Monday, 7 February 2011

UK to introduce time based heavy vehicle charging

The coalition agreement for the UK Government between the Conservative and Liberal Democratic Parties agreed to develop a road charging system to charge foreign lorries using UK roads, whilst ensuring domestic lorry operators do not have to pay more. 

The key concern being that foreign truck operators drive to the UK, with full fuel tanks and buy little of the very highly taxed UK fuel whilst undertaking work before returning to the Continent.  British truck operators say this is unfair because such trucks are not paying to use British roads.  Of course the British haulage industry pays annual vehicle licence fees and fuel tax both of which are high.

As a result, there has been substantial support among the British trucking sector for a charge for foreign lorries, as long as British operators do not have to pay more.

A report in the Daily Telegraph suggests some details of the proposed scheme, although many questions remain unanswered. 

The proposal is for a vignette, or time based licence, which could be bought in increments.  The article talks of a daily charge, but vignettes in other European countries are available for week, month or annual periods.  In essence it is a right to use highways (or all roads) in a country for a set period.   As such, it is simple to understand and requires no technology on board the vehicle.

There are two possible countervailing tax changes possible.  Whilst fuel tax could be refunded,  this would be complicated as it would not readily distinguish between light and heavy diesel vehicles.

The more likely compensation for British heavy vehicle owners is a significant reduction in annual vehicle excise duty (known as road tax) which is currently set at steeply increasing rates according to weight bands (although cheaper if there are more axles for a set weight).  Such a reduction is expected to mean that, when an annual vignette is purchased, British truck owners will pay no more than they currently do. 

EU law requires all Member States to be non-discriminatory.  So UK operators cannot have an advantage over foreign ones, but the matter of annual ownership taxes is a national consideration, so it is acceptable to impose a new charge on all heavy vehicles, but cut an existing tax for national ones.

There are a lot of EU Member States with similar schemes.  Belgium, Netherlands, Luxembourg, Denmark and Sweden have a common "Eurovignette", whilst Poland, Lithuania, Hungary, Romania and Bulgaria have their own ones.  Germany, Austria, Czech Republic and Slovakia have distance based tolling schemes for heavy vehicles, whilst France, Poland, Belgium and Sweden are developing similar schemes at various stages of development.

The government will be refining the scheme details this year, with a major consultation exercise and legislation to come.  One of the key issues will be the scope of the fleet to be covered, which could be only those over 12 tonnes or all vehicles over 3.5 tonnes.

Those with memories will note that the previous attempt to charge lorries was called LRUC (Lorry Road User Charging) and intended to charge all vehicles over 3.5 tonnes on all roads by distance, differentiated by vehicle type, road type and time of day.  That programme collapsed for fears of cost, IT risk and analysis indicating net revenue from foreign vehicles would not offset the cost of introduction.

It is hoped that UK Vignettes will be cost effective, derive net revenue from foreign hauliers and be a modest improvement on pricing at the moment.  Time based charging makes little difference for national operators who buy annual permits anyway, so little behaviour change is likely there (except perhaps incentives to have cleaner engines), but it will have an effect on levelling the market across borders.  That in itself is reasonable.

My bigger question is whether the vignette's revenue will be hypothecated, so that there is a relationship between what is paid for using roads and that money actually being used on roads.  Given that local roads are facing a pothole crisis due to budget cuts (and the Soviet style method of funding roads in the UK), a big difference would be made if that revenue was at least guaranteed as a pool of funds for road maintenance (it wont be near enough, but the principle would make a big difference to acceptability).   However, the UK Treasury will resist that on an almost ideological level.

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