Written evidence submitted by Jacobs (EVP0030)

Summary

1. This submission sets out our views on how road pricing can be introduced in the UK, as one measure to assist in tackling climate change. The approach we advocate will also address the negative economic, social and health impacts of high levels of traffic congestion.

The case for introducing some form of road pricing and the economic, fiscal, environmental and social impacts of doing so

Congestion

2. Roads are the arteries of economic activity: connecting workers to jobs, goods to markets and people to places. The vast majority of passenger and freight trips are on our roads. While there is considerable uncertainty about the cost of congestion, it is fair to say it is substantial both in economic and environmental terms and principally affects urban areas and parts of the strategic road network.

3. Traffic and hence congestion is not evenly distributed across the road network. Around 60% of all road traffic is handled by 13% of the road network. While rural minor roads, which constitute over half the length of the road network, account for only 13% of miles driven.

Climate change

4. Transport remains the largest emitting sector, responsible for 28% of all greenhouse gas emissions in the UK.[1]. Transport emissions are only 3% lower than in 1990, as increased road traffic, and larger sized engines have largely offset improvements in vehicle fuel efficiency.

5. The move to electric vehicles, on the face of it, addresses the climate change issue. However, as all sectors of the economy are moving towards decarbonisation there is a significant increase in demand for electricity. The amount of electricity required to support present car and van mileage is broadly equivalent to the output of four Hinkley Point C nuclear power stations[2] or six Dogger Bank Wind Farms[3].

6. According to EDF[4] the comparative fuel costs of running an electric car are around 4p per mile compared to 9p per mile for a petrol car. A 50% reduction in fuel prices, resulting from a switch from petrol/diesel to electric cars could lead to an increase in miles driven of 5-25%, exacerbating congestion and air quality problems. The latter relates to increased tyre and brake dust.

Government revenue

7. Fuel duty receipts generate a material amount of revenue for central government, £28bn in 2019-20. With the decarbonisation of road fuels these receipts will need to be replaced. The basic rate of income tax will need to increase from 20% to 26% to fully offset the loss in fuel duty revenues resulting from a move to electric vehicles.

Social impact

8. Car ownership is not uniform. In the top four decile income groups more than 90% of households own a car, for the fourth to six decile groups more than 80% of households have access to a car. This drops to just 35% in the lowest income decile group. Road user charging has the potential to radically improve journey times for bus users who are predominately from lower income groups and women.

Which particular road pricing or pay-as-you-drive schemes would be most appropriate for the UK context and the practicalities of implementing such schemes?

9. The ultimate aim is to charge motorists for every mile they drive on the road network. However, most traffic is concentrated on a relatively few strategic roads and in urban areas. Therefore, to minimise the cost of operating the system and increase public acceptability it is more appropriate, at least in its initial stages, to limit the scheme to just the motorway and A road network.

10. The mileage charge will not be a fixed amount but will vary, depending on the values attributed to each of the following three elements which will make up the total charge:

• a road maintenance and operating charge;
• a mitigation charge; and
• a congestion charge.

11. The maintenance and operating charge will be the only element that all motorists will automatically pay. The cost will vary slightly by type of road and each highway authority based on the actual cost of maintaining the highway authority’s road network. The mitigation charge will depend on how environmentally efficient and quiet a vehicle is. The congestion charge will apply where there is a noticeable reduction in speed from the free flow average.

How will the motorist pay?

12. We propose that motorists will have a choice in how they pay for future road journeys. The simplest method will be to just go and drive as they do now and receive an itemised bill every month for the journeys made. The alternative is that motorists will have the opportunity to pre-book a journey via an App, on-line or by ‘phone. The advantage of booking is that you receive a discount on the charge and if you are delayed on your journey, for example, due to an accident or unexpected heavy traffic, you are eligible for automatic compensation as is offered by the rail network. The reason for the discount is that booking your journey provides the highway authority with better information on expected demand and the possibility to nudge trips to other modes or times to tackle congestion issues.

13. The government’s role will principally be to set the legal framework by which the scheme operates. Due to the high regard it is held in for keeping personal data confidential, we suggest that HMRC should be responsible for managing the scheme and billing users.

