Will the Mayor of London introduce road pricing on a wide scale?

Transport for London (TfL) has a serious financial crisis due to ongoing declines in patronage of London Underground, Overground and bus services because of the Covid 19 pandemic. Patronage has never recovered to pre-pandemic levels, and now the Omicron variant has scared off many more passengers, with London Underground peak time patronage now at half of pre-pandemic levels. Given London Underground usually generates a net surplus of fare revenue over operating costs, this has had a severe impact on TfL’s finances.

The tools available to the Mayor of London are Council Tax (a tax on residents of London), fares and congestion charges, or to cut spending.  So far the UK Government has provided £4 (US$5.3) billion in assistance since the start of the pandemic, with another £1 billion in capital spending from the Spending Review (in part paying for the, still under construction, Elizabeth Line - formerly known as Crossrail). 

However, this is not enough. TfL is seeking £500 (US$0.66) m for the remainder of the 2021/2022 financial year, £1.1 (US$1.46)b for 2022/2023 and up to £500m for each of the following two years, plus guarantees of long-term capital funding. 

So there is pressure to save and raise more money, and the Mayor must come up with ideas, to get a longer term rescue settlement plan from the UK Government.  Part of this is politics, with the Mayor claiming he will have to scrap 100 bus routes, reduce frequencies on 200 others and possibly close one Underground line (which seems highly unlikely).  He is currently proposing to increase Council Tax by £20( US$26.50) a year, phase out free bus travel for people aged 60-65 and to keep congestion charges at the recently increased level of £15(US$19.90) a day.  I’ll focus on the road user charging based ideas.  It's worth remembering though that the London congestion charge is only imposed on a comparatively small part of London (see below)

London congestion charge zone as a part of greater London

London boundary charge

The Mayor has made various proposals, including a cordon charge for vehicles entering Greater London of £3.50 a day. That idea is particularly troublesome because the boundary of Greater London is not, as many think, the M25 motorway, but actually an administrative line that most Londoners would not know exists.  It would slice through Buckhurst Hill, part of Dartford, cut off Chigwell and Grange Hill from London, separate Borehamwood and Elstree from Barnett and Edgware, and Watford would be outside London. Moor Park would be divided from Northwood, Sunbury and Walton-on-Thames are on the wrong side of such a cordon and Long Ditton the wrong side from Surbiton.  Chessington would be inside, but Epsom outside. As can be seen in the map below, the boundaries are not well known and in only a few cases does the M25 actually represent the edge of London (e.g. adjacent to Heathrow). In short, it would mean a lot of communities, with relatively poor access options to neighbouring communities, would face a congestion charge, although it would effectively be just a toll – because it isn’t about congestion.  If it were, it might apply at peak times, but this is a money making proposal, albeit it would not be introduced until October 2023 (so it is not going to make much difference in the short term).

Ministers are not supportive of the idea and there is some uncertainty over whether the Mayor has the full legal powers to implement such a scheme.

Map depicting Greater London boundaries from Wikimedia  (Contains Ordnance Survey data © Crown copyright and database right, CC BY-SA 3.0)

London's "share" of Vehicle Tax

The idea with more merit is for Transport for London to receive some of the money raised by Vehicle Tax (what are effectively vehicle registration fees), which is currently almost entirely hypothecated for National Highways.  The Mayor’s estimate is that this is worth around £500m a year, although it is far from clear how much is spent on motorways in London in a year, it is likely to be much less than that.   

Of course this wouldn't mean the Mayor doing ANYTHING new, it's just a claim on an existing tax collected by the UK Government, which would then need to find the same money from elsewhere to pay for National Highways.

The argument of the Mayor is that London vehicle owners pay Vehicle Tax, but there are few motorways in London itself. This is true, but then I have long argued that there is a stronger case for Vehicle Tax to be hypothecated to pay for local roads not the strategic road network, because as a fixed charge, it makes more sense to pay for the roads that are used for access, not roads primarily used as arterials (which would be paid for by usage-based charges).  However, without changing the policy around use of Vehicle Tax more generally on those grounds (after all, why should London get such funding but not other municipalities), it seems unlikely that much of a case can be made for Transport for London to get such money for its roads. 

So that idea isn’t going anywhere either.

There is also a proposal to tax online deliveries (in London), which seems difficult to administer and enforce (as there would be a need to identify all those undertaking delivery activities, which can include anyone with a car contracted to deliver anything from a retailer). 

More road pricing?

The Government has been encouraging the Mayor to be more ambitious and implement a wider road pricing scheme to manage congestion and as a corollary, generate the revenue needed.  It appears the Mayor is not interested, having already implemented an Ultra Low Emission Zone (ULEZ) across a wide area (within the North and South Circular Roads) with some controversy, although it doesn’t raise much revenue.  However, what could the Mayor do?

The Mayor has considerable powers to implement road pricing, with the purpose of managing congestion, not raise revenue, so could consider a number of options.  Here are some of them:

1. Multiple zone charges: Whether area charges as at present (capturing all vehicle movement within an area) or more simple cordons, London could become a patchwork of congestion charging zones at peak periods. Crossing between zones could be subject to a charge, a little like underground fare zones.  The main difficulty with this idea is that it would seem inherently unfair for those living or with businesses located adjacent to a boundary to have to pay to travel in one direction, or to have a cost in the way of customers from that direction.  Unlike tube boundaries, it isn’t easy to soften that.  In any case, it could be an option, and it is not any less blunt than a greater London boundary charge.

2. Strategic corridor charges:  Congestion charges could be applied on some congested corridors, this could include some Thames Crossings (Blackwall Tunnels will have a toll introduced when the Silvertown Tunnel opens), parts of the North Circular Road, A40, A4, A13, A10 etc.  These would need to be carefully designed to minimise diversion of traffic, but could be implemented at specific times to lower congestion on those routes (and would generate revenue).  They could even be designed to exempt shorter trips by requiring vehicles to cross two or more points to be fully charged.  Key would be to only apply charges at times of peak demand, not all day like the current congestion charge.

