pricing will help to answer these questions. Fuel duty is not a visible tax, but road pricing will be. Engaging the public on the reasons for road pricing and the impact of the different design options on different people is key to ensuring that it is seen as fair and is easy to understand.
This article was originally published in the September 2022 issue of CiTTi Magazine. Read the original article.
