Pay-per-mile scheme for HGVs could be way forward for fairer ‘wear and tear’ road levy

Lorries could be charged under a new pay-per-mile regime to cover the cost of damage to the road network. The Government has launched a consultation on reforming the current heavy goods vehicle (HGV) levy, which is used to pay for wear and tear on the roads.  

It says it wants to work with industry to reform the levy “in a way that rewards hauliers that plan their routes efficiently, incentivises efficient use of roads, and improves environmental performance, including air quality and carbon emissions”.

However, it stressed its intention “is not to raise more money from hauliers”. 

It said: “We are interested in views on how international models could work in a UK context. For example whether a charge based on the amount of distance travelled by HGVs and by the emissions class of vehicle could help to meet these objectives, or a differentiated time-based charge.” 

Speaking on BBC Radio 4’s Today programme, the transport secretary Chris Grayling said it was about creating a “level playing field” for British and international hauliers.

He said: “Our hauliers often complain that a continental trucker comes in with a tank full of lower duty diesel, spends several days working in the country, goes away again and pays nothing towards the use of the roads.

“We already have a system in place that provides some limited contribution, but we’re now consulting the industry.”

A new pay-per-mile charging regime for HGVs raises the prospect that it could be used as a test-bed for all other vehicles, including vans, especially when fuel duty receipts are coming under increasing pressure.

While fuel duty receipts have been broadly flat in cash terms over the past six years – the Treasury collected £27.5 billion last year – they have fallen as a share of gross domestic product (GDP). This reflects the effective tax rate falling in real terms as well as weak growth in the amount of fuel bought.

The main rate of fuel duty was cut by 1p in the 2011 Budget to 57.95p per litre (ppl) and has been frozen at this rate since. 

In real terms, the headline rate has fallen by around 8% over the past six years, lowering revenues as a share of GDP. Growth in fuel consumption has also been weaker than growth in the rest of the economy, largely reflecting rising fuel efficiency of the vehicle stock, including the adoption of hybrid and electric vehicles. 

However, Grayling denied that the plan was the beginning of a wider charging system that would eventually apply to vans and cars.

Existing HGV levy

The current levy applies to HGVs of 12 tonnes or more and varies according to the vehicle’s weight, axle configuration and levy duration. When it was introduced in 2014, Vehicle Excise Duty (VED) was cut, which meant most UK-based hauliers did not pay more overall.

According to the consultation document, in its first year of operation the levy raised £192.5 million, with £46.5m from foreign-registered vehicles and £146m from UK-registered ones.

Richard Burnett, chief executive of the Road Haulage Association (RHA), said: “Although it’s good news that more money is being spent on roads, it’s not right to target only lorries with a new tax.

“This has to be revenue neutral for lorry firms. If we fail to do this, it will make us less competitive than our European counterparts.”

The mayor of London Sadiq Khan outlined proposals for a pay-per-mile charging regime in his transport strategy, which was published last year (commercialfleet.org, August 3, 2017).

The road-user charging scheme based on miles driven would be introduced in London to improve air quality and to cut congestion.

Some journeys would cost more – at busier times of day, in more congested areas or in more polluting vehicles – while others would cost less, such as shorter journeys in low-emission vehicles in quieter areas outside peak hours.

The new regime would replace pre-existing schemes such as the Congestion Charge, Toxicity Charge and the Ultra-Low Emission Zone (ULEZ), with a single, unified system which takes into account both congestion and emissions objectives.

Given the development of tracking and telematics technology, the transport strategy argues that it is now worth considering whether road use should be paid for in a way that “better accounts for the impact and context of individual journeys”.

A-road funding

The prospect of a pay-per-mile charging regime came as the Government launched a separate consultation on which A-roads in England should be included in a new Major Road Network (MRN).

The MRN consultation proposes that 5,000 miles of A-roads are brought into scope for new funding from the National Roads Fund for upgrades and improvements, with key A-roads benefitting from up to £100m each in funding.

From 2020, the intention is that the National Roads Fund will be financed by VED, which raised about £6bn in 2016/17.

Upgrade schemes which could be considered include: bypasses, missing links between existing routes, road widening and major junction improvements.

Grayling said: “For decades, these major local roads have been underfunded and not properly maintained. We are spending record amounts on improving our roads and we want more of our busiest roads to benefit from guaranteed investment.”

Growing cost of congestion

It is hoped the additional funding for A-roads will help tackle the growing problem of congestion.

The cost of congestion to UK business has risen by almost £150m in the past year, according to research conducted by TomTom.

Latest figures revealed as part of the TomTom Traffic Index show congestion is costing UK businesses approximately £915m a year in lost productivity, up from £767m in the previous year’s study.

Traffic across the UK’s 25 most congested cities and towns increases the time each vehicle spends on the road by an average of 129 hours a year (up from 127), which means an average commercial vehicle driver wastes more than 16 working days sat in traffic. This translates to an approximate loss of £915m for businesses across the country.

Burnett welcomed the prospect of additional investment to help ease the problem. “While major roads have often benefitted from investment, A-roads and local roads have been under-invested in for many years,” he said.

“This announcement is a positive step. The devil is in the detail and the RHA stands ready to assist Government in ensuring that funding is granted to the improvements that are most needed.”

Christopher Snelling, head of UK policy at the Freight Transport Association (FTA), also welcomed the prospect of additional investment. 

However, the FTA is calling for a guarantee that every scheme funded under the new MRN programme will support the needs of freight logistics.  

Snelling said: “Any investment in our road network is good news, especially given the lack of funding available over recent years for councils to improve just these kinds of roads.  But the Government must ensure that any projects funded by this scheme are designed for freight as well as car users.

“Above all, FTA believes any roads classed as part of the MRN must focus on making motor traffic more efficient and be open to all types of motor vehicle without restriction. There should be no HGV restrictions on anything that wants to claim to be a major road.”