Monday, 5 September 2011

RAC Foundation revisits the acceptability of road pricing for the UK

Background to UK pricing

A motorists’ advocacy group isn’t typically known for advocating road pricing. Most motorists are suspicious of being told it is “good for them” to have to pay to use a road, although they will grudgingly accept a toll on a new road, as the price to pay for a new route. As long as the old route is untolled, they are happy.  

However, roads are priced almost everywhere, just not very well and certainly not directly. Fuel taxes almost universally serve as a proxy price for road use, one that is “prepaid” in that a motorist pays a tax, with the fuel, before using the roads. This is grudgingly accepted because of its simplicity, but motorists have long been suspicious that the money collected isn’t well used. Why? Because they see the state of the roads they use.

In the UK, most towns and villages have plenty of potholed local streets, because of a lack of maintenance by local authorities, who themselves blame government for not giving them enough money for it. Motorists in the UK know they pay just under £0.58p a litre in fuel tax (US$0.94 a litre or around US$0.206 a gallon). Many also know that none of that money is hypothecated (earmarked) for spending on roads, but that the government spends around one fifth of what it collect on fuel tax on roads. Understandably, they think they are getting ripped off.

However, the real crippler for mobility on roads in the UK is congestion. Sir Rod Eddington undertook a comprehensive review of transport policy for the last government, and stated that congestion cost the UK economy between £10-20 billion p.a. (US$16-$32 billion) in lost time, productivity and wasted fuel. Given the current fiscal position of the UK economy, there is no remote chance that government will support road construction to address much of that (nor is there likely to be public appetite for the necessary road building in built up areas). Furthermore, while public transport delivers mobility on some major corridors, the potential for mode shift without radical changes in pricing, is marginal indeed. Again, given expansion of public transport tends to rely on subsidies, the government funding potential to do more than is currently approved is limited. Certainly, the business case for a new high speed rail line is not based on mode shift from road to rail.

Investigations and studies into road pricing in the UK were substantive in past 10 or so years. The London congestion charging scheme has been lauded worldwide, and the British government was on the cusp of introducing a nationwide distance based road pricing scheme, on all roads, for all trucks (called Lorry Road User Charging (LRUC)), until the project was cancelled due to Treasury fears of risk around cost and technology of large government IT projects (among other reasons).

The previous government’s embrace of road pricing saw it move emphasis towards incentivising local authorities to replicate the success of London with the Transport Innovation Fund. In essence, councils would get new money for public transport and roads if they also introduced road pricing (or workplace parking levies). However, that fell on its face when Manchester foolishly decided to put the idea to a referendum, and grossly mishandled the public relations. A nearly 4-1 majority against congestion charging in Manchester saw the deathknell of new congestion charging schemes for some years, along with the recession and financial crisis. 1.8 million people signed an online petition against national road pricing, as the public revolted against the idea of a new tax.

Quite simply, most British motorists didn’t trust politicians to introduce road pricing without reducing other taxes (and neither did politicians make it clear that would happen), and most didn’t trust that the money would be spent on roads. Even the devolved Scottish government abolished tolls on all of the roads in its territory.

The only light in the road pricing world in the UK has been the Conservative/Liberal Democrat coalition government that has been progressing a time based (vignette) lorry road user charging system, whereby it is expected that trucks will pay to use the road network on a daily, weekly, monthly or annual basis, and there will be countervailing reductions in annual Vehicle Excise Duty (known in other countries as annual vehicle licensing/registration fees).

RAC Foundation goes out on a limb

The RAC Foundation is one of the UK's leading motoring advocacy groups. The RAC Foundation’s Director, Professor. Stephen Glaister, is a renowned transport economist and has a long background in influencing transport policy in the UK. He was on the Transport for London board for eight years, and was a member of the National Road Pricing Feasibility Study steering group. He has long been an advocate of road pricing, so it is not surprising that he commissioned Dr. John Walker, (another renowned expert on Intelligent Transport Systems, with a particular emphasis on the technology behind road pricing) to prepare a report called “The acceptability of road pricing”. I recommend you download it here (PDF), because there is a wealth of useful information in it, and I can’t start to do justice to it all (or comment on it).

Dr. Walker seeks to break through the political morass of road pricing to find a way for it to be acceptable. The key points he made were:
- Road pricing has to be equitable, compared to the alternatives. Paying for what you use isn’t inherently unfair, but helping those less fortunate may be seen as fair;
- Revenue neutrality is important. For road pricing to replace existing taxes so that government doesn’t collect more than it does at present, or for any revenues to be invested in improving the transport system;
- It shouldn’t have high overheads. One of the chief concerns is that it will be administratively complex and inefficient to collect;
- People need to be convinced that it will work. Education and demonstration projects are essential to do this.

He points out that in London, congestion charging is now accepted, given Ken Livingstone was re-elected as Mayor after introducing it, and Boris Johnson as Mayor whilst abolishing the Western extension, has no interest in abolishing the original central charging area. In Stockholm, a demonstration project saw a referendum on congestion charging narrowly pass, whereas today it reportedly has 70% support.