14. The  existing independent Office of Rail and Road  will be responsible for setting each of the three road charging elements and for monitoring the efficiency of all highway authorities.

The level of public support for road pricing and how the views of the public need to be considered in the development of any road pricing scheme;

15. It is apparent that people’s views on road user charging are changing. Ipsos MORI 2020 poll found strong support for road user charging (over 60% in favour) when revenues are used to address climate change or support public transport.[5]. The Climate Assembly UK also supported charging to use the roads, by 56% to 39%, net support of +17%, as one measure to address climate change.[6]

The lessons to be learned from other countries who are seeking to decarbonise road transport and/or utilise forms of road pricing.

16. There are four key conclusions to be drawn from the examples of Sweden, Norway and Switzerland:

         Pricing works – all the localities have been successful in reducing congestion by using charging. Importantly the flexibility of a price-based system means that the level of traffic and its composition can be kept at any desired level.

         Public acceptability –the examples show that once road users and the wider public see the benefits of road pricing previous opposition turns to support.

         Cordon or link based charging – all these examples are cordon based which is not the most effective form of charging. They charge to enter a defined area but not for the distance driven nor the costs imposed on others. If cordons can deliver 20-30% reductions in user demand, then pricing across a whole network could do it so much more efficiently i.e. at a lower price.

         Charging for environment and maintenance costs – some effort is made in all the three locations to include environmental costs within the charging system. This is good politics as well as good economics. Those charges both changed driver behaviour and choices of vehicles and fuels.

Introduction

17. This submission sets out our views on how road pricing can be introduced in the UK, as one measure to assist in tackling climate change. The approach we advocate will also address the negative economic, social and health impacts of high levels of traffic congestion.

18. It briefly describes our role in Climate Assembly UK and our experience of supporting the development and implementation of road user charging schemes in the UK and overseas.

19. It answers the Transport Committee’s questions based on the above experience and expertise.

Jacobs

20. Jacobs is a global technical and professional services leader, employing over 55,000 people worldwide. In the UK, we employ nearly 11,000 staff, with offices in locations all over the country. We are helping to tackle some of the UK’s most complex challenges to make the future better – supporting projects with outcomes that safeguard the environment, and improve our security, social equity, resiliency and productivity.

21. As a company, we committed to and achieved, in 2020, our target of being Net Zero Carbon for our operations and business travel, with a long-term aim of being Carbon negative by 2030. We also transitioned to 100% renewable energy for our operations in 2020. We create better ways and impactful solutions that support net zero and help drive inclusive growth benefits in our communities.

22. For over 25 years, we have advised Transport for London on the development and evolution of London’s Congestion Charging Scheme. This has included:

• The definition and design of the original Congestion Charge scheme;
• The planning and removal of the Western Extension;
• Advising on the possible extension to “remote zones” including Heathrow Airport;
• Advising on changing the technology from the current ANPR system to a GPS distance-based charge; and
• Supporting the development of the Ultra-Low Emission zone and its extension to cover inner London.

23. We are presently advising New York on the implementation of its congestion charging scheme and Qatar on the potential for road user charging and have advised authorities in; Melbourne, Singapore, Hong Kong and Istanbul on road user charging, as well as a number of cities in the UK on the possible role of charging to meet their low emission zone targets.

24. In 2017, with Volterra, we were shortlisted for the Wolfson Economics Prize for our proposal on a UK wide road user charging scheme on which this memorandum is heavily based[7]. This led us to being invited to the Climate Assembly UK to act as an advocate putting forward the case as to “How surface transport could be decarbonised via economic incentives”[8]. In their final report Assembly members recorded 56% strongly agreeing or agreeing to charging to use the roads, compared to 39% who strongly disagreed or disagreed with the proposal.

Response to the Committee's Specific Questions

The case for introducing some form of road pricing and the economic, fiscal, environmental and social impacts of doing so

Congestion

25. Roads are the arteries of economic activity: connecting workers to jobs, goods to markets and people to places. The vast majority of passenger and freight trips are on our roads. After growing rapidly last century, car use remained fairly stable for the first part of this century, as illustrated in figure 1, but has grown by around 2% a year for the last five years. While growth of the service sector economy and E-commerce has driven a massive increase in the use of light goods vehicles, up by nearly 70% since 2000. This increase in traffic has occurred on a road network that has virtually been unchanged over the same time period, leading to rising congestion, increased unreliability in terms of predicting journey times, as well as continuing poor air quality.

