Is road pricing feasible?

It is two years since London’s congestion scheme was launched by mayor Ken Livingstone to a fanfare of opprobrium from its opponents. The charge has been widely acclaimed as a success but while none of the dire predictions of its critics have come true, nor have the expectations of similar schemes sprouting up around Britain or, indeed, Europe and the rest of the world.

And there is an even more fundamental paradox. Virtually the whole transport planning community reckons that within a decade or so, the government’s aim of a much wider road pricing, or even universal, scheme will have borne fruit. And yet, no one can quite explain how we will get there. We are always, as Phil Goodwin, professor of transport at the University of West of England put it, ‘ten years away from having the technology to introduce a national road pricing scheme’ but the need for a more sensible way of rationing demand on our roads rather than the crude system of high fuel taxes is becoming ever more apparent.

As Goodwin suggests, the concept of road pricing has been around for a long time. It was first seriously put forward in 1964 by the Ruben Smeed committee which, examining the then relatively minor problem of congestion, suggested road pricing was both timely and technologically feasible. However, while there was a lot of discussion and development of theoretical models on the subject over the subsequent four decades, very little progress was made on the ground.

There were a few notable exceptions. Singapore introduced a scheme controlling traffic entering its Central Business District 20 years ago. Originally it was a paper based scheme but it has subsequently been upgraded to an electronic collection method. In Norway, several towns charged for entry into a central cordon and used the revenue to develop transport improvements.

And, of course, there are toll roads, notably the motorway systems of countries like France and Italy and many bridges and tunnels across the world. In Britain, apart from London, there has been precious little: the M6 toll road, now just over a year old, and which controversially is now reckoned to have simply generated more traffic rather than solved the congestion problem, and a single street in Durham. Therefore, nothing like the full potential of road pricing systems has been realised.

The experience of London could change that, but probably more slowly than many supporters of the concept hope. The successful introduction of the scheme in the capital transformed the debate from being a largely theoretical analysis of how such schemes might be introduced, to a much wider debate about the full possibilities of road pricing in the context of wider transport policies.

Nevertheless, the obstacles are manifold and progress slow. London was a special case for a number of reasons. It had a strong mayor who had the courage to push through a scheme, against the recommendations of his advisers. London, too, has the advantage of a fantastic public transport system (yes, really) compared with other major cities in the UK that was already used by the vast majority entering the charge zone.

Even so, the debate in London has by no means ended and there is conflicting evidence on the crucial point of whether retail businesses have been damaged by the chart. A report commissioned by the John Lewis partnership, The Impact of the congestion charge on the retail sector, suggested that retail sales on London’s Oxford Street had fallen by 5.5 per cent as a result of the imposition of the charge. However, a survey for Transport for London covering 700 businesses in and around the charge area found that the reduction had been a result of lower tourist numbers and the closure of the Central Line resulting from the Chancery Lane accident, for the first few weeks after the start of the charge scheme.

Another potential negative of congestion charging schemes is that they could be seen as a regressive form of taxation as all drivers pay the same amount, whether they are in a Ford Fiesta or a Bentley. The research, however, suggests that the picture is more complicated. Car owners tend to be richer anyway and if most of those paying for the charge live in affluent suburbs, then the tax could actually be progressive. It depends on the precise nature of the scheme and the physical characteristics of the town on which it is being imposed.

While congestion charging schemes have been seen as one way of reducing local pollution, the impact on the environment in London has not been as beneficial as expected. According to Transport for London’s Impact Report, air quality had not improved, though when asked in surveys, people felt it had and commented on noise reduction. Certainly traffic has gone down – there has been a 20 per cent reduction – and not returned. However, net revenue from the scheme has been disappointing, just over half the hoped for £130m per year and the administrative costs have been high, something that has deterred would be imitators.

Nevertheless, so far most Londoners support the scheme but Livingstone is also increasing the price of the charge from £5 to £8. He is also hoping to extend it westwards which has attracted the fury of Kensington & Chelsea council, as well as the residents. This is strange since most would benefit. Residents get a 90 per cent discount, and therefore for just 80p per day they would no longer have to pay to enter the existing charge area.

The lesson, from London, therefore, is that virtually any initiative on charging quickly becomes controversial and attracts opposition. So perhaps it is not surprising that only tentative steps have been taken, both nationally and locally, towards introducing further schemes. On the national level, the government commissioned a study on the feasibility of road pricing which was published, along with the White Paper, the Future of Transport, last July. Ministers have not committed themselves definitely to implementing a scheme but, instead, according to the Paper, the government says it will ‘lead a debate on what would make pricing acceptable to motorists’ and ‘seek to build a public consensus around the objectives of road pricing and how to use the revenue’. Moreover, ministers want local councils to be braver and introduce more schemes which would make the idea more acceptable at a national level. In order to encourage them, there is to be a transport innovation fund introduced in 2008/9 which may be worth as much as £2bn per year to provide seed corn for such projects.

