Belgium's heavy vehicle road user charge starts tomorrow but...

As previously reported on this blog, Belgium is set to be the tenth country in Europe to implement distance based truck tolls (and the fifth to use a GNSS based measuring technologies) tomorrow (1 April), but it already appears some teething problems are emerging.    The system is expected to raise €750 million per annum, but issues appearing include delays in delivering OBUs to operators that have pre-ordered them,  claims that some are unreliable and long delays in call centre or email responses from Satellic. 

Notwithstanding attempts from the Dutch  (TLN) and Flemish (TLV) Associations for Transport and Logistics to legally challenge the charge, it looks like it will be operational tomorrow.   TTM reports (Dutch) that it is "chaos" and that TLN claims that call centre delays are around half an hour or more and that emails are not being responded to, and that operators are still waiting on OBUs paid for and ordered "weeks" ago.  The response from Satellic is that operators that haven't received them need to go to service points at the Belgian border, which is likely to cause chaos.  TTM  says that the border points on Wednesday were without sufficient OBUs, although Satellic claims to guarantee everyone who ordered an OBU in advance will have one in time for tomorrow.  TLV claims that Satellic isn't ready and wants leniency in enforcement and TLN pledges to support anyone with a legal challenge for enforcement, if they have taken all reasonable steps to comply. 

Viapass claims that 350,000 users will be registered by 1 April, but claims that 800,000 OBUs are available now.   In parallel to the launch of the system, Belgium will withdraw from the Eurovignette (which charges truck over 12 tonnes GVW) and has cut annual registration fees for trucks down to 3.5 tonnes GVW).  It has put out a press release in advance of the system launch where it points out that there are 128 automatic dispensers of OBUs.  

HLN.BE reports (Flemish only) that a survey from transport organisation Febetra (the Belgian freight and logistics industry association) indicates 60% of truck operators reported problems with either unreliable OBUs or difficulty accessing Satellic's (the concessionaire operating the system) call centre. It is concerned that operators with OBUs that have failed cannot get them replaced by tomorrow. Yet Flanders Today has reported that Satellic says the defective OBUs only need a software update which is automatic (presumably via mobile data) and there is no need to replace the OBU.  Apparently of the 2000 OBUs reported defective (out of 350,000) 90% have been fixed.

I suspect that enforcement over the next month will be sufficiently nuanced to not fine those who appear to have made best efforts to comply.  There are ways of designing enforcement procedures for introduction that do not undermine compliance in the medium term, but also give users a fair chance to become compliant. The fine is €1000 which must be paid within 3 hours otherwise a further €1000 must be paid.   However, enforcement is done by different entities in each of the three regions that the charge is collected.  It is a tax in Flanders and Brussels, but a fee in Wallonia (because its roads are managed by a private concessionaire).  So there is a chance that enforcement responses to early issues may vary.  The deposit for an OBU is €135.  

Gazet Van Antwerpen is reporting (Flemish only) that some critics claim the system will charge for use of parallel roads, to which the CEO of the managing company Viapass says that customers can check this on their invoices and it will be corrected if true.   One operator said it will increase the costs of freight transport in Belgium without any countervailing reduction in congestion, although it is not intended to manage congestion.

The problem of not enough OBUs having been installed before introduction is not new.  This happened in Slovakia as well, and the issue comes to whether it is a problem of the lack of supply of OBUs or the truck owners/operators simply waiting until the last week or so to get their vehicles equipped.  Having incentives for early installation would have helped that, a simple discount for the first month or so for those who are early installers would cost revenue, but would also spread out the logistical nightmare of last minute account set up.  Similarly, call centre problems are entirely predictable.  When London introduced its congestion charge, it provided vastly larger capacity for its call centre just to ensure that when the charge started, nobody could accuse Transport for London of not being able to "get through".  Indeed, a parallel call centre was established in case the main one failed.  Of course all this is expensive, but to get through the pain of introduction, it pays off in terms of acceptability.  

It's far too early to tell whether this is just a matter of far too many operators responding in the last week, or any mistakes on behalf of Satellic or Viapass, but hopefully nobody will be unfairly penalised for doing their best to comply.   Of course if Satellic is seen as giving poor service, it will be a strong incentive for the new competing service providers to offer better service.

Meanwhile, Satellic has produced this advice from its website, reproduced from its front page below to cover what appear to be all eventualities, except perhaps getting to a service point and there being insufficient OBUs or insufficient parking space for those queuing to get one:

You have an OBU

Couple your OBU to a vehicle in the Road User Portal. Install the OBU in your vehicle, switch it on and keep it on whilst driving in Belgium and abroad. If the OBU turns green you are ready to go! If the OBU shows a red light please check our Q&A section.

You don’t have an account - you don’t have an OBU

Go to a Service Point as soon as possible, create a fast-track account and get your OBU. Be sure to bring all the necessary vehicle papers.