3. Distance based charge with a high flat fixed fee:  The theoretical best solution would be to enable road pricing by distance, time and location, so those that drive the most miles, at certain times at certain locations, pay more.  Such a system could be trialled, using telematics systems already built into some cars and trucks, and new systems that could be installed in suitable vehicles.  Users could choose to pay by mile, or pay a high flat fee instead, at least during times of peak travel (such a system could be zero rated during off peak hours or weekends).  It could be limited to travel within the North and South Circular Roads, with those roads not charged, and could have charge rates that vary by route/road type (higher on B and unclassified roads, lower on A roads to discourage rat-running).  The big issue with this option is it needs time and needs vehicles to be suitably equipped with the technology to make it work (the idea in Brussels of using mobile phones for this is not without merit, but has bigger challenges around enforcement). 

Key to making any wider congestion pricing scheme be acceptable is that it needs to deliver a significant improvement in the level of service for those paying. That means it should ease congestion, considerably.  Net revenues should also ensure that road maintenance is at a suitably high standard because it would be inefficient and unfair to be paying by mile and have potholed roads.  It also means there should be some capital works to address bottlenecks, such as fixing Hammersmith Bridge, but also intersections that are poorly designed, and even plugging the grossly inadequate sections of the North Circular.

It seems unlikely such a radical step would happen, but if it did it would go a long way towards encouraging the sort of modal shift the Mayor says he wants, as well as reducing emissions and significantly improving the productivity of London – as cargo, commercial vehicle users and buses could all operate much more efficiently than at present.  Given around half of all London households don’t have a car, it seems likely that if presented as a package to avoid Council tax increases, improve congestion, improve road maintenance, make bus services more reliable and lower emissions, it might get support. 

Meanwhile... tinkering

Meanwhile, the Mayor has announced that he is cutting back the congestion charge operating hours from 0700-2200 to 0700-1800 (as it was before), which will cut revenue by about £60m a year, although it will still operate between 1200 and 1800 on Saturdays and Sundays. Discounts for fleets paying automatically or anyone paying automatically are to be abolished as well, effectively increasing charges for light commercial vehicles. This is, of course, just tinkering.

Jakarta includes congestion pricing in its Transportation Master Plan

According to Tempo, 18 Jakarta roads are to progressively have congestion pricing introduced, cover 174 kms of road.  Jakarta has been discussing congestion pricing for over eight years, and has trialled it with some success, but has not been able to develop sufficient support to introduce it in full.  Jakarta maintains its "odd-even" policy for number plate access into the central part of the city in the meantime.

Meanwhile, Jakarta has made tremendous efforts to improve the quality of alternatives to the private car in  recent years, spending a great deal on footpaths adjacent to key corridors and installing cycle lanes (63km by 2020) and major new public transport networks. This includes lanes for bus rapid transit, expansion of the city's metro and major upgrades of its long neglected commuter passenger rail network. It also integrated fares for most public transport including a flat fare for travel between modes.

This saw Jakarta win a sustainable transport award at the end of 2020. This matters because for congestion pricing in Jakarta to be a success, it needed capacity for alternative options and the city was particularly poor for active travel, but with Covid, there has been a significant increase in cycling and walking. 

There remain challenges for congestion pricing, including enforcement based on number plate recognition, but if implemented well, it could see a significant transformation for a city plagued by congestion, pollution and previously with very poor alternatives to driving.

Netherlands to introduce road pricing for light vehicles from 2030

Those who have been following the road pricing scene for around twenty years may have memories of the Netherlands attempting to introduce road pricing (as in full network, all vehicles, distance/location/time of day based road user charging) several times in the past.

So the most recent news that the new coalition government in the Netherlands has decided to advance road pricing may give some a sense of déjà vu. However, I am a bit more optimistic.

Five previous attempts at road pricing for light vehicles

Three times in the 1990s there were congestion pricing proposals based on either city cordons or corridor based pricing, all of which failed due to political opposition. However, in 2001 and then again in 2005 there were attempts to introduce nationwide road pricing schemes called Kilometerheffing and Anders Betalen voor Mobiliteit.

Kilometerheffing (Kilometre charge) was announced in 2001 as a proposal to introduce distance-based RUC at a flat rate initially, from 2004, transitioning all vehicles onto the system in 2006 (to replace registration fees and sales taxes). It was to be built to be capable of allowing location and time of day based pricing in due course to help relieve congestion. There was widespread opposition, in part due to the forecast €6 billion implementation cost (as it was to require On Board Units to be installed in all vehicles). The proposal was abandoned by the new coalition government following the 2002 election.

Anders Betalen voor Mobilitei (pay differently for mobility) was announced in 2006 with legislation to follow in 2009 for implementation in 2018, also distance based varying by time of day and location. A key condition was that it would be implemented when operating costs would be no greater than 5% of gross revenues. However, the 2010 election saw a new government cancel the proposal, due to concerns over its scale, costs and difficulties in persuading motorists of the merits.

In short, the Dutch appetite for believing politicians that road pricing is about improving mobility is low. There is some sign of progress though.

RUC for trucks coming in 2024

In 2018 the Netherlands decided to introduce RUC for heavy goods vehicles. This is unsurprising since it is surrounded by countries with such systems (Germany since 2005 and Belgium since 2012). It will apply to all trucks 3.5 tonnes and above, on all motorways, highways and major roads (and local roads that may see traffic diversion). It would not apply to the handful of toll roads in the country. It Is now planned that the Netherlands will have heavy vehicle RUC from 2024, although legislation to enable it has not been passed yet. Rates will vary by weight/size and emissions rating. It is intended to replace the Eurovignette for the Netherlands and reduce vehicle registration fees (and apply to foreign as well as domestic vehicles). Revenues will be placed in a hypothecated fund for transport.

So that is a start, and puts it on a par with its neighbours, and also helps to set up some of the infrastructure that could support RUC for light vehicles, even though it is not on all roads (which is common to all such European schemes, except Switzerland and Iceland).

Light RUC from 2030 announced

The new coalition Government is to introduce RUC for light vehicles by 2030.  The political parties in the coalition had different views on the topic.  The liberal/centre right VVD, centrist liberal D66, centre right CDA and the conservative CU coalition.  The VVD and CDA only wanted it to apply to electric vehicles, but D66 and the CU want it to apply to all light vehicles, including light commercial vehicles, so that is what is going to happen.

It was originally only to apply to electric vehicles, but will be phased in for all light vehicles.

What do we know so far?