Certainly, local councils need such encouragement. At the local level, no local authority has made anything like the progress achieved by Transport for London. Schemes like the Nottingham workplace parking levy have been at the embryonic stage for years and as for congestion charging, there is some talk in Manchester of a scheme to pay for trams, Bristol’s plans are effectively on ice while in Edinburgh, which has made most progress, there is to be a referendum that might make the scheme stillborn with the postal ballot starting on February 7 for a two week period.

The key problem, of course, is winning over public opinion. The transport arguments are largely accepted. The idea that the state can continue to provide a very scarce resource, road space, free at the point of use cannot be justified rationally. It is often said that road space is the last commodity that is provided in the style of the old Communist regimes by simply making people queue for it.

While this might persuade the cognoscenti getting the motorist on Clapham Common to agree that charging more for driving there rather than on a deserted road in the Cornwall countryside is a harder task. There is, too, an immediate elephant trap for politicians. To win over such motorists, they might be tempted to say the scheme should be revenue neutral – in other words, the overall tax take will remain the same as under the current system, but it will be made more expensive to drive on roads where there is high demand, and vice versa.

But that would be to negate many of the potential advantages of a national scheme. For example, road pricing could be used to attempt to persuade people to use their cars less, either by encouraging them onto more friendly modes or discouraging them from making the journey at all. Or the revenue could be used to boost public transport, as it has been done in London. Therefore, while politicians may be tempted to go for the line that this will not cost motorists any extra, that would severely limit the usefulness of a national road pricing scheme.

Moreover, it will not be revenue neutral for a particular motorist. The vast majority of people will win or lose, unless by chance they happen to be entirely Mr or Ms average driver. The road pricing mechanism could be used to bring about a variety of wider outcomes. For example, charging very low rates in rural areas might encourage development, or alternatively it might prove unpopular as traffic levels will soar. Alternatively, the revenue could be used to build more roads, something that might assuage motoring opinion.

These suggestions show the wide range of possible outcomes of introducing a scheme. Road pricing is a very important tool that has implications well outside transport policy.

The first big test of the feasibility of widespread road charging will be the scheme for lorry road user charging which is due to be implemented across the UK in 2007/8. The measure has received very little attention in the press but it aims to ensure that all goods vehicles, including those from overseas, make a contribution towards the cost of building and maintaining the road network. The scheme will be revenue neutral as the cost of the new tax will be offset by a rebate on fuel duty.

While this will be a test of the available technology, it will be on a much smaller scale than any national scheme affecting cars as only around 500,000 lorries will need to be fitted with the technology, less than 2 per cent of the nation’s vehicle parc. The technical difficulties of even such a limited scheme should not underestimated. In Germany, a similar scheme was due to be introduced in November 2003, but the scale of implementation, which required fitting units on all trucks above 12 tonnes, and technical problems with satellite technology such as avoiding charging vehicles travelling on parallel roads near motorways delayed roll out until later this year.

But it is not technology ultimately that will determine whether a scheme is introduced or not. It will be whether the politicians are brave enough to do so. So there is a real paradox. While transport planners talk glibly of ‘when’, rather than ‘if’, road pricing schemes are introduced, the reality on the ground is that we seem hardly nearer any major introduction of a scheme, either nationally or locally, than we were when Ken Livingstone took the plunge.

However, it would be wrong to be wholly negative. It is not surprising that progress should be slow in such a controversial area of policy, affecting virtually the whole population. The stakes are enormous and there is bound to be considerable controversy. To get a national road pricing scheme through the legislative process will require a Livingstone-type figure at a national level. It will need a big champion, backed by a supportive government that will not flinch in the face of opposition and that will withstand for any ‘revenue neutral’ solution (which will not be believed anyway). And that ain’t going to be Alistair Darling, even though his home town is Edinburgh, as he has shown no inclination to do anything more than go slowly through the motions on road pricing.

Whether that will come with the next, probably Labour, government or the one after that is a matter for conjecture. But despite the difficulties, the odds are that a scheme will eventually be introduced, simply because the gains are potentially so enormous.

Christian Wolmar’s latest book is The Subterranean Railway, how the London Underground was built and changed London forever, published by Atlantic Books, £17 99 and he wrote the recent pamphlet on road pricing for the Economic and Social Research Council in its ‘Mapping the public policy landscape’ series.

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