You have an account - you have not registered a vehicle - you don’t have an OBU yet

Go to a Service Point as soon as possible to get an OBU. Bring the login and password for your account on the Road User Portal and all necessary vehicle papers. Log in to your existing account, complete your vehicle registration and get your OBU.

You have an account – you registered a vehicle – you don’t have an OBU yet

Go to a Service Point as soon as possible to get an OBU. Bring the login and password for your account on the Road User Portal. Login to your existing account and get an OBU.

You have an account – you registered a vehicle – you ordered an OBU but did not yet receive it

Go to a Service Point as soon as possible to get another OBU. Bring the login and password for your account on the Road User Portal and the necessary vehicle papers. Login to your existing account on the Road User Portal and re-register your vehicle. As a license plate number can only be registered once in one account, you need to register your license plate number in a different manner. For example: if you registered 1ABC123 you can re-register as follows 1-ABC-123 or 1.ABC.123 or 1 ABC 123.

Next London Mayor will have to increase congestion charge says Boris Johnson

It's been reported in the Evening Standard that current (and outgoing) London Mayor Boris Johnson has said that the congestion charge has to be increased or reformed into "smart charging" if his successor is to manage congestion and implement policies to pedestrianise some streets.  The most popular post on this blog is my one on ten years of the London congestion charge, and since I live in London and use public transport and drive, I have a personal interest in what happens.

Boris Johnson was elected in 2008 and has served two terms, he won a constituency at the 2015 General Election in west London and is rumoured to be interested in succeeding David Cameron as Conservative Party leader (Cameron has said he does not wish to be Prime Minister beyond the next General Election in 2020).  So he is saying this without much political baggage, except, of course, he shrank the area of the congestion charge in his first term, by removing the Western extension that included Kensington and Chelsea (which was an electoral pledge of his in the 2008 election).   That makes his latest statement seem contradictory, but there was a case that the Western extension was poorly conceived and was largely a political stunt by his predecessor, Ken Livingstone, to hit the wealthiest part of London with a congestion charge (even though it perversely gave all of its residents a 90% discount to drive into central London).   With only a 3% reduction in traffic speeds in the zone of the Western extension after it was scrapped, it indicates that it was a blunt instrument that was poorly targeted.

The reason Johnson is advocating an increase or reform is simple.  The congestion reduction benefits of the congestion charge have been exhausted, because a significant proportion of road space in central London has been reallocated from general traffic to bus/taxi lanes, cycle lanes and wider footpaths.  With ongoing population growth (10,000 a month across Greater London), growth in delivery traffic because of internet retail, growth in minicab/Uber traffic and ongoing economic growth, the gains from the charge have completely been eroded.  Indeed, the volumes of cars entering central London has dropped by 30% since 2000.  If there were no private cars in central London during the day there would still be severe congestion.  A quick look at traffic data for one street in central London (Charing Cross Road near Trafalgar Square) shows a total average daily traffic count of 9674 vehicles in 2014, of which only 5791 vehicles were cars, minicabs or taxis.  As the RAC Foundation head of external affairs, Pete Williams suggests, it indicates that the volume of traffic isn't the issue (as car traffic is in decline), rather roadworks and the reallocation of road space have meant that remaining traffic delays have got worse.

London central congestion charge zone and the defunct western extension

The report indicates that delays have increased by 13% in the past two years with average speeds down to 7.4mph, with average speeds across Greater London down to 16.5mph, which is a new low. Around 66,000 vehicles pay the charge each day and gross revenues are around £257 million a year, with operating and capital costs of £84.9 million a year, resulting in net revenues of around £173 million (source: 2015 annual report)   That suggests the congestion charge remains expensive to operate compared to other charging systems internationally (the Stockholm congestion tax costs US$26 million a year in operating costs).  It is worth noting that 108,000 vehicles a day drive in the congestion charge zone and pay nothing, primarily taxis and buses.  There has been talk of extending the congestion charge to some taxis, although the impact of this on congestion would be negligible.  A charge of £11.50 per day could easily be spread across multiple trips for any cab, although it would certainly mean some marginal trips may be shifted onto other modes, this is unlikely to make a noticeable difference.  One other underlying concern is that bus patronage has been dropping after years of increases, with one reason apparently being congestion making bus travel too slow and unreliable.  As much of the road network has no scope for bus lanes, addressing congestion is also about improving the reliability of public transport that isn't on rails.

Little political interest in serious change

The Mayoral election is on the 5th of May this year.  However, neither major candidate (Sadiq Khan for Labour and Zac Goldsmith for the Conservatives) have shown much interest in transport policies that have anything meaningful to say about roads.  Khan's transport policy focuses on a freeze in public transport fares, but also says he wont increase the congestion charge.  Goldsmith focuses on public transport too, although also says he wont increase the congestion charge and wants to 'crack down' on pollution from trucks.  Clearly, neither candidate thinks there are votes to be won from advocating reforms to the congestion charge, regardless of their merit.  By contrast, Liberal Democrat candidate Caroline Pidgeon advocates increasing the congestion charge, with higher peak charges, although she's wrong if she thinks the peaks are 0700-0930 and 1600-1800, as traffic levels are lower at 0700 than they are during the middle of the day.   The Greens have previously advocated London wide distance, time, location based road user charging to penalise car traffic and raise money for public transport and cycling infrastructure.

