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Feasibility study of road pricing in the UK - Summary

Chapter 1 - Introduction

1. Following the publication of 'Managing Our Roads' in July 2003, the Secretary of State for Transport set up a comprehensive study to examine how a new system of charging for road use could help make better use of our road capacity. The study commissioned a wide range of work. It considered whether and how road pricing might work, not whether it should be adopted. This report sets out the conclusions.

Chapter 2 - The Importance of Public Opinion

2. The potential benefits of road pricing have been advocated for some time. Representatives of industry and freight transport have long favoured it for its potential to improve reliability. But very few places in the world have implemented it. It brings about change, and it is difficult to explain the benefits. A sufficient level of public acceptability is critical to the feasibility of road pricing.

3. To accept road pricing, people need to agree that it would deliver a solution to an issue that they can see needs addressing. They want to see choice. Experience in other countries and in London shows that attitudes become more positive once it is possible to engage with a real scheme rather than an abstract concept. Trust is crucial. People need to be confident that road pricing is designed to deliver transport and other benefits, rather than as a means of raising more revenue.

Chapter 3 - Travel Today and Tomorrow

4. Motorised road transport has brought us huge benefits, but at a cost to the environment, safety and congestion. Forecasts using the National Transport Model suggest that a well-targeted national road pricing scheme has the potential to achieve £10 billion worth of time savings a year (at 2010 traffic levels) in Great Britain alone. This figure could rise to as much as £12 billion a year if a value is added for reliability.

5. Traffic is forecast to grow, and congestion is forecast to grow at an even faster rate. Peak hours are spreading. Most congestion occurs in urban areas and on strategic long-distance routes in the vicinity of urban areas. Our patterns of living, working and doing business are leading to more and longer road journeys, with reducing car occupancy rates.

6. There will continue to be a case for expanding road capacity where necessary. Government policy has a strong presumption against this in environmentally sensitive areas. But in such cases pricing could help provide options, such as tunnels, for expanding capacity while limiting environmental damage.

7. A significant reduction in congestion would require only a relatively small reduction in traffic. In principle, there is capacity on urban roads in peak periods to achieve such reductions: some 20 per cent of commuting traffic in peak hours should find it relatively easy to change either mode or time of travel; and more car sharing seems practical - 71 per cent of cars and vans in the morning peak period in cities have a single occupant, just over half of whom are commuting.

8. The key to understanding congestion, and to putting together the right solution for tackling it, is understanding its causes. These vary from place to place. It requires local knowledge of the make-up of the traffic in a given locality to work out which solutions would be best fitted to those particular conditions. This does not mean that local needs should be given priority over strategic needs, simply that without the local knowledge it is not possible accurately to target either.

9. There is a wide range of tools available for tackling congestion, such as better public transport, more road capacity, better land-use planning, car share, park and ride. But in areas of high demand, these can have only a short-lived impact in keeping traffic moving if new demand replaces old.

10. By differentiating between times and places, road pricing targets congestion and environmental costs such as air pollution. The alternatives become relatively more attractive. More road users change their method of travel so that there are worthwhile improvements in journey time. Bus services become quicker and more reliable. Freight is more efficient.

11. Thus road pricing locks in the benefits of other measures. Without it, new traffic would soon replace that which has moved off, so that queuing would continue to ration road space at a cost to personal choice and economic wellbeing.

Chapter 4 - How Would National Road Pricing Work?

12. There is significant experience, both internationally and in the UK, of road charging schemes. They fall into three main types: charges for crossing a cordon; for driving in an area (e.g. the London Congestion Charge) and charging for the use of a linear section of infrastructure such as a bridge or motorway. They use technologies such as toll booths, self-declaration, microwave tags and automatic number plate recognition. These are well proven, but limited in scale. As demand management tools they are effective at dealing with city centres (the London charge has cut congestion in the charged area by an average of 30 per cent), but cannot deal with large complex urban areas without a large number of boundaries with infrastructure at each one. And they can be blunt. They do not distinguish between short and long journeys, or several journeys in a zone.

13. The key to a fully national road pricing scheme is a technology which can charge by time, distance and place to target the costs, including environmental costs. Most costs are caused by congestion. Targeting congestion might require a complex 'box' on board the vehicle which could work out exactly where, when and over what distance the vehicle was being used, possibly using a positioning system, although the technology requirement will depend on the precise requirements of the scheme, and on technological developments over time. On the advice of experts, the study estimates that the equipment necessary to deliver a full position-based charging scheme will not be available in a mass market, low-cost form, until at least 2014.

14. Signalling the costs of travel leads people to decide that for some of their journeys they will change the way in which they make those trips, if that is at relatively little inconvenience to themselves. Modelling using the Department for Transport's National Transport Model (which covers Great Britain only) on the basis of 2010, shows that a carefully constructed national scheme using marginal social cost pricing has the potential to reduce urban congestion by nearly half, through an overall reduction in urban traffic levels of only 4 per cent, as well as providing significant environmental benefits in terms of air quality, noise and severance.

15. These benefits would be achieved by more than half of traffic paying less than it would otherwise be paying in fuel taxes, and only a small proportion of traffic paying the highest charge levels. This scheme would nevertheless raise considerable revenue - some £9 billion (gross) a year - although the modelling shows that little congestion benefit would be lost if prices were set at levels which did not raise more revenue than would otherwise be raised by fuel taxes.

