National road pricing ‘threatened’ by local schemes

A version of this article was first published in the February edition of Fleet News 

Local road pricing schemes could scupper the Government’s ability to replace fuel duty and vehicle excise duty (VED) with its own pas-as-you-drive tax.

The Mayor of London has asked Transport for London (TfL) to investigate a road pricing scheme for the capital, while Scotland is also considering whether it could help it meet climate targets.

Logistics UK’s head of policy for the south, Natalie Chapman, says that a “proportionate and joined up approach” to road user charging is essential.

She added: “Any London-specific road charging scheme must be flexible and adapt to the possible introduction of any future national road charging schemes to avoid fragmentation of regulations.”

A road pricing system, based on miles driven, is backed by a majority of fleet decision-makers, research from Fleet News suggests. 

The snap poll, taken in the wake of a report from MPs recommending road-user charging as the only way to plug a £35 billion fiscal black hole from a fall in revenues, showed 55% support for the tax change.

A sizeable minority, two-in-five fleets (40%), however, did not favour road pricing, while 5% said that they were unsure. When the views of all respondents were added into the mix – not just fleets – those against the road tax change stayed virtually the same (39%), but less than half (42%) said they backed a pay-as-you-drive scheme. One-in-five respondents (19%) were undecided.

The Transport Committee report explains that the switch to electric vehicles (EVs) will wipe out road tax revenues of £35bn – £28bn from fuel duty and £7bn from vehicle excise duty (VED) – by 2050, unless an alternative is found.

ROLE OF TELEMATICS

It urges ministers to consider a road pricing mechanism that uses telematics technology to charge drivers according to distance driven, factoring in vehicle type and time of day.

Huw Merriman MP, chair of the Transport Committee, says it’s time to have an “honest conversation” on motoring taxes.

“We need to talk about road pricing,” he said. “Innovative technology could deliver a national road-pricing scheme which prices up a journey based on the amount of road, and type of vehicle, used.

“Just as with our current motoring taxes but, by using price as a lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives.”

POLITICIANS WARY OF NEW TAX

The report, however, concedes the “greatest barriers” to introducing road pricing are political. Several Governments, it says, have “foundered on the rocks” of introducing new taxes.

“Democratically-elected politicians are painfully aware that advocating the introduction of new taxes, however well intentioned, is unlikely to engender general popularity.”

The political risks associated with road pricing have made it “too toxic” a prospect for successive Governments, it adds.

A road pricing scheme was first considered as early as the 1960s and was raised again by then Transport Secretary Alistair Darling in 2005. However, the plans were ditched after a backlash from road users and an anti-road pricing petition gained more than one million signatures 15 years ago.

More recently, the merits of a national road pricing scheme to plug the shortfall from road taxes, including fuel duty, were expected to be investigated as part of the Government’s Net Zero Strategy, which was published in October, but were omitted from the final report.

Furthermore, the Treasury launched a consultation which covered the future of VED, with direct reference to EVs, following the March 2020 Budget. It has still not published its findings.

Paul Hollick, chair of the Association of Fleet Professionals (AFP), believes some sort of road toll charging system is now inevitable, given the Government faces a significant fall in fuel duty.

“From an AFP perspective, we don’t really like it, but if you think about the other options, there really isn’t another, apart from road charging,” he said.

SCOTLAND CONSIDERS ROAD CHARGING

Hollick highlights the Government’s track record with major IT projects as a cause for concern, alongside the issue of trying to agree a common approach with the devolved administrations of Scotland, Wales and Northern Ireland.

“The whole thing just scares me, because I can see a future where England does one thing, Scotland does another and it unfairly taxes the poor,” he added. “It needs to be done, but it needs to be done fairly and equitably.”

Fuel duty and VED are national taxes levied by the Treasury. Bearing in mind the partial devolution of transport policy, the report acknowledges that agreement between the UK Government and the devolved administrations will be key to developing and implementing an alternative road charging system.

Ministers in the Scottish Government, however, are said to be considering a pay-as-you-drive scheme to help meet climate change targets.