What could be done?

Vancouver toll reform needs fundamental rethink

Vancouver has been talking about roadpricing in one form or another for over five years now.  It has been driven by revenue, as ambitions to upgrade and expand public transport aren't able to be met by revenue from users nor existing sources of taxes.  However, behind it is also the interest in using tolls or urban road pricing options to achieve behaviour change.   Both can be achieved simultaneously, but the fundamental problem is public acceptability.  Nowhere in the world have motorists warmly supported paying more to use roads to pay for expansion of public transport.  Stockholm's congestion tax gained support because it literally demonstrably reduced congestion.  Manchester held a referendum on implementing a congestion charge sold primarily on raising revenue to pay for improved public transport, and lost 3 to 1.  

July 2015 a plebiscite was held on establishing a sales tax to pay for improved public transport in greater Vancouver, but nearly 62% of the 52% who voted in the plebiscite.  It seems less likely that motorists will support them paying for other people to get improved public transport, but that doesn't mean that road pricing in Vancouver is fruitless.  Instead, a more complete strategy needs to be developed.

Vancitybuzz reports that the Surrey Board of Trade supports "regional road pricing" with 60% of surveyed respondents agreeing with tolls being introduced on existing roads to support new infrastructure construction.  The issue in Vancouver arises from there being tolls on two bridges on the Fraser River, but not others raising the issue of equity among road users who pay directly to use some crossings but not others.  The report notes that not only are revenues on the (tolled) Port Mann and Golden Ears bridges well below forecasts, but that the untolled crossings are facing higher levels of traffic as motorists avoid the tolls.  One bridge (Pattullo Bridge) needs replacing and the plan is for the replacement to be tolled and the George Massey Tunnel is in a similar position.   The case for a comprehensive strategy to toll all crossings to pay for all crossing improvements and maintenance is not unreasonable, but it will create a de-facto cordon charge towards the south of Vancouver.

In the map below, the black dots are the Port Mann and Golden Ears bridges (from left to right), the red dots are the George Massey Tunnel and Pattullo Bridge (left to right), with a question mark over the Alex Fraser bridge (the only untolled crossing west of the Golden Ears bridges that doesn't need replacement).

Vancouver Fraser River tolled and untolled crossings

However, The Now newspaper online reports that British Columbia Minister of Transportation thinks a solution to the "toll problem" could be years away because it only matters if a decision is made to replace the Pattullo and Massey crossings with tolled crossings.   Whereas Premier Christy Clark when asked about "mobility pricing" (one of the many terms for charging existing roads) she said it was "controversial" and she isn't in a position to take sides (which I think is code for thinking it is a good idea, but not being sure how to support it and not lose too many votes).  

It seems obvious that focusing on toll reform at these crossings is a positive step, as long as it is focused on recovering the capital and maintenance costs of all of the crossings, with tolls that are higher at peak times to reflect demand (and conversely lower off peak).   Raising revenue for wider plans, especially those not involving roads is going to be more controversial (this CBC report indicates two-thirds oppose any increases in taxes or charges to pay for public transport)  but raising revenue for the crossings, including their maintenance will reduce pressure on public finances more generally.  

A long term strategy

Tolls exist on two crossings now over the Fraser River.  Two further crossings need replacement, so the case for tolling them should be able to be made, which raises the question of two other crossings that do not need replacement for now, but will face unacceptable levels of congestion if left untolled.  The case for tolling those crossings needs to be made based on the users of those crossings benefiting from the tolled ones - because of the transfer of demand (and congestion), and for those crossings to be better maintained as a result.  The tolls should be used not just to pay for crossings, but their approach roads and other routes directly related to using the crossings.  

If successful, the obvious next step is to think about the Vancouver Harbour crossings, but also to more clearly investigate more strategic reforms into how roads and public transport are funded for the Vancouver metropolitan area.   That means looking at existing taxes (on vehicle registration and fuel) and whether these need reform or replacement with more usage based charges such as are being piloted in Oregon and soon California (although fuel tax in Vancouver is much higher than in Washington State).   However, it should also do a proper study into the merits of urban road pricing for the city, whether it be looking at cordon charging, area charging or distance charging.  

Yet it also reminds me of how Australia is treating heavy vehicle road reform, (summarised here PDF) which is to reform how roads are funded and managed before introducing direct road user charges.  Going back to first principles may help increase efficiencies and make transparent why and how public funding of land transport infrastructure (and public transport services) is justified.  Having a funding and governance framework that is more widely accepted will make it easier to justify new or higher charges and proposals on spending.

Without this, Vancouver and BC will remain stuck between ambitions for spending that neither users nor taxpayers are willing to pay for, and infrastructure problems of both congestion and aging capital that need addressing.  Can the local authorities and province go to first principles and develop a long term strategy that can get wider support?