He also notes that while Stockholm had a major expansion in bus services before congestion charging, the mode shift did not occur until afterwards. In other words, simply supplying more public transport is not sufficient in itself.

Perhaps the most important conclusion he reaches is that previous estimates about the costs and risks of introducing wider road pricing systems in the UK are now obsolete. Technology and the implementation of systems elsewhere has reduced the cost and the risks of road pricing. He believes costs need to be looked at again, with some piloting done to confirm it.

He believes such piloting could enable LRUC to be started again, and that another comprehensive study, like the ROCOL study of 1999, be commissioned, to review how to introduce road pricing.

A key proposal is that any future introduction be undertaken with rebates of fuel tax. That is a critical way to drive acceptance, as people will understand they are getting something back.

In short, any further progress will depend on giving motorists a reduction in the current taxes they pay.

Some of the interesting statistics he quotes include how 67% of freight tonne kms shifted go by road (second is water, covering coastal shipping and inland waterways with 20%, rail is a distant third with 9%). 84% of passenger kms travelled (excluding pedestrians) are by car or taxi, with rail far behind on 7% and bus on 6%. In short, roads are by far the dominant mode of domestic transport, even a doubling of rail passenger and freight trips will not change this.

My analysis

Walker’s thesis is compelling. He is quite right that it does not seem impossible to gain public acceptability, but to do so requires motorists to be convinced that road pricing will benefit them. The chief barriers to that come down to:
- Disbelief that road pricing will reduce congestion;
- Lack of trust that the money collected will be used to improve the network;
- Lack of trust that other taxes will be reduced to compensate.

His paper includes some summary costings for a potential nationwide LRUC scheme based on distance of between £200 million and £1.3 billion (US$324 million-US$2.1 billion). More interesting is that a more recent public opinion survey indicated the three biggest reasons to oppose road pricing are:
- “it would cost more” (which could be addressed by rebates of other taxes);
- “too much tax paid already” (ditto);
- “things are fine as they are”.

He believes there should be more demonstrators. I agree this would be helpful, but there have been several demonstrations and other than those who are part of the “road pricing community”, their results have been almost invisible on a wider basis. The odds of a second congestion charging scheme in the UK in the next five years are very low, the LRUC vignette system likely to be introduced will do little to demonstrate anything (besides the government’s appetite for low risk, but low impact options) and anything more will need money to prove something beyond technology. In my view, the technology isn’t the issue – it is proving to people that behaviour will change and positive results can be gained for road users.

However, I don’t agree with his idea of some sort of nationwide pilot of ANPR (automatic number plate recognition) based charging. Simply because it will be unlikely to achieve anything in terms of demonstrating value to the public, and will unnecessarily raise fears about “tracking” and “privacy” which will louder than the genuine public concern about it.

I think it would be preferable to pilot a system whereby people chose to pay by distance instead of paying either annual vehicle excise duty (road tax), or/and part of the fuel duty. Such a system would need to be about private motorists, and may duplicate part of the pilot trial undertaken in Oregon some years ago. It would be intended to show how road pricing can be introduced in a “revenue neutral” cost effective way, and demonstrate that it isn’t simply about getting more money.

Beyond that there needs to be a debate about the future of raising revenue from motorists. Part of this can be driven by the ever decreasing yields from fuel tax because of electric and ultra fuel efficient vehicles, but it also needs to be about changing the relationship between the motorist and government in the UK. At the moment most motorists feel taxed a lot (and they are), and they see the state of some road maintenance, and congestion at bottlenecks, and wonder what value they get from it. The truth is, the road transport sector has for years been a windfall form of easy taxation, which governments have used to pay for anything but transport. That wont be quick or easy to fix, but what can be done is to have a closer relationship between what is paid and how roads are funded.

People accept that they pay for what they use in electricity, gas, water and telecommunications. They know that what they pay for, pays for the networks and services they get, begrudgingly at a profit for the owners. The networks almost always function to expectations as a result. In some cases they willingly pay less or more at different times due to demand.

Conclusions

I believe that the future for the UK has to come from freezing existing motoring taxes and providing motorists with options to opt out of them. In the meantime, surely the most obvious demonstration project would be to hurry up with converting the Dartford Crossing barrier based tolling system, with electronic free flow tolls and peak time charges. As long as new capacity is being progressed, with the cashflow from tolls, this ought to be a simple test case as to how to make tolls become more publicly acceptable on an existing road.

The RAC Foundation’s support for road pricing hasn’t gone done well among some motorists, but its courage in pushing for a rational, sensible discussion and to seek to address the key issues behind it, is welcome. If only all motorists’ organisations could soberly read this report, instead of writing ignorant insane rants that are technologically illiterate.

and think a bit more about how road pricing can produce positive results for motorists as a whole, rather than remain wedded to the Soviet style central planning approach to road funding and taxation that is the norm in most of the developed world.   As Dave Hill of th Guardian writes - Conservatives should have no opposition to road pricing, as it is a market based mechanism.  However, as in politics all too often, perception is more important than principle.

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