Figure 1: Car and goods vehicle traffic in Great Britain, rolling annual totals 2000 =100

Source: Department for Transport, Table TRA2506a

26. Traffic is not evenly distributed across the road network as shown in figure 2. Around a fifth of mileage is driven on motorways and over two fifths on the A road network. In mileage terms the motorway network represents just 1% of the total road network and A roads 12%. That is, 60% of all road traffic is handled by 13% of the road network. While rural minor roads, which constitute over half the length of the road network, account for only 13% of miles driven.

Figure 2: Proportion of traffic by road type

Source: Department for Transport Table TRA2506a

27. This concentration of traffic on a small part of the network leads to congestion. The Department for Transport, in 2019, reported “Time lost as a result of congestion costs the UK economy approximately £2 billion per year. As well as the huge economic costs, congestion also imposes serious environmental costs as internal combustion engine vehicles are less fuel-efficient when driven in stop-start traffic, increasing greenhouse gas emissions and air pollution. These impacts are particularly severe in urban areas; 56% of respondents to the 2017 British Social Attitudes Survey perceive congestion in towns and cities as a serious or very serious problem, compared to 37% for motorway congestion.”[9]

28. However, this £2bn figure relates only to England’s Strategic Road Network (SRN) and is from 2014 as set out in the Department’s Road Investment Strategy. “The network we have today was primarily built in the 1960s and 1970s. The intervening decades have seen traffic on the SRN drastically increase, but investment in the network has reduced – in contrast to many of our international competitors. Now, in certain places, the SRN has reached capacity, and congestion currently costs £2 billion each year. With traffic expected to grow steadily over the coming decades, this situation will worsen – the cost of congestion is set to rise to around £10 billion per year in lost time by 2040 unless action is taken.”[10]

29. In 2011, the Department of Transport reported that” the welfare cost of road congestion on a normal day is around £60m”[11], implying an annual cost of around £15bn a year assuming a normal day equates to a weekday.

30. Trade organisations and lobby groups have produced their own estimates. The Centre of Economics and Business Research in 2017 calculated “the total cumulative cost of congestion in the UK to be £307 billion from 2013 to 2030. Of this, total direct costs are £191 billion, and indirect costs equal £115 billion. By 2030, we estimate the total cost of congestion per household will be £2,057. From 2013 to 2030, the annual cost of road congestion will have risen 63%."[12] Whilst Inrix estimate the cost of congestion in the UK in 2019 was nearly £7bn[13].

31. While there is considerable uncertainty about the cost of congestion, it is fair to say it is substantial both in economic and environmental terms and principally affects urban areas and parts of the strategic road network. Road user charging can play a useful role in nudging people to change their time and or mode of travel thereby reducing the costs of congestion and mitigating the need to provide more expensive infrastructure capacity.

Climate change

32. Emissions from transport fell by 1.4% (1.8 MtCO2e) in 2018, their first fall since 2013. Despite this, transport remains the largest emitting sector, responsible for 28% of all greenhouse gas emissions in the UK.[14]. Transport emissions are only 3.0% lower than in 1990, as increased road traffic, and larger sized engines have largely offset improvements in vehicle fuel efficiency. As figure 3 shows, there have been two conflicting changes in engine size. The number of cars with an engine size below 1000cc declined by 20% between 2000 and 2007 but then increased dramatically, year on year, helping to reverse a steady trend in the increase in average engine size across all cars. However, at the same time the number of 2,501-3,000cc engined cars has more than tripled since 2000. It is also worth noting that the total number of licensed cars increased by over 30% between 2000 and 2019.

Figure 3: Index of licensed cars by engine capacity and average engine size

Source: Department for Transport vehicle statistics

33. The move to electric vehicles, on the face of it, addresses the climate change issue. However, as all sectors of the economy are moving towards decarbonisation there is a significant increase in demand for electricity.