UPDATE:  Toronto Metro reports that Vancouver is likely to get capital funding from the Federal Government for at least some of its public transport initiatives, but still faces problems finding the funds to support operating subsidies, with road pricing still on the agenda.  Whereas the Toronto Star editorial from Sunday supports the use of tolls being introduced on two major highways in the Toronto area to fund repairs and upgrades of them, not only because those who pay will benefit from the improvements but because tolling can help reduce congestion (implying the use of peak time tolls to manage demand).  Although a separate type of project, this editorial from one of the largest newspapers in Toronto is a positive sign (although the editorial notes the political reticence over tolling).

Jakarta congestion pricing facing problems by charging only main roads

The Jakarta Post reports that the city's planned Electronic Road Pricing (ERP) congestion charging system has been delayed, for governance reasons.  It had previously wanted to introduce the proposal by the end of 2015, which seemed ridiculously ambitious. 

The "ERP management unit" (with the acronym BLUD) has to be set up first, which of course makes perfect sense, and it apparently will be established in July.  Following that establishment, tenders for the design, installation and operation of the congestion pricing scheme will be let.

However, I'd urge some caution.  It would make sense for the ERP management unit to be bedded down and establish its objectives and procurement strategy before jumping into procurement.

As part of that the report notes

Korlantas chief Insp. Gen. Condro Kirono said police were gathering vehicle data for the ERP electronic registration and identification (ERI).

“We have held workshops with police offices and have supervised their digital data collection,” he said. 

A key element of any congestion charge will be reliable identification of number plates and associating plates to owners who can be billed/fined as appropriate. This is already proving to be a problem. 

The proposed congestion pricing scheme fits into the vision of Jakarta as a "Smart City" although that "Asia One" article weirdly thinks that 4,800 CCTV cameras will help this, when it really has little to do with it (except perhaps a related function of monitoring traffic volumes)

A substantial public marketing campaign is proposed to be launched in September/October, but it does have some major problems as Asia One news reports (includes TV report in English):

One of the challenges facing the implementation of ERP concerns motorists using small shortcut roads. Jakarta has a complicated network of roads which includes small shortcut roads.

The provincial government is well aware that motorists may try to bypass the ERP by using shortcut roads. But while taking such a route may save some money, it may not save time because during peak hours shortcut roads are even more congested.

This of course, is the key problem with proposals to charge only main roads.  There effectively needs to be a cordon put in, or parallel charges introduced for alternative routes.

In addition to pricing, it is useful to take some of the advice from Widya Anggraini, a Jakarta-based urban planner, in this article by City Metric, particularly addressing sexual harassment on public transport and ensuring pedestrian and bicycle access is improved.  This is clearly an important mode now and Jakarta should avoid the mistakes of some other developing country cities in letting these modes be neglected, which of course helps to encourage car use.  Walking and cycling for short trips is an obvious answer both in encouraging efficient use of road space, but also reducing pollution and improving the liveability of the city.  Development does not mean abandoning active modes.

Singapore will have world's first GNSS urban congestion pricing scheme by 2020

The world's most sophisticated urban road pricing system is going to become even more sophisticated as Singapore looks like being the first city to ever implement a full distance, time, location and vehicle type based road pricing scheme, using GNSS technologies. 

Singapore's Land Transport Authority announced the winning bid for its procurement of a GNSS based electronic road pricing (ERP) system on 25 February - a consortium of NCS and Mitsubishi Heavy Industries Engine System Asia. NCS holds the contract for maintaining the ERP system and Mitsubishi was responsible for developing the original ERP system.   NCS is a subsidiary of Singtel, Singapore's major telecommunications carrier, itself owned by Temasek,  the Singaporean Government investment company that invests in firms such as Singapore Airlines.

The cost is S$556m (US$407m) and implementation is expected in 2020, with development starting around April.  According to Channel News Asia, the existing ERP system will operate in parallel for an 18 month transition period.  Two other participating suppliers were ST Electronics, which bid the project for S$1.26b, and the consortium of Watchdata Technologies and Beijing Watchdata System which did not reach the bidding phase.  This enormous difference in bidding price must have been influential, as well as NCS/Mitsubishi's long standing experience and understanding of the current ERP system.

The winning consortium will build and maintain the next generation GNSS urban road pricing system.   Although it will primarily use GNSS systems to detect and measure distance, it is also reported that beacons may be used to supplement GNSS signals in some locations.  It is using 4G systems for communication, but according to Business Times intends to still be compatible with stored value cards - a first for GNSS charging systems (as no OBUs in use anywhere currently take payment cards).

Channel News Asia published this image depicting some value added services that the new system will bring, including real-time traffic and parking information, and payment systems for parking.  The OBU is intended to be "open to new applications" to enable the ERP system to be a telematics platform.  One feature will be warning in advance of a charged road, so that a road user can choose to divert elsewhere.