· It will apply to ALL light vehicles

· It will apply to distance travelled on all roads

· Charge rates will vary by emissions rating, but not location or time of day

· Once introduced, tolls will be abolished on the three existing/planned toll roads

· It will replace sales tax on vehicles and registration fees, not fuel tax

One report indicated that KPMG had estimated the capital cost of introducing RUC for all light vehicles (9.1 million in the Netherlands) is €160 million (which seems plausible, although the technology proposed is not published), with annual operating costs of €350-450 million (which seems ridiculously high, but again the technical proposal is not reported).

So what now?

2030 is a long time away, so it is entirely possible this wont proceed as expected, except that it is widely accepted that as the electric vehicle fleet grows, revenue from motor vehicles is in decline. Fuel tax revenue will drop, but this wont directly replace it, although it is hard to see it not doing so, in effect.

Key is that the Netherlands is, this time, not considering road pricing to relieve congestion, but just to replace existing revenue sources.  The UK should heed this, as its previous attempt to introduce road user charging sought to fix congestion, but this simply isn't possible until all vehicles are on the system, and that means equipping all vehicles with technology to measure distance by time and location.

The Netherlands is just introducing a basic distance based system, that will only be defined geographically by the borders.  There is a lot to do, but at least this seems like a policy that, as long as it is clear it is replacing sales tax and registration fees, might just be acceptable enough to be a successful fifth attempt at introducing RUC in the Netherlands for light vehicles.

More here and here (both Dutch)

Victorian Government "Supports in Principle" replacing registration fees with distance, time and location based road user charges

What was proposed?

Victoria, Australia, Infrastructure Victoria (an independent government advisory body on funding, regulation and governance of infrastructure) put out a series of recommendations for the next thirty years as a draft strategy for the state. That draft is available here (PDF).  It made several recommendations regarding road pricing notably the following (there are several on parking pricing which I will NOT cover here, but are adjacent to the road pricing proposals:

48. Remove annual charges while introducing distance-based pricing for electric vehicles

Remove annual up-front charges, such as registration fees, while introducing a distance-based road user charge for electric vehicles in the next two years. Consider extending this to other types of vehicles on an opt-in basis, allowing for expansion over time.

This was implemented earlier this year.

also

49. Appoint an independent transport pricing adviser

Immediately appoint an independent body to advise on and monitor transport prices.

This isn't just tolls/road pricing, but also public transport fares, but it is interesting to want more transparency and objective advice on pricing

51. Incorporate congestion pricing for all new metropolitan freeways

Apply congestion reducing tolls to all new metropolitan freeways, including the North East Link.

This is fair enough too to help spread demand, with lower tolls off-peak and higher during the peak, with a commitment to use such tolls to manage demand permanently.

52. Trial full-scale congestion pricing in inner Melbourne

In the next five years, trial full-scale congestion pricing in inner Melbourne.

This also seems reasonable, the presumption being it is some sort of cordon, but given the intensity of public transport and active mode provision, it also seems worthwhile.

and finally

55. Phase out fixed road user charges and introduce user pays charging

In the next 10 years, replace fixed road user charges with variable distance-based and congestion charges. Ensure user pays charging reflects the relative costs of providing roads, and encourages drivers to change their behaviour.

This is a much bigger deal, because it means replacing annual registration fees with distance, time and location based road user charging, reflecting both the costs of infrastructure and congestion.

The Victorian Government response

The Victorian Infrastructure Plan, is the State Government's response to Infrastructure Victoria's proposal. So what did it think of these road pricing proposals?

Number 48 is already implemented, so was obviously accepted..

49 (Independent pricing advisor) was not supported because "current legislation and procedures provide sufficient scope to review and set transport pricing to ensure positive community outcomes". It's effectively not wanting oversight of existing processes and political direction over pricing, which is disappointing. The National Road Transport Association (NatRoad) supports such oversight.

51 (Congestion pricing for all new metropolitan freeways) was not supported because "This recommendation does not align with existing government policy. Each new tolling project in Victoria currently requires its own project-specific legislation to establish a legal basis to facilitate the operation and tolling powers involved in the project. These tolls are set at rates that aim to achieve balance for a number of movement, revenue and contractual objectives. The North East Link motorway will be tolled, but rates have not yet been set. This legislative requirement means that significant lead time is required for each new tolling project to ensure that it has the required rights and powers to charge tolls and enforce their collection."

Victoria COULD move from project-specific legislation to general empowerment legislation for tolling, and this could then allow for this. Project-specific legislation is desired by concessionaires who want certainty over the regulatory environment, but this is not essential. The reason the proposal has been rejected is not about the merits of the policy. 

52 (Trial congestion pricing in inner Melbourne) was not supported because "This recommendation does not align with existing government policy, however the Government is continually monitoring the balance of public versus private vehicle use and congestion on inner-city roads. Impacts of management of the COVID-19 pandemic have significantly changed travel patterns particularly into Melbourne CBD and this has increased uncertainty about future demand, particularly in central Melbourne."

Again, there isn't a claim about the merits of the policy, it isn't either a concern that Covid means that there is concern congestion pricing might go too far (which is a function of the scheme design, not the concept). If there isn't congestion, then it isn't worth implementing. Again there is no real criticism of the proposal on merit.

BUT there is hope...

55 (Phase out fixed road user charges and introduce user pays charging) is supported in principle.

This has much more potential that congestion pricing on new freeways or in central Melbourne, as it involves drastically cutting registration fees and replacing with distance based RUC with charges varying by time of day and location (congestion pricing).

The official response is: 

The Government supports the intent of this recommendation and is considering the long-term effects of the erosion of revenue from the fuel levy as more vehicles move to non-fossil fuels and electric propulsion. The introduction of distance-based charging for zero and low-emission vehicles in Victoria is a first step in ensuring the long-term sustainability of the transport network by making sure everyone pays their fair share to build and maintain our roads.

The Victorian Government is also currently working with its state and Commonwealth counterparts to enhance the manner in which heavy vehicles (those over 4.5 tonnes) are charged for their road use. The Government will continue to work with the Commonwealth Government on heavy vehicle road reform to develop a future model that is fair for all users of the transport network while funding maintenance and development of infrastructure and services that provide the best value to Victorians. The Government will continue to monitor the policy settings associated with road charges.

Victoria starts the journey towards expanding RUC

The simple fact remains that Victoria is the fourth jurisdiction in the world to introduce a road user charge based on distance for at least part of the light vehicle fleet (the others are New Zealand, Oregon and Utah).  Victoria recognising that it will need to transition other vehicles to RUC eventually.  It is working with the Commonwealth Government on Heavy Vehicle Road Reform (which includes a trial of heavy vehicle RUC).  