34. In 2019, cars and taxis drove 278.2bn and light goods vehicles 55.5bn miles. In normal driving conditions it is estimated 1kwH of electricity provides enough charge to drive 3.5 miles for cars and 2.2 miles for LGVs. As shown in figure 4, this requires 104,700 GwH of generating power per year, the equivalent to the output of four Hinkley Point C nuclear power stations[15] or six Dogger Bank Wind Farms[16].

Figure 4: Amount of electricity required to support present car and LGV mileage

Source: Jacobs

35. If traffic grows by just 1% a year, then electricity demand to power electric cars and vans by 2050 will be in the order of 140,000GwH, that is requiring the output of the equivalent of an additional Hinkley Point C. These figures are broadly in line with National Grid projections which suggest by 2050 electricity demand for road and rail transport will be around 137,000 GwH (this includes HGVs which are assumed to be powered by hydrogen).[17].

36. According to EDF[18] the comparative fuel costs of running an electric car are around 4p per mile compared to 9p per mile for a petrol car. There is considerable divergence in the evidence on scale of fuel price elasticities. (That is, the degree that a change in price of fuel leads to a change in demand.) A study for the Department for Transport reported a range of -0.1 to -0.5[19]. That is, a 10% increase in the price of fuel leads to a 1 to 5% decrease in demand. So, a 50% reduction in fuel prices, resulting from a switch from petrol/diesel to electric cars could lead to an increase in miles driven of 5-25%, exacerbating congestion and air quality problems. The latter relates to increased tyre and brake dust.

37. Electric vehicles may reduce carbon emissions but could exacerbate the economic and environmental costs of congestion.

Government revenue

38. Fuel duty receipts generate a material amount of revenue for central government, £28bn in 2019-20, see figure 5. HMRC estimate that increasing the basic rate of income tax from 20% to 21% could raise £4.7bn[20]. So, in simple terms the basic rate of income tax needs to increase to 26% to fully offset the loss in fuel duty revenues resulting from a move to electric vehicles.

Figure 5: Public sector current receipts 2019/20

Source: House of Commons Library

39. The impact of both the freeze in fuel duty rates and the growth in electric vehicles is illustrated in figure 6. which shows revenue for fuel duty in real terms declining by around a sixth since the turn of the century. Reducing the real cost of motoring leads in turn to higher mileage and more congestion.

Figure 6: Fuel duty receipts in 2020 prices

Source: Office for National Statistics

40. Road user charging replaces an existing motoring tax that is rapidly diminishing in terms of revenue it brings in and ensures motorists pay a fair contribution towards the upkeep of the road network.

Social impact

41. Car ownership is not uniform, as figure 7 highlights. In the top four decile income groups more than 90% of households own a car, for the fourth to six decile groups more than 80% of households have access to a car. This drops to just 35% in the lowest income decile group.

Figure 7: Households owning at least one car by income decile

Source: Office for National Statistics

42. The same data presented by composition of those households, shows that single parent households are the least likely to own a car other than single retired people, figure 8.

Figure 8: Households owning at least one car, by composition

Source: Office for National Statistics

43. Lower income groups spend less on transport in both absolute and proportionate terms than higher income groups, figure 9. The highest household income group spend 17% of their income on transport (mainly on the purchase of vehicles) while the lowest income decile spends under 8%.

Figure 9: Spend on transport by household income decile

Source: Household Expenditure Survey

44. Not surprisingly, as figure 10 shows, the miles driven increases with income as do the length of trips. This suggests higher income individuals are more likely to make longer journeys on the strategic road network.

Figure 10: Annual miles driven by income quintile

Source National Travel Survey

45. Road user charging will be a progressive system with higher income groups paying more as they drive further and potentially on more congested routes. The system also has the potential to radically improve journey times for bus users who are predominately from lower income groups and women.

46. Research undertaken by Tom Forth on bus reliability in Birmingham highlights this issue. Figure 11 shows the scheduled bus journey time and variability by time of day on the Birmingham to Stirchley corridor. Timetabled journey times almost double between off-peak and peak periods, but in reality journey times can be 50% longer than timetabled. Both longer journeys and unreliability reduce the number of jobs people can access within a reasonable time from home leading to negative outcomes both for individuals and the economy as a whole. The figure also shows what can be achieved when services are mainly isolated from traffic congestion as in the case of West Midlands Metro.

