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.