(Title Image: Raimond Spekking under Creative Commons Licence BY-SA-3.0)
Following neatly on from last week’s post on the DVLA, this looks at one of the most often talked-about replacements for fuel duty (and possibly car tax).
What do we mean by “Road Pricing”?
As it suggests, one-off or continuous charging for using the road network. This can range from straight-up tolling with fares collected electronically or at a booth, charging road users during certain times of the day or more sophisticated systems such as emissions-based charging.
The possibility of UK-wide road pricing has been discussed for the last two decades and recently resurfaced as a potential replacement for vehicle excise duty/car tax and fuel duties when the sale of new petrol and diesel vehicles is phased out during the 2030s (The End of the Engine?).
Politically, there’s a lot of push-back against the idea and, as a result, it hasn’t taken off. Road tolls have gradually been removed and there are only a dozen or so active road pricing schemes in the UK – the most notable of which being the London congestion charge.
At a Welsh-level, a congestion charge has been mooted for Cardiff, emissions-based road charges were put forward as a possibility in the Welsh Government’s recent Clean Air Bill white paper, while Plaid Cymru’s Independence Commission included road pricing as a possible future replacement for fuel duty.
Road Pricing: Case Studies
Singapore (Electronic Road Pricing) – Introduced in 1988, the system collects fares via a combination of gantries and in-vehicle collectors which charge payment cards inserted into them. All Singaporean-registered vehicles are required to have the collector installed, while foreign-licenced vehicles can either hire a collector or pay a flat daily fee regardless of how much they drive.
It effectively acts as a congestion charge for Central Singapore, though variable pricing linked to levels of congestion has been rolled out. There’s a measure of scepticism over how effective it’s been in reducing traffic levels, but the most commonly cited figure is a reduction of between 10-15%. Singapore still charges car tax/vehicle excise duty and fuel tax.
Norway (Autopass) – Autopass is an electronic toll collection system used to pay for the maintenance and construction of new road infrastructure in Norway. The variable tolls are collected by toll operators owned by local authority consortiums. The tolls are usually charged on high capacity roads (i.e. motorways), bridges, tunnels and some ferry services. There are some manual toll booths, but those using the Autopass tag get a variable discount based on their vehicle type.
All registered vehicles over a certain weight are required by law to use an Autopass tag with the threat of a fine for non-compliance. Foreign-licenced vehicles have to be registered to the toll scheme and are charged by automatic number plate recognition if they don’t have a tag. Norway charges a registration fee for new vehicle purchases (an equivalent of vehicle excise duty/car tax) while fuel tax is charged at a base rate and a carbon emissions rate.
Republic of Ireland (Tolled Motorways) – The Republic of Ireland uses a combination of toll booths (where you can pay by cash and card) and electronic toll tags on the motorway network (the M50 around Dublin is all-electronic). The tolls vary and may be collected several times along the same stretch of motorway. They’re largely a result of the new motorways being built under PFI-like schemes with the tolls being collected to pay off the cost of construction.
As nearly all motorways have physical toll booths, foreign-registered vehicles can’t avoid paying the toll. Where there are no toll booths, number plate recognition is used. Foreign drivers and tourists are encouraged to register for electronic tags. The tags are supplied by private companies and each has differing associated fees and charges. Tags can also be used to pay for parking spaces. There are additional charges for non-payment which eventually becomes a fine. The Republic of Ireland still charges car tax (along similar lines to the UK) and fuel duty – split into an excise rate and a carbon rate.
Top 3 Arguments For PAYG Road Pricing
It could replace lost income from fuel duties once road vehicles are decarbonised – This is ultimately why it’s being discussed at UK-level. According to Wales’ Fiscal Future report (pdf – p65), Wales raised just under £1.4billion from fuel duties during 2018-19. Once the bulk of road vehicles are hybrid, running from electricity or hydrogen or whatever that’s going to leave a large hole in public finances. There are alternatives to road-pricing as explored later.
Drivers are essentially paying to use roads anyway via fuel duties but don’t notice it as much because they fill up the tank and forget about it. Direct charging would be the same principle in a different format.
You can tailor pricing to change driving behaviour – This is the main advantage to a variable/PAYG road pricing system rather than a fixed price/toll system like a congestion charge. Charges to individual vehicles could change based on several factors. That could include driving during peak time along regularly congested roads or ensuring that using rat-runs becomes more expensive than taking a route with a higher capacity. Rural drivers wouldn’t be penalised and could be charged less for driving the same distance as someone driving through central Cardiff.
There would also be the opportunity to introduce exemptions (similar to those for car tax) or flat annual fees for the disabled (i.e. those driving under the Motability scheme), agricultural vehicles, the emergency services, public service vehicles (i.e. bin lorries, military vehicles), buses and professional drivers (licensed taxis, driving instructors, funeral directors, delivery vehicles etc.). Additionally, a whole business model could spring up similar to that of Trainline etc. where drivers search for the “cheapest route”.
