Friday, 10 January 2014

Irish Transport Minister rejects more road pricing, but Ireland can do better

In an unsurprising announcement, the Irish Times reports that Minister for Transport Leo Varadka has "ruled out" new tolls or congestion charging during the term of the current government.

The point appeared to be that public transport wasn't good enough to allow for the imposition of additional charges on motorists, so on the face of it, it looks like a rejection of any congestion charge for Dublin (which is the only sort of scheme that the comments would seem to be directed towards).

The report quoted him saying:

"We need major improvements for public transport before we bring in any new taxes on motorists. Places like London, Oslo and Singapore have congestion charges but they put in place top class public transport first. That is the right way to do it in my view but the current state of the public finances means we have limited resources to invest in public transport".

It is curious that several other dimensions to pricing don't appear to have been entertained at all.  

One being to replace some existing motoring taxes with some form of road pricing, as I advocated in a presentation to the ITS European conference in Dublin last year.

The obvious example would be to replace the high tax on ownership of heavy vehicles with a distance/weight based charge for using all untolled roads in Ireland.  This could evolve into a system whereby motorists choose to pay by distance for using their cars, with a significant discount on fuel taxation and ownership taxes.

Ireland, being a relatively self contained country (its border with northern Ireland creates some issues, but also some opportunities) can evolve towards a more efficient way of charging for its roads, and take the success of individual toll roads and use it towards a road pricing system that isn't about paying more, but about recovering the same revenue more efficiently and fairly.

Yet why should this be done in Ireland?

There are three sound reasons for doing so:

1. Revenue sustainability:  Fuel taxation faces ever decreasing revenues as motorists shift to ever more fuel efficient vehicles with the only easy policy response being to increase taxes, which increases the pace of this shift.  It also penalises those who have little alternative but to drive.  A shift towards charging vehicles according to what they use, can mean charges can be set to recover the costs of maintaining and renewing roads (which in Ireland should be able to be optimised across a network that largely needs a long term approach to asset management).

2. Economic efficiency and equity:  Taxes on owning vehicles and burning fuel do not reflect the costs of maintaining and renewing roads, whereas charges based on distance and weight can do so.  The heavier the vehicle, the more it contributes towards wear and tear of roads, and the more it should pay.  Being able to set charges on an economically efficient basis to recover these costs fairly across road users, should mean a more efficient allocation of resources and costs.  Given there is little need for capital investment in new roads outside major cities, it will mean road users in rural areas would not be charged to pay for high capital projects, but it would also mean they would be ensuring that what they pay gets spent on the network.  If charges need to rise, they could do so transparently, but similarly efficiencies in road maintenance could see money channeled into improvements or in keeping charges from rising.

3. Long term scope for congestion charges:  In most cases, the Irish road network doesn't need congestion charges, but in Dublin in due course, it will make sense to charge to use some roads at peak times, to manage demand.  Having a system in place whereby all vehicles eventually pay by distance, can also enable a seamless introduction of congestion charging on a distance, time and road specific basis, rather than a blunt London style area charge.   Of course it would take many years before this could be effectively introduced, but it would avoid the distortions and boundary issues with conventional congestion charging, and agreement could be reached before such charging to use such revenue either for additional expenditure on transport infrastructure or on lowering charges at other times or across the network.  There is no particular reason why congestion charging need raise additional revenue, rather than enable discounts at other times.

What I'd do is set up a dedicated highways fund to place part of existing motoring taxes into, to pay for national and local roads, and then develop a plan to transition heavy vehicles towards a weight/distance charge that would fully offset ownership and purchase taxes, and partially offset fuel taxes.  

Charges should be set objectively, based on a cost allocation model that considers the long run capital and operating costs of the network and allocates them by vehicle type.  Then a system be put in place to adequately refund vehicle owners with reduced taxes.

Why should any politician consider this?  Isn't it just likely to cause more grief?  Well not if it is placed in the context of fixing up the country's poorly maintained roads, and for the scheme to be mandatory only for newly registered heavy vehicles, with a transition plan over time.

The Irish economy would benefit considerably by a shift from fuel taxation to charging for road use directly, and it would protect Ireland from the inevitable difficulties of confronting declining fuel tax revenues with higher taxes.  It would put it head and shoulders ahead of the UK in confronting this and in charging more efficiently, and it would change any future debates about congestion charging in Dublin - by making it not about new charges, but about reforming road taxation more generally.

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