Singapore congestion charging based on GPS

Context

Since September 1998, Singapore has had the world's most sophisticated urban congestion charging scheme, which has directly targeted only segments of roads that are heavily congested and applies prices to those segments of road based on achieving a minimum "level of service" (operating speed).  Its prices vary by time of day and direction of travel, apply to virtually all vehicles (including motorcycles and buses) and are reviewed regularly to ensure they are appropriate - that means the prices rise if speeds drop below a set threshold, or are reduced if they go above another threshold.  The intention being to optimise the use of the network.

It goes back to the Area Licensing Scheme in 1975, which essentially introduced a pass based system of congestion charging for access into central Singapore, and the subsequent introduction of controls on the numbers of vehicles allowed to be licensed in the country (a policy that is more plausible in a city-state than in a larger country, let alone the individual liberties concerns in many countries).

Singapore has curbed car ownership by limiting the number of cars in the country, but it has not stopped the country building adequate road capacity.  12% of the land area is taken up by roads, although again, in a city-state it is hardly surprising, built up areas need access which means they need roads, and there is little room for farms or forests which can cover vast areas with little road access.

Transport Minister Khaw Boon Wan has a target of 75% of trips made by public transport by 2030 and 85% by 2050.  It is doing this by increasing the bus fleet by 35%, doubling the rail network, expanding cycling paths and quadrupling covered walkway distance (essential during Singapore's tropical downpours).  However, I wonder how much difference vehicle automation might make, as Singapore would appear to be well positioned to pilot incentivising automated vehicles to get better use out of the road network.

ERP today

An interactive map of all charging points which you can click to get the prices of reach vehicle class per time of day is here.  Most gantries operate at peak times only, but some charge during interpeak periods and some on Saturdays (e.g. Orchard Road in downtown Singapore).

Singapore ERP gantry points

Prices for cars at set times at one Singapore ERP charging point

Prices range considerably, with prices set to reflect vehicle type according to metrics of road space occupancy based on PCU (passenger car unit equivalent) Cars, vans and taxis are 1 unit, motorcycles are half, heavy goods vehicles and minibuses are 1.5 and the largest trucks and full sized buses are 2.  This is a measure of congestion impact and nothing else.

Rates are reviewed quarterly to ensure charges maintain average speeds of 20-30kph on main roads and 45-65kph on expressways.  If speeds drop below that at specific times passing by a gantry on a regular basis, prices for that direction of travel at that location are increased (to reduce congestion).  If they go above that, prices are reduced (as it is assumed prices are too high and are suppressing efficient demand).  This excellent article (PDF) published five years after ERP was introduced discusses Singapore's experience with the system and the results.  Violation rates are less than 0.5% of trips.

Singapore has long used what is now a rather dated tag and beacon system (DSRC) that is non-standard, and involves a two-way communication with vehicle on-board units (OBUs) by deducting prepaid credit from smart cards inserted into the OBUs.  To achieve the detection, the communication from the unit and back to the smart card (and provide back-up ANPR cameras for enforcement) has resulted in Singapore having very large elaborate gantries that many cities would see as unsightly (and which are increasingly controversial in Singapore itself).

Singapore ERP gantry

UK does not increase fuel tax for sixth year in a row

With the release of today's UK Budget, the rumoured increase in fuel duty did not occur, making it the sixth year in a row that the Government has decided it is inappropriate to increase a tax that has ever decreasing yields due to inflation and the increased efficiency of the vehicle fleet.

It is rumoured that any increase would have been opposed by backbencher Conservative MPs.  For although the price of fuel is now the lowest it has been in many years, it is clear that fuel duty (and VAT on fuel duty) comprises the majority of the price of petrol and diesel (at £0.6954/l), with retail prices usually between £0.999 and £1.10/l depending on location.   Given no UK fuel duty is hypothecated and it has no relationship at all with spending on roads, it has usually been seen as an "easy" tax to raise, but it is clearly unpopular with grassroots Conservative MPs and supporters.   As the Conservative Party has a small majority in the House of Commons, and Chancellor of the Exchequer George Osborne is expected to be seeking to succeed David Cameron as Conservative leader when he stands down before the next election, it is not surprising that he has taken a political decision that raising fuel duty is not wise.

The net impact is a loss of revenue of between £435m and £450m (XLS) per annum each year (the previous assumption being a CPI based increase).  Also notable is that Vehicle Excise Duty and the HGV Levy (vignette) are not being inflation adjusted, costing around £5m per annum in lost revenue. Curiously, Treasury's assumption about the impact of price reductions on fuel consumption is as follows (PDF - pg 53):

For a 1% reduction in pump prices, the model assumes a short-term 0.07% increase in the quantity of fuel consumed which increases to 0.13 as consumers react to the price change.

However, there is no indication that revenues have increased due to lower prices.