Possible reduced congestion and environmental (and health) benefits – Price of fuel aside, most drivers don’t need to think about how much their journey is going to cost. Road pricing could change that. It may (but not necessarily would) make people slightly more inclined to walk or cycle for short journeys (i.e. a top-up shopping, going to or from school or routine medical appointment if fit to do so) instead of driving if variable pricing penalised people for not doing so.
Road pricing probably wouldn’t be financially ruinous if professional drivers have a separate pricing regime from the general public, but it would certainly be annoying for everyone else and that’s how you nudge people to make the “right” choice – much like the plastic bag levy. Also, if the public had an idea of how little they use their car in a year, they may question whether they need one at all – possibly opening the door to an expansion of on-demand hire cars or car-sharing.
Top 3 Arguments Against PAYG Road Pricing
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Cross-border complications – Blah, blah, blah “most porous border in the world”, blah, blah, blah “live in Flintshire, work in Chester” etc. This largely depends on the method of collection (which I turn to later); physical toll booths and number plate recognition would be easier to handle cross-border traffic than a GNSS-based system which requires all registered vehicles to have a tag. That said, many of the nations which have introduced road-pricing and road tolling have overcome this (it’s not as if they had any choice) by either requiring all foreign-registered vehicles to carry a tag/pay a flat toll or using number plate recognition with the threat of a fine and legal proceedings for non-payment.
Political and technological concerns – Road-pricing is, as you might expect, politically unpopular. Motorists and haulage are powerful lobby groups that usually get their way on everything except fuel duty. They will likely (rightly or wrongly) argue that they already pay taxes to access the road network, so why add charges on top of that? Additionally, if Wales used a GNSS/satellite tracking-based system it would naturally raise concerns about data privacy – though it would be a useful tool for law enforcement and monitoring things like driving without insurance.
Driving may still work out cheaper at the point of use than public transport despite road pricing – Public transport is already subsidised to an extent, but rail and bus travel remains more expensive than driving the equivalent distance. Our economy is so heavily focused on personal mobility, that if road pricing was applied at such a level as to match or exceed the price paid to use a bus or train then it’ll never be approved because business leaders and employers would be having kittens.
Alternatives to PAYG Road Pricing
Increase vehicle excise duty – To make up for the lost income from fuel duty, vehicle excise duty/car tax (which amounts to around £336million a year in Wales) would probably have to increase at least five-fold – the standard rate rising from £140 to closer to £700-a-year. There’s also a complication in that vehicle excise duty is currently based on engine emissions and zero-carbon vehicles are exempt. That would have to change and would likely need to move to a system based on horsepower (or power output for electric vehicles), purchase price and vehicle size/weight.
Free or heavily-subsidised public transport (Radical Wales: Free Public Transport) – Instead of using the stick to change behaviours, you use the carrot. Road charging could be used to partly or wholly cross-subsidise public transport and active travel initiatives, but in the absence of that it has to come from taxes – though there would be associated financial savings from environmental, congestion and health improvements.
Apply an equivalent of fuel duty to public charging stations and hydrogen fuel – I wouldn’t be surprised if this is what happens at UK level in the end. It would probably be the easiest thing to do and unavoidable, but it wouldn’t do anything to change driver behaviour or reduce congestion. We’d just end up with “green congestion” (traffic jams full of low or zero-carbon vehicles).
Congestion charge – As mentioned earlier, this has been discussed for Cardiff, where it would be a £2 daily charge to drive within a designated area. It could be introduced as soon as 2024 to pay for public transport improvements. It’s already been criticised as a “Valleys Tax”, though £2 would be significantly lower than the equivalent charge in Central London. There’s also the potential of introducing congestion charges at pinch points such as Port Talbot, Swansea and Newport (maybe the Wrexham and Deeside areas too).
Low Emission Zone (LEZ) charge – The same principle as a congestion charge, but instead of charging all vehicles it only charges those with high-emission engines. An LEZ was introduced in Central London during 2019 and applies to registered vehicles which don’t meet certain exhaust standards. While this would work until the 2030s-2040s, the obvious problem is it becomes redundant once the majority of vehicles are low or zero-emission. The way around that would be to shift the charge to cover the carbon footprint involved in the manufacturing of the vehicle itself; people forget that electric vehicles are not “clean” due to the processes and resources involved in making the battery packs in particular.
Selective road-tolling – There are several ways to do this including high-occupancy lanes (exempting high-occupancy and car shares from tolls) and HGV-only tolling (similar to that used in Germany and New Zealand).
Parking space levy – An idea that’s been raised in the Senedd and legislated for in Scotland during 2019. The idea is usually raised in relation to workplace parking spaces where an employer is charged for every parking space used by employees. In principle, it could be used in any scenario where employers or retailers provide parking spaces. As of 2021, Nottingham charges £428-per-space to any employer who uses 11 or more liable parking spaces. Glasgow, Bristol, Leicester, Edinburgh and some London boroughs are amongst those local authorities considering introducing a levy.