16. We have not been able to work out the impacts of road pricing on individuals or regions. It could potentially provide a number of benefits for groups that suffer from social exclusion or limited accessibility. Freight and business would gain. Bus passengers would enjoy more reliable services. The environment would gain through improvements to air quality, and reductions in noise, community severance and other nuisance. Much more work is needed to understand these effects more fully and to examine how pricing structures could influence different road users.

17. It is the better way of paying that makes the difference rather than the total amount paid. But the overall effects would depend on what use was made of the revenues. There are options for making road pricing neutral to drivers as a group so that they would not pay more than they otherwise would in motoring taxes. Or additional revenue, which would also have additional environmental benefits, could be used to fund public transport or new road capacity, or to reduce other taxes.

18. It would cost a lot to introduce a national road pricing scheme. As well as the costs of setting it up, there are the costs of enforcement and the back-office systems handling payments and enquiries, as well as compliance costs for industry. We cannot put a precise figure on these costs today, but the system could cost as much as £3 billion a year to run. Potentially the biggest cost in a national scheme would be the on-board technology in vehicles. However, position-fixing technology is becoming more common, and the costs are bound to fall. So it is difficult to forecast what such a national pricing system would actually cost in 10 or more years' time. The challenge for Government is to work with industry and at the European level to get the right technology in vehicles at low cost and exploit the potential synergies with other 'positive' applications such as navigational systems.

19. The costs would need to be paid for, but need to be put in perspective. Apart from the revenue, there is the potential for £12 billion worth of time savings and reliability a year in Great Britain alone, where we already spend over £1 billion a week on private motoring.

20. Current motoring taxes cannot match the sophistication of a national road pricing scheme in addressing congestion where and when it happens. National road pricing would therefore need a new national system - a platform of a distance charge, with variations, up or down, to reflect conditions of time and place. Setting the levels will not be easy. Central Government and the devolved administrations would need to work with local authorities and other stakeholders to agree the calibration of variations, and establish where and when they should apply. A major decision would be whether the national charging system should replace fuel duty in whole or in part.

21. Delivering such a system would be a major challenge. Getting the prices and complementary local measures right will need a greater knowledge at the localised level of road use and road users. In developing price structures it will be important to consider the different needs and lifestyles of different road users. The institutional structure used to operate and regulate the charges, including the use made of the revenue from them, will need to gain and retain the trust of road users. Clear objectives and criteria would need to be established for setting charge levels, and some on the Steering Group believed that a more fundamental reform of motoring taxation to establish a more transparent system would be required.

Chapter 5 - Implementation: Institutional Issues

22. The national system outlined in Chapter 4 would require a close relationship between all tiers of government with tailored structural approaches for the devolved administrations. Local government's role (except in Northern Ireland) is to develop transport strategies, of which charging would be an element. Central Government would need to establish the legislative and wider framework, including delivery of any national system.

23. In the meantime, central Government and the devolved administrations could encourage and help local authorities to establish local congestion charging schemes when and where appropriate. They could give practical support in areas such as modelling expertise and methodological guidelines to ensure that decisions in different localities are taken on a consistent and transparent basis, that schemes are subjected to proper appraisal and review, and to ensure interoperability as a number of local schemes develop, with common and easily understood mechanisms to ensure compliance and to protect privacy.

Chapter 6 - Pathfinders

24. While a national scheme is at least ten years away, there are reasons for undertaking forms of road user charging on the more limited scale that is technically feasible now, in particular area or cordon congestion charging. These can help to address current problems on the road network, improve our knowledge of the practicalities and effects of pricing, and, through growing familiarity, should greatly improve understanding of its benefits.

25. The Lorry Road User Charging scheme, which is due to take effect from 2007/8, will anticipate many features of a national charging scheme. But its immediate purpose is different: to ensure a fairer system of taxation rather than explicitly change behaviour. There would be value in different types of scheme being rolled out to help develop a better understanding of the responses of road users in this country to pricing, and to improve awareness of its benefits. It will be possible to trial a distance-based scheme using positioning technology.

26. Microwave technology can now toll motorways at high speed, without the need for toll plazas. The M6 Toll has successfully demonstrated that in this country, as well as elsewhere in the world, tolled new capacity can gain popularity as an alternative to an existing route.

Chapter 7 - Conclusions and next steps

27. National road pricing is becoming feasible, and it could meet the objectives that the Government has set. In the meantime, a number of congestion charging schemes at the more local level, and Government considering the case for charging new strategic capacity, would amount to a trajectory towards a national road pricing system, leaving open until the appropriate future moment choices either of principle or method that would have to be made along the way.

28. If the Government wishes to make progress towards national road pricing, there are number of steps that it ought to take:

• inform and lead a debate to promote public understanding and trust
• develop proposals on how receipts from road users would be governed, managed and accounted for, and how motoring taxes would be dealt with on the introduction of any road user charging system
• develop a detailed research programme into road users' attitudes and behaviour, including market research, to inform scheme design and provide a better understanding of the range of travel choices and pricing options which would reflect the different needs of different segments of society; and develop and evaluate pricing propositions likely to appeal to road users as consumers, while keeping the price signals needed to have the right effect
• work with car manufacturers, and take a lead in the EU, on the standards and agreements for equipment in vehicles
• provide detailed guidance and practical assistance to local authorities considering introducing a variety of local charging schemes
• consider how best to provide appropriate incentives to local authorities to introduce local schemes
• consider whether a national back-office and management function would be worthwhile and value for money
• proceed with and develop existing trials of technology
• consider the case for charging for new strategic capacity, building on the successful model of the M6 Toll
• work closely across all levels of government and with stakeholders to share knowledge and consider how best to deliver the benefits of charging.