Road spending programme

Curiously though, and apparently unrelated, the Budget announced a long term funding approach for the English Strategic Road Network after 2020 (PDF) (Strategic Road Network means the central Government owned motorways and major highways in England only -  Scotland, Wales and Northern Ireland get bulk funded as part of devolution and manage their own transport spending, although not taxation of vehicles and fuel). £15 billion has already been committed through to 2020, that is assured and forms a programme of maintenance and capital spending that is agreed.   The document above is all about consulting about long term priorities, and should be welcomed as developing a closer link between what users want and what money is spent on those roads.  Having long term guaranteed funding streams enables maintenance costs to be optimised across the life cycle of the network and to help depoliticise funding decisions, instead of subjecting the network to annual budgetary whims of increases and decreases in funding.

This notes that from 2020/21, Vehicle Excise Duty in England (effectively the annual registration fee) is to be hypothecated entirely into spending for that network into a new National Roads Fund ( a term I last heard in New Zealand in 2001).   That's worth exploring more.

Tax on ownership?

From a economic pricing point of view I've alway thought that a little odd.  Vehicle excise duty is a tax on owning a vehicle, but it bears no relationship whatsoever to usage of any part of that network.  For example, in London there is very little such network as there are only three motorways that enter metropolitan London, and in each case only reach around halfway from the M25 orbital motorway into central London.  Many thousands of London motorists may never use the Strategic Road Network, so why should their taxes on ownership be used to pay for it?  It would make much more sense for the National Roads Fund to be supporting investment in all local roads, which all vehicle owners use, and treat it as an access charge to recover the fixed costs of the network.

I presume that Vehicle Excise Duty includes the Heavy Goods Vehicle levy which comprises much of the cost of VED for UK registered HGVs and is imposed on foreign ones too.  The link between revenue from the HGV Levy and the Strategic Road Network is 

There could, of course, be a cunning plan behind this, which could allow for a transition from VED to tolls or some other form of road user charging to be introduced on the Strategic Road Network.  A political deal whereby you can choose to not pay VED and instead pay by weight and distance could benefit millions of car owners who rarely use the motorways, and no doubt would reap in much more revenue in the longer term.  However, it will raise the issue of fuel tax, which Treasury resists in seeing as a tax on road use, even though it is - in effect - primarily generated from that activity.

Future for fuel tax?

For now, the UK Government wont entertain road user charging to replace any existing motoring taxes, although it ought to look at the deadweight costs of these existing taxes and watch what is going on in the USA as Oregon and shortly California pilot replacing fuel taxes with distance based charging.  However, to do this well it will need to build up political capital to convince people that any such move is about raising money for roads and about replacing existing taxes.   Given local elections in May, a referendum on EU membership in June and a forthcoming Conservative Party leadership contest, it would appear the interest in taking what would be seen as "brave" steps towards reforming how people pay for the roads is nil.

Meanwhile, given it has been over 20 years since the Federal fuel tax was last increased in the USA (and the state tax in California), is six years of no increases meaning the UK is hitting the same political obstacles the US has already hit with fuel tax?

Will the car oriented motorists of California be phasing out fuel tax whilst UK politicians wring their hands about increasing a tax that it has encouraged motorists to not pay at all?

Australian Federal Treasurer urged to investigate replacing fuel tax with road user charging

The Australian Financial Review reports that the Australian Automobile Association (which claims to represent seven million members across eight motoring associations) and Infrastructure Partnerships Australia (a think tank on infrastructure market reform opportunities which includes government and private sector members) have called upon Federal Treasurer, Scott Morrison, to hold an inquiry into replacing fuel tax with road user charging.

The report continues:

A joint-letter by the groups to Mr Morrison, obtained by The Australian Financial Review, describes the current transport funding model – based on a 39¢-per-litre excise that raises more than $15 billion a year – as "ad hoc, outdated, fragmented and lacking in transparency".

"It is clear that the current funding model cannot deliver the infrastructure required to address increasing congestion across major cities or meet the needs of Australia's regional communities and industries."

In short, the concerns are:

- Increased inequity of users of the most fuel efficient and electric vehicles not paying;

- Inability to charge for congestion;

- Inability to target charges for specific infrastructure improvements unless they are of a scale to justify dedicated tolls.

A spokesman for the Treasurer recognises the focus in Australia right now on heavy vehicle charging, but with an interest in looking at the merits of charging light vehicles, seeking to:

accelerate work with states and territories on heavy vehicle reform and investigate benefits, costs and potential next steps of options to introduce cost reflective road pricing for all vehicles.

M6 toll road up for sale: a good long term prospect?

According to the FT, the consortium of 27 banks and lenders which own the M6 Toll Road (including Crédit Agricole, Commerzbank and Banco Esparto Santo) have decided to sell the road to attempt to recover the £1.9 billion (US$2.76 billion) debt tied to the road.  The road is still managed by Macquarie Atlas Roads which holds 100% of the equity in it, although the beneficial interest is zero due to the underlying debt (which was subject to restructuring at the end of 2013). 