However, although it supports it "in principle" it is, technically, a huge deal to think about implementing RUC by location and time of day not just distance, across the State.  It requires all vehicles to have the necessary technology to distinguish distance by location and time of day, such as on-board telematics (mobile phones aren't up to it for multiple reasons).  However, it COULD be that if confined to Melbourne, that a backup system could be in place for unequipped vehicles (particularly out-of-state vehicles) to pay based on location and time-of-day.

Let's not get too excited, but it is a positive step forward and it is about a ten year transition.

Worth noting the responses to date:

The Australian Logistics Council is supportive but wants it to be nationally co-ordinated (which makes some sense, as there will need to be some interoperability and common approaches to dealing with vehicles from one state measuring distance travelled in another and being billed for it). 

Opposition MP Roma Bricknell (Liberal) is opposed, adopting the commonly held opinion that it would mean people in regional areas paying more, even though there is no evidence at all that people in rural areas drive more distance on average than people in cities.  Research in the United States indicates that it varies considerably, largely because people in cities tend to do many more driving trips (there is more to visit, more places to go), but shorter trips. So on average, people in rural areas may drive on average more or less the same as people in cities. However, what also matters is the fuel efficiency of the vehicles people drive, and if you cut registration fees significantly, people with multiple vehicles will pay less, because it is based on usage. 

Update:  

Brussels City Region Congestion/Road User Charge might be implemented in 2024?

Around a year ago I reported that the Brussels Capital-Region Government (which is one of the federal regions of the Kingdom of Belgium) was planning to introduce road user charging (RUC), specifically a distance, time and location based RUC for all light vehicles registered in and driving in the Brussels Capital-Region. Prices would vary by engine size (and it wouldn't apply to heavy vehicles because Belgium already has a national heavy vehicle RUC system). That was to start with a pilot called Smartmove, but ultimately lead to replacement of the very high annual vehicle registration fees in Brussels, with RUC. Charges would be applied to all public roads except the ring motorway and some park and ride access roads at the periphery.

Brussels City-Region zone for RUC

It is interesting for three reasons:

1. It is the latest attempt to introduce distance-based RUC for light-vehicles in Europe, replacing an existing tax (there have arguably been several attempts, notably in the Netherlands, Finland and the UK). So far no European jurisdiction has introduced distance-based RUC for light vehicles (but it does exist in two US states, one Australian state and New Zealand, in all cases for only a subset of the light vehicle fleet).
2. It seeks to combine RUC with a form of congestion charging, by varying distance by time of day and location.  The time of day factor is intended to charge higher rates for peak time travel, and the location factor being that only distance travelled within the Brussels Capital-Region would be subject to a fee.
3. Smartmove intends to pioneer using smartphones as a means of identifying and measuring vehicle trips. This has not been successful elsewhere to date, primarily because of the difficulties in ensuring that the phone is always linked to the vehicle, and the vehicle always has a smartphone operating to measure and report trip data. 

There is a project website, but in English (and Flemish and French) at least it still has dates that are now unrealistic.

Covid 19 has delayed progress, so that earlier this year it was reported in the Brussels Times that it would not be implemented until 2024, noting there is considerable opposition from neighbouring regions Wallonia and Flanders (primarily because RUC would apply to residents from those regions entering Brussels, but they would not receive a reduction in registration fees). Other regions feared variously that it would be a "tax grab" from their residents, and that it could creation additional congestion on the uncharged ring road (which seems unlikely, given it is likely to reduce overall demand for driving in Brussels - and experience in both Stockholm and London with exempting boundary or bypass routes is that the net effect on such roads is neutral). 

Delays have cost money, as the Brussels Government was anticipating €250 million per annum in net revenue from the programme from next year (which clearly indicates that even after drastically reducing vehicle registration fees, RUC makes more money because it is charging vehicles from outside the region), and is now having to make budget savings to make up the difference. 

There have been legal challenges, with the Council of State (Federal Government) authorising the Brussels City-Region to introduce RUC, but only after it has consulted with Wallonia and Flanders.  The Minister-President of the Region has indicated legislation to implement it would not be introduced during the current Parliamentary term.  Brussels is authorised to proceed only with taxes that are not already the competence of the Federal Government, but the Viapass heavy vehicle RUC system is already implemented by all three regions. Also with a congestion pricing element, it is not just about revenue.

Brussels must do "everything it can to reach a co-operation agreement" with the other regions to prevent or limit possible discriminatory situations. Obviously the easiest solution would be for ALL regions to implement a similar policy, but that's unlikely at present.  However, it is NOT mandatory for Brussels to reach such an agreement, according to an article in L'Echo (French).

All of this means it is far from certain whether it is proceed. The next regional election is 2024 and there is limited political enthusiasm for the policy in the current government. This leaves aside testing the technology and its feasibility.

My bet is that the odds are that, at most, this will be a trial, because until the trial is implemented and runs, there won't be enough political support.

Of course separate to all of this is the gradual erosion of Federal fuel tax revenue because of the growth in hybrid and electric vehicles, but none of that revenue goes directly to the Brussels City-Region Government.  However, that issue really does require all of the Regions and the Federal Government to co-operate.

Singapore delays next-generation congestion pricing due to supply chain issues

It was five years ago when I wrote about how Singapore was planning to have the world's very first GNSS technology based congestion pricing scheme from 2020.  Thanks initially to Covid this was put off to this year with full roll out in 2023, now it is being delayed further, apparently due to supply chain issues. 

Roll out is now reported by Asia One and the Straits Time that the start of installation won't be until mid 2023, with the key issue being the supplier's inability to access enough chips.  Bear in mind Singapore is looking to equip almost all vehicles in the city state with the new On Board Units (OBUs), which requires 987,450 units (as of October 2021 according to ZDNet).  The time to install is estimated to take 18 months, as all are to be professionally installed.

It's worth remembering that despite having a system that is 24 years old (and having had congestion pricing in one form or another since 1975), Singapore still has the world's best performing congestion pricing system.

The reasons why?