It comes 15 years after the Scottish National Party (SNP) vowed to abolish road tolls in its manifesto, with former First Minister Alex Salmond describing them as a “the poll tax on wheels”.

The SNP fulfilled its campaign pledge to axe all remaining road charges in Scotland, including those on the Forth and Tay bridges, but ministers now acknowledge that some form of road pricing is inevitable.

A paper by the Transport Scotland government agency confirms that the option is being examined as part of the SNP/Green administration’s plan for a 20% reduction in the distance travelled by cars by the end of the decade.

While the idea is at an early stage, it could mean motorways such as the M8 being tolled and a return to charges for bridges and tunnels.

PATCHWORK OF LOCAL SCHEMES

Fleet operators, working nationally and cross-regionally, are also concerned about local road charging schemes, such as congestion zones or clean air zones (CAZs), with the Transport Committee report suggesting they could compromise or even scupper a national system.

Duncan Buchanan, policy director at the Road Haulage Association (RHA), told MPs on the committee: “One of the enemies for us is local complexity. You have different rules in London, different rules in Manchester, different rules in Birmingham, and it just adds more and more complexity.”

Fleets face a growing patchwork of local schemes, with Oxford opening the country’s first zero emission zone (ZEZ) at the end of February, while London, which already operates the ultra-low emission zone (ULEZ) and the congestion charge, is looking at the merits of introducing its own road pricing scheme. 

Such a system, says Mayor of London Sadiq Khan could abolish all existing road user charges in the capital and replace them with a scheme where drivers pay per mile, with different rates dependent on how polluting vehicles are, the level of congestion in the area and access to public transport.

However, the Transport Committee report warns that the devolution of road pricing could lead to the introduction of “clunky, unconnected schemes” that charge users the same price for driving one mile into the zone as those who drive across it for hours in a day.

“The more regional schemes that are created, the harder it will eventually be for the Government to implement a functional national system,” it said.

‘INCONGRUOUS LOCAL SCHEMES’

The MPs argue that fuel duty and VED are Treasury taxes that require a national level replacement rather than a “patchwork of incongruous local schemes”.

Indeed, the report suggests that the introduction of a range of more- or less-generous local road pricing schemes could create regional inequality and may make it impossible to deliver a national road pricing scheme.

“The simultaneous operation of local and national road pricing schemes would subject drivers to confusion and unfair double taxation,” it says.

Ben Foulser, head of Future Mobility at KPMG UK, believes it is imperative that any national road pricing system takes account of these local charging zones.

“There are a number of local clean air and congestion charging schemes in existence in the UK already and any national system developed needs to incorporate those, rather than add to them,” he said.

The committee report also highlights how Government departments must work together. The Treasury is responsible for taxation policy, including motoring taxation; the Department for Transport (DfT) is responsible for road connectivity.

ARM’S-LENGTH BODY

It says the Government must work on a cross-departmental basis to join up policy on maintaining tax revenues, facilitating road connectivity and supporting the shift to zero emission vehicles.

It recommends that the DfT and the Treasury should work together to set out their preferred options for replacing fuel duty and VED and establish an arm’s-length body with an appointed individual to evaluate the potential merits of those options.

Furthermore, it says that the arm’s-length body should be tasked with recommending an alternative road charging mechanism by the end of this year.

Toby Poston, director of corporate affairs at trade body the British Vehicle Rental and Leasing Association (BVRLA), who gave evidence to the committee in October, agrees.

He said: “A key role in the implementation of the required technologies sits with multiple Government agencies. We need to see them working in close collaboration, receiving additional support in order to meet the challenges of this monumental shift.” (For more from Poston, read his opinion piece).

Michelle Gardner, head of public policy at Logistics UK, says that any new charging system, must be “fair, proportionate, and provide businesses with the certainty they need” to plan their long-term investments into alternative fuelled vehicles.

“As the Transport Committee identified, road charging must replace, rather than add to, existing motoring taxes and be revenueneutral to limit the financial burden placed on logistics businesses, with all investment going back into road maintenance and improvement,” Gardner concluded.

Poston says it is time to ‘get off the fence’ and get started on road pricing, read more here.