M6 toll road bypasses the M6 through Birmingham

The concession ends in 2054, so any investors will be looking at the long term.  They have to, since the road has yet to turn a profit, as the road average 48,000 vehicles per day, well below forecasts of 72,000 when the concession was let.  Yet growth has been significant as of late, with a 12.6% increase in traffic for 2015 over 2014.  This suggests it is not far from returning to its previous record demand of 55,000 per day in 2006 (although that still is insufficient to break even).  It cost £900 million (US$1.3 billion) to build in 2002 values and prices (around £1.3 billion (US$1.88 billion) in todays prices).

The road lost £28.6 million in 2014 (debts have simply been increased to absorb the losses on top of the capital cost for the construction).

As I wrote before, the project has been good for the taxpayer, as it is completely unsubsidised, debt is not backed by the Crown and Treasury still gets revenue from fuel tax paid through burning petrol and diesel on the road, without paying a penny for maintenance.  However, it is also likely that the 1p nominal drop in fuel duty since 2010, and the significant drop of wholesale fuel prices will contribute to some increase of demand and willingness to pay the toll increasing.

There is a modest campaign calling on government to nationalise the road and remove tolls to reduce congestion on the bypassed segment, but I doubt if the current Conservative government would be keen on bailing out private investors for a project for which there may be a buyer (given it is generally positive about tolls on roads that have a viable alternative route).

From an equity perspective, it would be justifiable for there to be some state contribution towards maintenance costs based on that revenue (and indeed revenue from vehicle excise duty and the HGV levy), but that would mean challenging Treasury's position that fuel tax is "just another tax on energy" rather than a tax that is generated primarily from using roads (unlike VAT).  There is little chance of any movement on that in the foreseeable future.

As an investment, it is definitely one for those willing to tolerate years of losses before seeing any success.  Tolls as they stand are around about at the yield maximising level.  Although it does not have electronic free flow tolls (but has a non-interoperate barrier based DSRC electronic toll system), there will be little appetite to address this while it continues to lose money.

Any investor will be hoping that economic growth generates more demand so that eventually the road can reach break even (given the "hope for a government bailout" option is almost certainly not going to happen under this government and the next general election is 2020).  Given the greatest increases in traffic in the UK in recent years have come from light commercial vehicles (PDF) (partly because of the increase in deliveries due to online retail), it is unclear whether M6 Toll is able to take advantage of that traffic.   Nevertheless, as overall traffic demand in the UK is now at pre-recession levels, and oil prices look like staying relatively low for some time, the prospects may look brighter than they have been for ten years.

Still, after 13 years of losses, it would take a courageous and bullish investor to think that paying £1.9 billion for the road is worth it.

Jakarta ERP (congestion charging) update: GPS under consideration

I've written several times about the plans for Jakarta to have what it called ERP (Electronic Road Pricing) very much modelled on the Singaporean approach.  There is broad political agreement of the merit of introducing charging on existing roads to manage congestion, to replace the current high occupancy rule (a minimum 3 occupants) for certain main roads.  That system gets abused as people offer themselves "for hire" to make up the numbers on roads approaching the "HOV road" zones.   After trials it was intended that the first stage of an operational system would be in place this year, with the law having already been amended to allow for its implementation.

Jakarta embarked on a trial of two DSRC systems, one with Kapsch and another with Q-Free reported here.  One of the big issues was non-standard number plates being difficult for ANPR cameras and systems to recognise.  

The two trial DSRC charging gantries are in place at Jl Jenderal Sudirman and Jalan Rasuna Said (installed by Kapsch and Q-Free respectively).

Jakarta ERP trial corridors

In October 2015 it was reported in Tempo that the Jakarta Governor was considering moving beyond DSRC type technology and embracing GPS systems to trial for the proposed electronic road pricing scheme.    His chief concern is the cost of installing gantries vs. installing GPS based OBUs, saying that each gantry costs 1 billion rupiah (US$73,000), implying it would be cheaper to implement distance based charging.  

So now it appears the programme has been delayed not least because of the Governor's interest in investigating the viability of using GPS technologies, but also because of concerns over how enforceable the system would be with the current generation of number plates in Indonesia.  The Jakarta Post reported a month ago that implementation has been delayed until 2017 with a decision on supplier by the end of 2016 (a rather short implementation time which would tend to preclude a large scale implementation geographically.  

The minimum charge is expected to be 30,000 Rupiah (US$2.21) to use charged roads at peak times. 

Proposed Jakarta congestion charging / ERP routes

The Google Earth image above depicts the routes proposed for full implementation of congestion pricing, covering major inner city corridors.

I said it's about number plates!

The Governor was quoted as saying:  “The main obstacle is legal enforcement — how to catch vehicles with non-Jakarta STNK [vehicles registration fee documentation] that violate the ERP. However, I think it will be easy to monitor it through closed-circuit television [CCTV]".  

So the issue is having number plates that are non-Jakarta issued, which is really about access to databases for others.  Yet he is wrong to say it can be monitored through CCTV reliably or cheaply.  CCTV is not ANPR, and would be unlikely to deliver the clarity of resolution for effective enforcement.  