1. Its sole objective is to improve road network performance by managing congestion down to efficient levels of traffic flow. It isn't about revenue, it isn't about emissions, but it certainly generates revenue and reduces emissions.
2. To achieve this objective it targets, precisely, by location and time of day, parts of the road network that have demand exceeding road capacity, with rates varying by specific point, direction of flow and by the hour.  There are charges when demand is high, but not when it is low.
3. Rates are varied quarterly based on actual road network performance, not goals around revenue or political whim. If congestion grows, prices are raised to increase speeds, if traffic demand drops too far, prices are lowered to get better use of the network. So motorists understand it is a finely tuned pricing tool, not a punitive measure.
4. It started as a cordon, then another cordon and is now a corridor and cordon scheme. Singapore has added charging points as demand justified it. 
5. There are few exemptions. Only emergency vehicles and vehicles that don't use public roads regularly don't pay. Cars, trucks, buses and motorcycles all pay, all proportionate to the road space they occupy. Buses? Sure, occupying precious road space imposes costs, so the cost of providing bus services takes it into account.

Also worth noting that Singapore is introducing GNSS telematics for congestion pricing NOT to shift towards distance based congestion pricing (although it certainly could), but to replace an ageing, increasingly unreliable system and deliver an authoritative source of traffic and travel data into vehicles. This is to encourage drivers to take alternative routes and modes, to advise of disruptions, accidents and the prices of charging points.  An interactive map of Singapore ERP charging points is here.  Further details on how the system works are here (it is often described as using toll tags or DSRC, but these are interactive OBUs which deduct payment from prepaid cards, not simple toll tags seen widely elsewhere).

Singapore ERP (congestion pricing) charge points

A consortium of Mitsubishi Heavy Industries and NCS (a subsidiary of Singtel) won the contract to implement "next-generation ERP (Electronic Road Pricing)" in 2016 at a cost of S$556 million (US$408 million), including supply and installation of OBUs for all vehicles registered in Singapore (replacement OBUs would need to be paid for by the vehicle owner).

Making Road User Charging work in the UK: Part Two - Get motorists on side

So what should the UK do to advance road user charging?

Decide on objectives. The fewer the better. Let’s be honest, there are two key ones that matter here:

• Revenue replacement
• More efficient pricing of road use

But there should be a third one, fairness. More on that later.

Bearing in mind that to even get a chance politically to implement any form of RUC in the UK, there needs to be public acceptability for it, which means key public concerns must be addressed, and for the public to be taken with the policy makers on this issue. This is hard because so often policy makers have failed to want to address some serious “elephants” in the policy room.

So let’s say the primary objective is replacement of existing taxes on road use, but that better pricing would be nice to have as well. That seems reasonable, it’s just how far down the road of better pricing you might want to go. Simply charging for road use by mile IS better pricing, and for heavy vehicle making weight and configuration count would also be better pricing. Yet to do more you need location and time of day, and that’s where you face some key issues – because most vehicles will need equipment to enable measurement of that data, and for older vehicles that’s a challenge. So you could choose to say, for now, that you just want to charge by mile and for heavy vehicles, by weight and configuration, and leave aside location and time of day, until all vehicles are moved over to such a system – with an eye on the idea that every ten years or so, you can make further steps. After all, it is unlikely to be a good idea to charge just electric vehicles by time of day and location (to address congestion), because it will incentivise other vehicles to drive at those times. It might be a good idea to charge just heavy vehicles by time of day and location, once all of them are on such a system, which in itself could take time.  However, don't get too tied up with pricing yet.

Incorporating congestion pricing with a replacement of fuel tax is difficult if many vehicles are not on the system, unless you run two systems in parallel. A time/distance/place based RUC for newer vehicles, and fuel tax plus a number plate based location congestion charge for older vehicles. However, don’t let the perfect be the enemy of the acceptable, and remember the UK, the Netherlands and Finland have all tried to go towards some form of national road pricing, and failed because what was wanted was unacceptable.

Alongside objectives need to be some principles around designing a system for such revenue replacement. These could be:

1. Net revenue neutrality. This isn’t a means to raise additional revenue. The message has to be that nobody will pay both fuel duty and a road user charge. This cannot be repeated and emphasised enough, because any doubts over this will be real and will undermine any progress.

2. Shifting road funding to full user pays. Treasury might not like this, because it will look like hypothecation, but road pricing is about pricing road use, then what is raised needs to be related to what is spent on roads. Rate setting should be based on objective criteria as to who should pay what. For National Highways that should be relatively easy, but for local authorities, it would make sense to fully fund all A and B roads from central government, and for the management of their roads to be accounted for transparently.

3. User choice and competition: The old model of delivering RUC was that government would contract a single entity, through a PPP, to install and operate a system across the vehicle fleet, but this neither necessary nor commercially wise. In Europe, competition among service providers for RUC is increasingly commonplace, and consideration should be given as to whether all users need to be charged by location and time of day, particularly owners of vehicles that may do limited distance.

4. Depoliticise road funding: User pays roads should be managed by an independent funding body that funds based on maintenance needs and delivering net benefits to users. This will help take away the idea that it’s just another tax, but can also provide security of funding for maintenance and major projects, although it also needs wider reform of governance of roads at the local authority level.

There needs to be very clear and simple messaging once objectives are clear. Messaging ought to be:

· Who will pay and what they will not pay

· The basis for setting how much they will pay

· How trips will be measured and paid for

· What will be done with the money

Transition paths need to be developed. It may be that the UK starts with pure EVs and then hybrids (taking into account what they pay in fuel tax either as a credit to a RUC account, such as in Oregon, or a refund). It could start with heavy vehicles replacing the HGV Levy. It could start with all new vehicles paying RUC, whatever strategy it starts with needs to consider scenarios around revenue and objectives.

Rate setting ought to be objectively based at the start, on a medium-term approach to road funding. The long run costs of maintaining and developing roads should be identified (across all public roads), and these costs recovered from a rate structure based on a cost allocation approach.

A wide range of technological options should be considered. There should be choices such as having telematics systems on commercial vehicles certified as trip measurement devices, certification of vehicle manufacturer installed telematics systems and on the other end of the scale, verified odometer reporting IF location and time of day doesn’t matter. As new vehicle enter the fleet, built-in telematics could be designed to meet the needs of a RUC system so that, over time, more sophisticated pricing could be implemented.