Figure 11: Journey time reliability by bus and tram in Birmingham

Source: Tom Forth, Open Data Institute Leeds

47. Road user charging can benefit lower income groups and encourage the use of more sustainable transport.

Which particular road pricing or pay-as-you-drive schemes would be most appropriate for the UK context and the practicalities of implementing such schemes?

48. The ultimate aim is to charge motorists for every mile they drive on the road network. However, as the above discussion has highlighted, most traffic is concentrated on a relatively few strategic roads and in urban areas. Therefore, to minimise the cost of operating the system and increase public acceptability it is more appropriate, at least in its initial stages, to limit the scheme to just the motorway and A road network, which account for around 13% of road length but around 60% of miles driven. Once the public have seen the benefits of the scheme it is likely that it will be gradually extended to cover more of the road network especially in urban areas.

49. The mileage charge will not be a fixed amount but will vary, depending on the values attributed to each of the following three elements which will make up the total charge:

• a road maintenance and operating charge;
• a mitigation charge; and
• a congestion charge.

Maintenance and operating charge

50. This will be the only element that all motorists will automatically pay. The revenue raised will go to the highway authority whose roads you have used and which are chargeable. The cost, therefore, will vary slightly by type of road and each highway authority based on the actual cost of maintaining the highway authority’s road network. There will also be variation in charges between cars, LGVs, HGVs and bus/coaches. Heavier vehicles will pay higher rates, proportional to the damage (wear and tear) they cause to road assets. Transparency of these costs and regulation (discussed below) should lead to this charge falling in real terms, especially as to begin with they will be set at a level to enable highway authorities to catch up on the present backlog of road maintenance that exists.

Mitigation charge

51. Whether motorists have to pay this charge will depend on how environmentally efficient and quiet their vehicle is. This cost will also vary by location, being highest in areas with poor air quality and where traffic is intrusive, such as in historic centres and near schools and hospitals. Less polluting vehicles will pay less. Again, we expect this element of the charge to diminish over time as vehicles become cleaner and quieter, both with advances in technology and the change in behaviour that the charge will lead to.

Congestion charge

52. Where congestion does occur, that is, there is a noticeable reduction in speed from the free flow average, then a congestion charge will be levied. This charge will be set at a level to either achieve free flow speeds or, where traffic volumes are too great, to achieve a target journey time (how this will work is covered in the regulation section). Hence the charge will vary by time of day and section of road.

How will the motorist pay?

53. Small nudges can lead to major changes in behaviours as evidenced by the initial 5p plastic bag charge and the resultant massive reduction in their use. At present the cost that motorists pay for a road journey are bundled up in terms of their annual vehicle excise duty and excise duties on fuel. To change behaviours users need to have a better indication of the cost that any individual journey will incur. We, therefore, propose that motorists will have a choice in how they pay for future road journeys. The simplest method will be to just go and drive as they do now and receive an itemised bill every month for the journeys they make. The alternative is that motorists will have the opportunity to pre-book a journey via an App, on-line or by ‘phone.

54. Envisage a long distance journey that you want to make under the pay as you drive system App. As with many existing Apps and journey planners it will provide you details of journey times and costs by different modes. However, in this case it will also show the charge that you have to pay to drive. This may vary by time of day or route based on real time information or forecast congestion levels. You could be given the option to pick up other travellers and share the journey costs or be offered incentives to switch your travel mode or departure time, in order to reduce the peak demand on a congested route. You decide to drive and arrive at your destination on time, payment is automatically deducted upon arrival and a receipt emailed to you.

55. The advantage of booking is that you receive a discount on the charge and if you are delayed on your journey, for example, due to an accident or unexpected heavy traffic, you are eligible for automatic compensation as is offered by the rail network. The reason for the discount is that booking your journey provides the highway authority with better information on expected demand and the possibility to nudge trips to other modes or times to tackle congestion issues.