I had highlighted number plates and databases for number plates as an issue on this blog a few years ago.  Indonesia (like many other countries) needs to establish key enablers for such systems, which includes either mandating electronic vehicle ID or having a number plate system that can be detected and corresponds with a high level of accuracy to the names and addresses of vehicle owners to allow for enforcement.

Croatia considering introducing vignettes

Croatia is the newest EU Member State and as a result now has greater trade (and movement of people - notwithstanding the migrant/refugee crisis) with its neighbouring EU Member States Slovenia, Hungary and beyond.  Main highways in Croatia are managed commercially by a state owned enterprise called Croatian Motorways. 

Croatian Motorways charges tolls on its roads both through manual and electronic means, with both open (pay once) and closed (ticket collected at start and paid for at the end) systems in place. Electronic tag accounts get a discount of 21.74% on manual toll rates (rising to 33.48% between 1 November and 31 March).  Tolls vary by individual road and appear to reflect differing infrastructure costs.  An interactive map of the network is here.

However, according to Croatian news website Vecernji (Hat Tip: Ptolemus) the newly elected centre-right coalition government includes the Croatian Social Liberal Party which opposes more PPP concessions, so there is discussion about both increasing tolls and introducing vignettes (which presumably would apply to all other roads).   Croatia's problem comes down to growing debts for existing roads that need renegotiation and repayment.  

Neighbours Slovenia and Hungary both have vignettes for light vehicles on motorways/major highways, whereas Slovenia has tolls for heavy vehicles only and Hungary has a weight/distance heavy vehicle road charging system.  However, having both vignettes and tolls would add a level of complexity that would mean some foreign motorists would think that paying for a vignette would also cover tolls.

Total Croatia News reports that Goranko Fižulić, former minister of economy, published a letter to the transport minister Siniša Hajdaš Dončić with five reasons why Croatia should introduce vignettes:

- Revenue: "Slovenia has introduced vignettes and in 2013 collected revenues of 327 million euros. In the same year, Croatia had revenues of 185 million euros". This is a function of vignettes applying across a wider network than tolls, but also Slovenia geographically having proportionally higher transit traffic.

- Lower employee costs: "Slovenian motorway company DARS has 1,237 employees, and HAC (Croatian Motorways) has 2,503 employees, with one third of them working on the collection of tolls. HAC spends 32 percent of revenues on salaries and other employee costs while DARS spends just 10,39 percent." More electronic tolling may reduce this, but vignettes require staff for enforcement too.  It is not clear that a change would make much of a difference.

- Annual vignette (product most likely to be used by Croatian motorists) would only be 546 kuna (around $81): "just from domestic and foreign passenger cars, the total revenues would climb to 509 million euros".

- Successful use of vignettes in other countries:  "Vignettes were successfully introduced, along with Slovenia, in Austria, Switzerland, Slovakia, Hungary, Romania, and Bulgaria. Germany will also introduce them starting on 1 January 2016".  Germany has faced delays for car vignettes, but of the others four have embraced distance charging for heavy vehicles (along with Germany) with two others seriously considering it.

- Better use of motorways lowering costs of maintenance of other roads and improving safety: "Domestic vehicles would use motorways in far greater numbers, which would reduce the cost of maintenance of other roads, increase safety and reduce the number of traffic accidents. The cost of using motorways would be drastically reduced for regular users of highways and the economy as a whole"

Fuel tax in Croatia is around €0.42 per litre for petrol and €0.33 for diesel, this is 23rd in the EU for petrol and 26th for diesel, suggesting scope to increase diesel (particularly given its relative environmental impact), but none of this revenue is linked to road spending.   It is lower than fuel tax in Slovenia and Hungary (indicating Croatia may gain a little from trans-border users filling up in Croatia in preference to its EU neighbours. 

A better response may be to look at distance charging for heavy vehicles to replace or supplement  tolls on a few routes, as such a system should see revenue grow as freight traffic grows through the country (and can be used to charge on a wider network).  If tolls are abolished, a light vehicle vignette would make sense as an interim measure as well.  Croatia's E70 motorway is a key corridor linking Serbia (and Macedonia/Bulgaria) to Slovenia, Austria, Italy and Germany, the potential for revenue growth should be considerable. 

Croatia with the key E70 corridor highlighted

With the success of Hungary's distance based heavy vehicle charging system,  Croatia could do worse than look at that model (Slovenia has previously investigated and abandoned this option because of cost, but it was looking to use a different procurement approach to that which has been adopted in Hungary).  However, it needs to look at existing tolls and other charges, and decide whether it wants to add to what it already has, or be bold and make a shift towards distance based charging (that may have targeted rates for existing toll roads).  Hungary transitioned from manual tolls to vignettes to distance charging for heavy vehicles over the past 20 years (and from tolls to vignettes for light vehicles).  Croatia could do the same, but given the distances for much transit traffic through Croatia, I'd suggest it skip vignettes for heavy vehicles and just go for distance.