How could Wales introduce PAYG Road Pricing?
There are a raft of policy areas relating to transport which are not devolved to Wales, while excises (including vehicle excise duty) are also a reserved policy area in the Government of Wales Act 2006.
Although road pricing isn’t strictly non-devolved, something as comprehensive as national-level road pricing (as opposed to local congestion charges) would likely need independence or the devolution of the necessary powers.
Road pricing may not require a law – though it would probably be best introduced as a law to allow proper scrutiny rather than left to regulations.
Let’s start with a few assumptions:
- Wales would continue to use a UK road pricing system if it’s introduced before independence (rendering the rest of this moot). But if that didn’t happen….
- Car tax/vehicle excise duty continues to be levied separately from road pricing, whether it’s similar to the current standard rate or modified to take into account a vehicle’s power output (in kW), size/weight and purchase/scrap price. This would continue to raise around £336million a year in Wales.
- The Welsh equivalent of the DVLA would be responsible for collecting the successor to car tax/vehicle excise duty and road pricing.
- Road pricing is charged to the vehicle’s registered owner (including businesses) rather than a household, though drivers may be able to opt-in to a household-based charge which combines the bills of several vehicles into one payment.
- Drivers would have the ability to check their journeys and bills (probably online or via an app), will be able to see a real-time running meter and be able to appeal charges if they can provide evidence (i.e. if a vehicle is stolen).
- Local government and council-led consortiums would be allowed to introduce top-up charges (congestion charges, parking levies, selective lane/road tolling etc.).
Next, the question as to how to collect road charges, which is dependent on the type of road pricing adopted:
GNSS-based system – Probably the most sophisticated method (and ideal for variable road pricing), this would use global navigation satellites (GNSS) and an on-board unit to issue a variable charge based on the type of vehicle, distance travelled, levels of congestion and the type of road driven along (known as a Time Distance Place) system. The system is used to charge goods vehicles in some mainland European nations and it could easily be adapted for private vehicles. On paper, it’s the best option overall but has never been tried on such a wide scale before and would inevitably raise questions about privacy and data management. The major complication is the UK no longer participates in the Galileo and EGNOS satellite systems (pdf) because of Brexit – though still has access to open navigation services. Data transfer costs are said to be €2 (£1.80) per-vehicle per-month, which could be paid for via a surcharge or car tax/vehicle excise duty.
Electronic tag-based system – Similar to Norway and Singapore, all vehicles would carry an electronic tag that would charge the driver when they pass through virtual toll booths. The virtual toll booths would likely be made up of a combination of roadside sensors and number plate/ANPR systems. Ideally, the sensors would be small enough to be installed on existing street furniture like lampposts, gantries, speed cameras, traffic lights and road signs.
Vignette-based system – A low-tech equivalent of the electronic tag. Instead of an electronic system, all drivers would need to put a sticker or coupon in the window (similar to tax disks) to prove that they’ve paid upfront to access certain roads. The vignette would be checked by cameras and ANPR systems. The vignette could be bought from pretty much anywhere and last for maybe a week or so at a time.
Number plate recognition and distant charging – Instead of having a tag or vignette, drivers would be billed directly for passing a virtual toll booth using their number plate and registration details. I’m not a fan because it seems “sneaky” and it would probably be the most difficult and time-consuming method to administer – though the “annoyance/nudge” factor may have the desired impact on modal shift from cars to public transport.
Physical tolls/turnpikes – The old school method and probably as time-consuming as distant billing, though it would be harder to avoid. It would also be harder to justify installation on non-motorway standard roads. It would be unpopular, though could be combined with express lanes for those with an electronic tag. Given our history with tolls, it’s a non-starter except on newly-constructed motorways.
There would naturally be an up-front capital cost which would vary depending on the method, though this could be reclaimed from the road pricing scheme itself.
Last but not least, probably the most important question: How much could PAYG road pricing raise?
According to Welsh Government statistics, in 2019 (so pre-pandemic figures) 32.1billion vehicle kilometres were driven in Wales.
Although exact pricing could be variable, every 1p-per-km driven raises about £321million a year, so an average price of 6p-per-km driven could raise up to £1.93billion a year – which would close any gap from lost fuel duty and leave wriggle room for exemptions/concessions and to compensate for different driving behaviours (such as a reduction in driving overall).
An example annual bill – based on the average per-person figure (10,186 vehicle km driven, or 28km/17.4miles a day) – would be around £612 a year (£11.77 a week), which compares favourably to average annual petrol and diesel bills.
Though, as stated, the exact bill could vary based on the type of vehicle, the type of road driven along, time of day/levels of congestion and personal circumstances (which could make someone eligible for a concession or exemption).