A big policy issue is how to address demand for revenue far above what is spent on the transport network. The current system generates much more revenue than is equivalent to that spent on roads and railways/public transport more generally, so there may be several ways to continue this in a more transparent manner, ranging from keeping fuel tax through to a specific levy on top of RUC or to start treating roads as commercial assets that make a profit (that is then used by government to invest in public services). This might be one of the more difficult policy questions, but understanding of the problem is needed to develop options that could be acceptable. For example, it could be that all footpaths and cycleways get funded from this source, but there needs to be oversight and accountability for how that is spent and leaving it up to local authority councillors is a bad idea, because they are not accountable for the raising of revenue. Roads as utilities is a better model.

However, most of all, there needs to be a vision more sophisticated that “we’re not making enough money”. 

See the US states facing exactly that issue, due to the rise of alternatively fueled vehicles, got NO traction from the public when they complain about a lack of money -it is different when it is about fairness and about spending on the roads.

The entire debate in states like Oregon, California, Washington, Hawaii etc is that it is unfair that those who can afford new electric vehicles pay nothing to maintain the roads, because it means the burden of doing so gets transferred more and more to others. Sure, in the UK that argument seems less obvious because fuel duty doesn’t get spent on the roads, it is just general revenue, but if you drive a petrol-powered car you pay to use the roads, even if much of the revenue is effectively spent on welfare and the NHS.

So the UK needs to start a discussion, about fairness, about sustainably funding the roads and maybe then, about how charging for road use directly can result in better outcomes.

If you doubt why focusing on congestion wont work, look at the experience with congestion pricing so far. London still only has a central city area charge that is blunt and ineffective, its one serious attempt to expand it didn’t last for political reasons. No other city (Durham really doesn’t count) has implemented a congestion charge (and no, low emission zones aren’t congestion charges). Much of the public doesn’t believe road pricing can reduce congestion, because the London experience looks like a tax, not pricing, because it is effectively is just a tax – unlike the more sophisticated Stockholm and Singapore examples.

The UK needs to start talking about road pricing or road user charging now, and to talk about it in relation to paying to use the roads, using money for the roads, and worry about better pricing later, worry about how much money is raised, later. Get motorists on side, it will be a LOT of work.

Making Road User Charging work in the UK: Part One - it's got a problem

Nothing to see here! This is the response you might give to the Chancellor of the Exchequer (UK)’s latest budget (PDF) in terms of the future of revenue from UK road users. Well not strictly true. For the twelve year in a row, the Government has frozen fuel duty (it officially is meant to inflation adjust it, but this has not happened now except once, under the Conservative/Liberal Democrat coalition in the Government’s first term). This is estimated by Treasury to cost £1.51 billion (US$2.05 billion) in 2022/23 alone, but the net impact over that time has been to erode the value of the £0.5795 per litre (US$2.99 per gallon) fuel duty significantly. If it had been adjusted it would be £0.78 per litre (US$4.01 per gallon), meaning it has already lost almost 26% of its value, although arguably if it had been inflation adjusted there would be slightly reduce demand, so the revenue loss is far from linear (and indeed it is a gain in the hands of households and businesses).

So this is quite some problem. It's not quite the US scenario, which has seen the US Federal Gas Tax not increased since 1993, at US$0.187 per gallon, which translates into a mere £0.035 per litre. Even California, which has the highest state gas tax, only adds £0.129 per litre.  So even around £0.16 per litre in the US isn't anywhere near £0.5795 per litre in the UK.  What it means though, is that fuel tax in the UK is much much more important than in the US, and the key reason being, it isn't about paying for roads, it's just another tax.

What do existing motoring taxes raise?

Fuel duty does raise £28 billion (US$37.9 billion) per annum as it stands. 

Related, but much simpler to resolve, is declining revenue from Vehicle Tax (formerly known as Vehicle Excise Duty (VED)), which is basically registration fees. The decline is purely due to the zero rating for new electric vehicles, which could easily be addressed by introducing fees for such vehicles. VED raises £7 billion (US$9.5 billion) a year. There might be a case for shifting away from a fixed fee to pay for roads to a usage-based fee, to encourage change in behaviour, and better reflect externalities, but that’s another story. 

The real issue is that the UK Government has a whole series of policies that result in declining fuel tax revenue. The main one being the prohibition on the sale of new petrol and diesel light vehicles from 2030, supported by £620 million (US$840 million) in public spending to fund plug-in charging points for electric vehicles. Of course, all of this is driven by UK Government commitments on climate change, so the issue arises as to whether the UK can manage with fuel duty revenue declining or if it will want to replace it, and if so with what?

Road user charging (RUC) is an obvious answer, but unlike in the United States, the revenue collected from fuel duty is many times the spending on roads in the UK. The latest budget (which only reflects England), seeks the Department for Transport spending £6.4 billion on roads, £5.6 billion which comes from VED (the remainder of VED is allocated to Scotland, Wales and Northern Ireland as devolved administrations). Adding fuel duty and VED revenue sees £35 billion raised almost entirely from road transport, even though spending on the sector is a fraction of that. A shift towards RUC to replace revenue becomes qualitatively and politically challenging if it is revenue, not only to pay for roads, and even public transport, but for general spending purposes. RUC, after all, is much closer to a fee set to recover costs, not a general tax. Nowhere has RUC been introduced just as a tax to raise revenue for general government spending (although Singapore’s Electronic Road Pricing (ERP) system, which is a congestion pricing scheme, sees all net revenues treated exactly like that – but its objective is not to generate revenue).

UK history of RUC

The history of attempts to introduce RUC in the UK matter as well. Let's also NOT muddy the waters with related, but fundamentally different policies. For a start, tolls are insignificant ( a full list here) in their role in paying for roads in the UK. Beyond a few bridges and tunnels, and one motorway near Birmingham (M6 toll), they have not been widely used. Similarly, congestion charges are not really relevant here. There are two in the UK, London and Durham, and both are in place to manage traffic, not raise revenue. 

From 2001 until 2010 there were three connected but separate attempt to introduce road pricing, which varied on scale, scope and to some extent, objectives.

