Monday, 29 October 2012

Higher road tax for UK motorways?

Some UK newspapers have a history of vocal opposition to any suggestion of road pricing, so what appears to have happened in the last 24 hours needs some explanation.

The report comes from a senior Treasury official apparently saying that one of the options considered for reforming vehicle excise duty (VED - an annual vehicle licencing fee commonly but misleadingly called "road tax" as none of the money collected is hypothecated for roads) would be to charge motorists much less in VED, but charge a higher rate for permission to access the motorways and other major trunk roads.

In short, it would replicate the vignette system which applies in eight countries in Europe and is soon to be introduced in Belgium.  Those systems mean that motorists who wish to use the motorways/major highways need to buy a vignette for access to those roads, but those who choose not to, can use the rest of the network for no more.   Most countries with such systems offer options to buy 1 year, 1 month or 1 week for those who may not regularly use the network.

The reason for it is primarily to allow for foreigners to pay a share of the costs of using those network, a relatively minor issue for the UK, which has less than 2% of traffic carried by foreign vehicles.

The Daily Mail produced the headline claiming that there would be a "two-tier" road system with the rich paying to use motorways, and the poor left to using other roads.   It claimed "spy cameras" would catch those who don't pay, which is just going to be ANPR cameras, such as those used to enforce the London congestion charge, speed cameras and service station fraud.  

The AA rightfully said it would encourage diversion onto non-arterial routes, and that would be correct.   It makes little sense to charge the motorways and trunk roads more, largely because the marginal infrastructure costs of using these is lower than using local roads, and the environmental and congestion impacts lower as well (as it does not expose pedestrians or residential buildings to as much pollution).

Another option cited in the article would be a one-off tax on new vehicles, which would be worse as this would simply delay new vehicle purchases, meaning the vehicle fleet would get older over time.  This would mean more fuel consumption, more pollution and less safe vehicles than would otherwise be the case.

Oddly, the Daily Mail also reports that the one option that would make a positive difference, has been excluded:

A proposal to link the amount motorists pay in road tax to how far they drive on motorways, or their use at peak times, has been ruled out.

The RAC Foundation published an interesting report by Brian Wadsworth of the "Roads Ahead Group" proposing such reform.   He suggested that once people pay VED, they could earn discount points if they opt into a system that means if they do not drive at peak times on certain congested roads, they earn a credit towards their VED.  It means at one extreme, the rural driver who never goes on congested city or arterial roads would earn a substantial discount on the following year's VED, whilst at the other end, the driver who frequently drives at the peaks on busy roads, loses all discount points and that is that.  That driver just pays VED - as now.   The system would require technology on board vehicles to measure time or distance spent in peak zones to calculate the discount, which wouldn't be dissimilar to road pricing.

Of course, this doesn't fix the long run revenue issue, which for VED is the fact it is an ownership tax that is based on CO2 emissions.  Revenue from such a tax is unlikely to grow as people get ever more efficient vehicles.

What it does do, is create a new level of trust with motorists that government measures regarding tax are not always punitive, and helps to derisk the future introduction of road pricing to replace existing taxes, although I remain unconvinced that this is the right way to do it.  It is fuel tax that is the real issue for long run revenues.

Yet the reports in the Daily Mail and Daily Telegraph do not enlighten.   What they do display is the ease by which motorists can be angered and upset by ill thought out ideas, because there is no trust in how governments set, collect and spend taxes that are levied directly or indirectly on vehicle ownership and use.  Until that is addressed, any reforms will be a political liability and unlikely to be implemented.


I doubt the UK government will introduce a vignette system for UK trunk roads, as there is little discernible benefit in doing so, and plenty of negative impacts from the idea.   Too many would divert from motorways and trunk roads to local roads, creating congestion and additional pollution, and it would not adderss the fundamental revenue issues.

Given the unwillingness to directly charge for road use on existing roads, it is fair to say that the most useful thing that may come under this government is some sort of hypothecation of existing motoring taxes and reform of the highways sector to allow for private ownership and commercial operation of the highways networks.

A few have been publishing interesting ideas about how to do this, including myself.  I will write about these shortly, but the key point is that until the way roads are governed and managed, the way spending on roads is determined and allocated and the incentives on road providers are radically altered, there is no way that tinkering with the existing second-best pricing tools will make a meaningful difference to the experience of road users.

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