Friday, 27 January 2012

UK truck road user charging: Consultation document released

As was reported in February 2011, the UK government has decided to introduce a "vignette" system for heavy vehicles, largely so that foreign trucks pay something to use UK roads.   The policy driver behind this comes from extensive lobbying from the Freight Transport Association regarding what it sees as an unfair competitive environment.

The UK has one of the highest rates of diesel tax in the EU, as a result, the UK domestic haulage industry claims that many foreign lorries enter the UK with full tanks of fuel, do business within the country (which under EU law they are entitled to do, as road freight haulage is a service subject to the free trade provisions of the EU treaty) and leave without paying a penny to use the roads (unless they happen to cross one of the small handful of toll roads).

Given UK truck operators pay annual vehicle excise duty (vehicle registration/licensing fees) that vary according to vehicle size (as a very broad proxy for road damage caused by different vehicle types) and diesel tax at £0.5795 per litre (about US$0.91 per litre), this is seen as a considerable disadvantage (notwithstanding that the foreign lorries will pay local registration charges in their country of origin).

In almost all other EU Member States, there are truck tolling or road user charging systems that mean UK operators would pay to use their roads.  In Germany, Austria, the Czech Republic, Slovakia and Poland there are all distance based toll systems on motorways for heavy vehicles, with Belgium and France proceeding to introduce such systems as well.  France, Italy, Spain, Ireland and Portugal all have extensive toll road networks for many of their major motorways.   Belgium, Luxembourg, the Netherlands, Denmark, Romania, Hungary, Bulgaria and Sweden all have vignette systems.

As a result, the UK will introduce a vignette system as well.  A vignette is essentially a pass or permit to use a road network over a set period of days.  The UK Department for Transport has released full details of its plans for public consultation this week.  Below is a summary of the highlights:

Vehicle scope:  All goods vehicles with a maximum Gross Vehicle Weight of at least 12 tonnes
Network scope: All roads in the UK
Type of charge:  Time based charge (vignette) based on pre-purchasing access to UK roads for either 1 day, 1 week, 1 month or 1 year.
Variations by vehicle type:  Vehicles will pay according to seven classifications, based on existing UK Vehicle Excise Duty categories.  These represent size, axle configuration and weight.
Technology:  Automatic Number Plate Recognition.  Unlike most systems in continental Europe (but like Hungary and Romania), the purchase of a vignette will not involve a sticker or paper licence, but be a record of the vehicle's number plate.  This enables enforcement to be matched with enforcement of Vehicle Excise Duty, so that number plate images will be taken at random locations to enable enforcement to be carried out by stopping vehicles or checking them at the border (e.g. Ports and the Eurotunnel rail terminal).

The proposed rates are described below:


It is clear that the rate "per day" reduces considerably for those choosing to drive on UK roads for ever longer periods.  This is fair because it is likely that short term users will be using the network more intensely for that period of time compared to longer term users.  The Department for Transport claims that the charge levels do provide a broad proxy for road damage costs based on the various vehicle types.  Although the table above indicates UK owners can only buy an annual vignette (which is not the case for systems in other countries), they can also buy a six monthly one and the reason is logical.  As the vignette is needed to drive on all roads, a vehicle that is licensed for a year in the UK needs a vignette of that duration to operate on any roads at all.  Vehicles in the UK can also be licensed for six months.

However, it is curious that a foreign vehicle can't pre-purchase a six-monthly product.  This may be an issue with the European Commission, which is scrupulous about ensuring Member States do not act discriminately in how they charge trucks.

However, unlike many other truck charging systems in Europe, this one will have an offsetting reduction in other charges.  Vehicle Excise Duty is to be reduced by around the same amount as the price for the vignette.  It wont be a 100% matched reduction, but 94% of UK vehicles will pay no more, and 4% will pay no more than £50 a year.

Curiously, two systems of sale and administration are proposed.  For UK vehicle owners it will be through the Driver and Vehicle Licensing Agency, an arm of government that already operates the Vehicle Excise Duty scheme.  For foreign owners there will be a private company contracted to provide retail, phone and online sales outlets.

The price is estimated, on average, to represent around £0.05 per mile travelled (US$0.08).  It is estimated to raise a total of £22-£25 (US$34.5-US$39) million per annum from foreign trucks (and £0.5 million from UK ones once the offsetting reduction in vehicle excise duty is taken into account), with annual operating costs of £3-£4.8 (US$4.7-US$7.5) million.

Around 250,000 vehicles in the UK will be eligible to pay the vignette.

All of the revenue expected from the vignette will simply be treated as standard taxation, with no hypothecation for road spending (hypothecation is an anathema to the UK Treasury which likes to treat all government revenue as flexible for any purpose).

The Freight Transport Association supports the move with only a few concerns around detail.

Further details are available in the consultation document here (PDF)
The impact assessment is here, including slightly more details about revenues, costs and economic impacts.

Curiously, but not surprisingly, a distance based charge has been ruled out, but the consultation includes asking whether distance charges would be preferred.  The basis for ruling out the distance charge appears to be cost (and the fact it would raise a lot more revenue from domestic users making offsetting cuts in Vehicle Excise Duty insufficient to fully compensate), but I will have a more detailed look at that before deciding whether to make a submission.

Conclusion

A reasonable approach appears to have been taken, although I am wary of the different treatment that appears to be given to UK and foreign lorries, albeit it is being described as being equivalent.  The scheme will clearly raise some revenue, although that wont vary according to usage for obvious reasons, it is more likely to mean that increasing in volumes of foreign vehicles will increase revenues.
It is a shame that none of the revenue will be hypothecated, as it could have been a useful source of funds for maintenance - directly, but it requires Ministers with steely determination to take on Treasury mandarins in their ideological opposition to user pays also being spender accountable.

I am curious as to what the Irish response will be, given it is the UK's only land border and has no border control at all.   My first thought is that the Irish government ought to start investigating how it might do the same thing.

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