First, the Lorry Road User Charging (LRUC) project, from 2001-2005, which was both to recover revenue from foreign lorries, but also to become a first step in introducing national road pricing. It would have priced all UK roads by vehicle weight, but also a broad-based time of day (night/day) and location (cheaper on motorways), using the now widely applied GNSS telematics technology. It folded for several reasons, not least being cost and the low level of expected new revenue generation. It was led by Her Majesty’s Revenue and Customs (HMRC), which raised questions about the incentives around governance for a project requiring high levels of customer service, user acceptability and ultimately application of transport economics. (More recently, the UK introduced the HGV Road User Levy to raise revenue from foreign trucks, essentially implementing a European-style vignette scheme)

In 2005 it was replaced by the National Road Pricing project, which sought to reduce congestion and emissions by implementing full scale time of day, distance and place (TDP) road pricing for all vehicles on all roads.  It was meant to be a 15 year programme, but it collapsed in 2007 due to public opposition, and was folded into the Transport Innovation Fund (TIF) programme to support proposals from local authorities for congestion charging. No actual congestion charging schemes resulted (although Manchester came close, until local politicians decided a referendum was necessary to obtain support to proceed), and with the change of government in 2010 that was the end of further measure by the British Government to promote road pricing.

How hard is this?

The politics around this are brutal. Over 1.7 million people signed a petition opposed the National Road Pricing project, and polling has regularly indicated large majorities opposed to the idea. In 2010, a paper written for the RAC Foundation by Dr John Walker included a poll indicating that a majority would support reforming how roads were paid for, but was not supportive of congestion pricing. Bear in mind that the MAIN objective for all of the previous attempts has been to reduce congestion, which at the time required all vehicles to be equipped with GNSS based telematics systems. Headlines about “tracking your movements” scared many about government interference in privacy. Even more critical, given the previous Labour Government had a policy of increasing fuel duty higher than inflation, year after year, few would believe that same Government would actually cut a tax to introduce road pricing, so on average, people wouldn’t pay more.

So introducing road pricing/RUC in the UK to manage congestion is unlikely to gain much support, but what about introducing RUC simply as a replacement of fuel duty?

The House of Commons Transport Committee recently held an inquiry into both electric vehicles and road pricing, and has yet to issue its report on the inquiry (it most recently heard oral evidence in mid October). However, from the evidence seen so far there is every risk that the UK will repeat some of the previous mistakes. This includes:

· Treating the whole exercise as being mostly if not entirely about revenue-raising, which is understandable if it is led by HM Treasury and HMRC, but does not encourage public support and is unlikely to be seen as acceptable politically.

· Turning only to European experience as particularly relevant, when in the past decade it has been the United States that has moved much more rapidly and, in some cases, nimbly, to test and implement small-scale RUC systems designed to replace fuel tax revenue. Australia also has some lessons that may be drawn upon as it considers whether to replace fuel tax and registration fee revenue from heavy vehicles, and some states introduce RUC for light electric vehicles.

It’s worth reminding those from countries where hypothecating fuel tax for road funding is standard practice that this is NOT what happens in the UK, this is treated as “just another tax”, with no link whatsoever to any spending. This is a position held firmly by HM Treasury, because of fear about what would happen if there was “too much revenue raised” or indeed “too little”, which reflects a position whereby governance, funding decisions and the structure of the highways sector is largely unchanged. Bear in mind, that the creation of Highways England (now National Highways) as a company, with a five-year funding settlement, drawn from VED has already broken away from this model.

Clearly the number one barrier to implementing RUC in the UK is public acceptability and the politics around this, but to address that there needs to be a significant change in the mindset around how motor vehicles are taxed/charged, how the revenue is used and what governance arrangements need to be put in place to support that.

Even if there were to be growth in the scale of spending on roads in the UK, and indeed that might be justified given the backlog of maintenance particularly on local roads (and in some cases, the paucity of local authority interest in capital spending due to funding constraints), it is not going to be anywhere near the scale of £35 billion per annum. The “right” amount is unknown because the lack of price signals and useful data on revenue raised doesn’t indicate what should be spent on the network, but given that motor vehicle owners and users are clearly willing to pay £35 billion a year to own and operate their vehicles, it is likely to be higher than at present. However, the question may well be reasonably asked as to whether the road networks, in their entirety, shouldn’t be generating returns on capital, that could then, reasonably, be treated as dividends able to be applied to other public spending. A return on capital and a carbon tax might be ways to address the revenue gap between road spending and current revenues from motoring taxes, but all of that needs some more revolutionary thinking that has largely been absent from the debate to date.

So what could the UK do? That’s the subject for a future post.

It's not a congestion charge if its purpose is to reduce emissions

According to the Norwich Evening News, Norfolk (UK) County Council, in its Proposed Transport for Norwich Strategy has suggested congestion charging as part of its strategy to improve air quality. I used to live in Norwich, so I have a particular interest in this, so reviewing the Proposed Transport for Norwich Strategy does reveal that congestion charging is mentioned four times.  Three times in the context of improving air quality and once to 

The second part of its "vision" is "improving the quality of our air" and this includes "road charging/congestion charge" presumably as a tool to achieve this.  This is far from helpful, because a congestion charge by definition is established to ease congestion.  Yes it should also reduce emissions, but because it should only operate at the times and locations of congestion it isn't a scheme to comprehensively address emissions, like the London Ultra Low Emission Zone. 

This is where confusion appears, because if you sell a congestion charge as a public policy measure based on it actually being a low emission zone, then it isn't a congestion charge.  

A low emission zone operates much longer hours (indeed up to 24/7) because its purpose is to exclude higher polluting vehicles from the zone.  It isn't to collect revenue (the only revenue are effectively fines or permits to drive in the zone for such vehicles).  A congestion charge shouldn't operate at times of low or zero congestion, because then it would be overpricing the road.

There is some hope that the Norfolk County Council does actually mean congestion charging for the sake of improving trip reliability, for under the statement of policy "Journey times and reliability", the strategy states:

Journey times and reliability will be improved on the local highway network with particular emphasis to support fast and frequent bus services

We will ensure that journeys by bus are consistent and journey times are reduced where possible and consider the feasibility of demand management approaches such as congestion charging and workplace parking levies to facilitate traffic reduction to free up road space for essential travel.

THIS is a reason to introduce congestion charging, to actually reduce congestion.  However, this can't just be for buses, it needs to improve journey times for the vehicles that are being charged, otherwise it is simply a tax to punish driving.

If local authorities WANT to improve journey times and trip reliability, then sure introduce a congestion charge, and it will happen to reduce emissions as well, because there should be less traffic and the traffic that remains will flow more efficiently, wasting less fuel. Then those paying are getting a benefit from improved travelling conditions, and it happens to reduce pollution too.

HOWEVER, if your objective is to reduce emissions first and foremost, then a congestion charge on peak traffic isn't the tool for the job.  The related tool is a low-emission zone, that penalises vehicles that are not rated as having low emissions, and it should operate at all times there are issues around pollution.  It isn't priced to optimise traffic flow, but rather operates to improve air quality.

I THINK Norfolk County Council actually wants a low emission zone, but is calling it a congestion charge.  

US Federal Government looks to fund more state pilots and a Federal RUC pilot : Part Two - A National RUC pilot for the USA

Following on from proposed additional funding for state led RUC pilots is the proposal for what is called the National Motor Vehicle Per-Mile User Fee Pilot (NMVPMUFP!). It is always intriguing how Americans can generate new terms for what could just be called a National Road Usage Charge Pilot (although I’ve also heard that officials in one state didn’t like the acronym RUC because it rhymed with a well-known pejorative). 

Objectives

The Infrastructure Investment and Jobs Act would establish a pilot program to demonstrate a national RUC system. The objectives of RUC are stated as being:

· To restore and maintain the long-term solvency of the Highway Trust Fund; and

· To improve and maintain the surface transportation system.

This is all very well, but there is no way it can restore the solvency of the Highway Trust Fund without setting fees that are substantially higher than what is paid now with the Federal Gas Tax, because it hasn’t been increased since 1993. To make the Highway Trust Fund solvent, it will need to be increased by more than inflation over the next decade or so. It seems unlikely there is much political will for that. To improve and maintain the surface transportation system is laudable, and presumably means raising enough funds to spend on the network. However, it could also improve it by subtly using tools around pricing, particularly around heavy vehicles and configurations, by encouraging more road-friendly configurations. It seems highly unlikely that location and time of day pricing would be explored (which would really make a difference).

The objectives of the national pilot are stated as:

(A) to test the design, acceptance, implementation and financial sustainability of a national motor vehicle per-mile user fee;

(B) to address the need for additional revenue for surface transportation infrastructure and a national motor vehicle per-mile user fee; and

(C) to provide recommendations relating to the adoption and implementation of a national motor vehicle per-mile user fee.

Elements

This largely parallels other programmes, which is fine, although the second objective is somewhat tautological. Other interesting elements of the proposal are:

· Multiple methods of measuring miles travelled will be tested.

· Volunteer participants will be sought from ALL states and DC, and even Puerto Rico;

· The distribution of participants will be an equitable geographic distribution (although it is unclear how this will factor in population size);

· Both “commercial vehicles” and “passenger motor vehicles” will be included, so not just light vehicles, but also trucks and potentially buses.

· The pilot will co-ordinate with states pursuing pilots, to consider using the components of their systems or pilots.

All of this seems largely sensible, although one unanswered question is the scale of the proposed pilot program, which seems likely to be in the thousands of vehicles.

It’s unclear whether the pilot will collect money (either from those that pay no gas tax or by crediting gas tax paid), or will just generate mock invoices, but the Bill states that the Secretary of Transportation will set rates for the pilot and the amounts may vary between vehicle types and weight classes (which is dead right for heavy vehicles) to reflect estimated impacts on infrastructure, safety, congestion, the environment, or other related social impacts.

Infrastructure is obvious, but safety seems odd, as nowhere charges differentially based on safety ratings of vehicles. Congestion is only possible if there is location and time of day measurement as well as distance, which limits technical solutions (but is likely to generate huge benefits if feasible). Environment could be reflected in different rates for levels of emissions. Related social impacts is unclear but would need to be explored further. Let’s be clear though, the gas tax does none of this well.

Technology

Tools for measuring distance are mentioned in the Bill, specifically:

· Third-party OBD-II devices (plug-in devices, suitable for most light vehicles up to a certain age);

· Smart phone applications;

· Automaker installed telematics;

· Data collected by car insurance companies;

· Data from States that have piloted RUC under the FAST Act;

· Data obtained from fuelling stations; and

· Any other method considered appropriate by the Secretary.

Interestingly this does NOT include commercial vehicle telematics, widely used for truck fleet management. It also doesn’t include more manual options, but of course there is scope to include these obviously. 

A Federal System Funding Advisory Board will be set up to develop recommendations related to the structure, scope and methodology for developing and implementing the pilot programme, carrying out the public awareness campaign and developing a report to Congress. That report will be on whether the pilot has achieved its objectives, how protections for participants were complied with and some estimate of administrative costs and equity impacts.

Members of the advisory board will include representatives of:

• State Departments of Transportation
• Entities that led pilots under the FAST Act
• Representatives of the trucking industry (note, these have been vehemently opposed to RUC for many years)
• Data security experts with expertise in personal privacy (though I would have thought it needed legal expertise as well)
• Academic experts on surface transportation systems
• Consumer advocates, including privacy experts
• Advocacy groups focused on equity
• Owners of motor vehicle fleets
• Owners and operators of toll facilities
• Tribal groups or representatives
• Anyone else deemed appropriate by the Secretary

This is potentially recipe for an utter mess, but is demonstrative of the US approach to public policy, which is to consult with whatever interests are seen to be relevant (interestingly it doesn't include railroads, doesn't include automotive manufacturers, doesn't include telematics system suppliers, doesn't include customers of transportation systems, doesn't include bus or coach operators, doesn't include agriculture or business).  

Conclusion

This is potentially a BIG deal, and has the potential to be quite some success, but also the potential to fail spectacularly due to complexity, scale and overlapping objectives. It seems likely to be much more appropriate to first undertake a desktop study of options for RUC and to then consider why a pilot is a good idea. There are really only two main reasons in this case, given pilots are underway at the state level:

• To build public acceptability by demonstrating that RUC would be unobtrusive and not cost more than the Federal gas tax;
• To test how a Federal system might interact with State ones.

US$10 million per annum is being proposed to fund this pilot, which is a great deal of money, but likely to be necessary.  However it begs a lot of questions particularly around scale, duration and how a wide range of participation will be enabled and ensured. What matters most of all is ensuring that a national pilot can avoid being dominated by negative publicity and negative narratives, which requires a lot of work to be done around communicating objectives to a public that is highly sceptical.

The US needs more rational debate and discussion about how roads are paid for and are managed, and this ought to help. It just needs to be done with a great deal of thought and care, because the world is littered with countries that have tried to advance road user charging on a wide scale (see the Netherlands, UK and Finland) and have failed, due to public backlash.