Implementing a new charging system

56. Once the scheme receives Parliamentary Approval motorists will have around 24 months to prepare for its introduction. They will receive an explanatory booklet setting out how the new scheme will work. At their vehicle’s next MOT[21] they will have a “black box” installed in their vehicle which will capture data on journeys made on the chargeable network via GPS. [New vehicles that do not require a MOT in this 24 month period will need to have an appropriate tracking system installed, most will already have one fitted by the manufacturers.]. At least six months before the scheme commences they will begin to receive ‘dummy’ bill statements showing how much their journeys will cost when the system goes live. Depending on the nature of the journeys made these dummy statements will suggest alternative routes, times or modes which can be cheaper or faster. These nudges may alter people’s journey patterns even before charging actually starts. Motorists will also be able to download an app to a smartphone, tablet or computer that at this stage will provide information on journey times, modes of travel and prices. The app will provide predicted journey times and compare that with actual times achieved and where appropriate highlight when the motorist will have received compensation for an excess journey time.

57. The early implementation of a ‘dummy’ pricing system will help motorists get accustomed to road user charging and iron out any issues with the charging system. It will also help to collect data and analyse pricing strategies to work out the technicalities before going live. Owners of older more polluting vehicles will be offered a scrappage allowance to allow them to switch to cleaner vehicles and hence minimise future mitigation charges.

58. About 18 months after Parliamentary Approval there will be a steady increase in the provision of buses in urban areas where the charges are likely to be highest, just as occurred when the London Congestion Charge was introduced, to provide an alternative means of travel.

59. Approximately 24 months after Parliamentary Approval and 24 hours before the scheme goes live, excise duty on all road fuels will be reduced to zero and all existing road tolls and charges will be abolished. Vehicle Excise Duty will also be abolished. Again, this will be a legal requirement of the Act. The next day the scheme will go live.

Government’s limited role

60. The government’s role will principally be to set the legal framework by which the scheme operates. It will set the maximum congestion cost that can be charged, so motorists know they will not be subject to price surges, and the regulatory framework by which the scheme operates. The government will also set up a transitional fund to pay for a vehicle scrappage scheme (removing older polluting vehicles) and enhancements to urban bus networks to be put in place before the scheme goes live.

61. Due to the high regard it is held in for keeping personal data confidential, we suggest that HMRC should be responsible for managing the scheme and billing users. This could help address some of the privacy concerns that the public may have which is discussed later.

An Independent Regulator sets prices

62. The Office of Rail and Road (ORR) is the independent safety and economic regulator for Britain's railways. It is also responsible for monitoring Highways England’s performance and efficiency. Our scheme will extend the functions of the ORR so that it will be responsible for setting each of the three road charging elements and for monitoring the efficiency of all highway authorities.

63. Prior to the passing of the requisite legislation, the ORR will be tasked with setting the prices that will apply when the scheme is launched. These prices will then be reviewed on at least an annual basis and may be adjusted more quickly if required. Once the scheme has settled in. It is envisaged that the congestion charge will move to a completely dynamic system subject to maximum caps.

64. The congestion charge will be set using standard speed/flow curves (for each type of road there is a relationship between the amount of traffic that can be accommodated and its speed) and price elasticities which will be refined by road type, location etc within parameters set by the Government in terms of the maximum charges by road type/location to achieve free flow conditions or target journey times for each link. As the congestion charge is set to achieve free flow speeds or target times, it can go down as well as up over time depending on demands on the network.

65. Revenues from the congestion charge may only be spent on transport infrastructure projects which may include provision of additional capacity, removal of bottlenecks, road safety improvements, improved operational systems, and public transport/cycling provision (especially in areas where it is not practical or desirable to provide new road capacity). An element of the congestion fund may be top-sliced by government to set up a fund that highway authorities may bid for to carry out similar works in cases where their own funds will not be sufficient. For example, while a highway authority may have minimal congestion now and hence obtain minimal funds, new planned development could lead to considerable future congestion which investment now may prevent. In this instance the highway authority could bid for funds for the scheme.

66. The maintenance charge will be done by vehicle and road type to achieve an average charge across a highway authority’s portfolio of roads. That is, all roads in the highway authority’s area will carry the same maintenance charge per vehicle type and all revenues will flow to the relevant highway authority. The charge will be set at a level that enables the highway authority to restore the condition of its road network to an agreed national standard within 10 years. (The average backlog on road maintenance is estimated at 11 years in England[22]). The ORR will be responsible for driving efficiencies in road maintenance and it is envisaged that annual increases in the road maintenance charge will be set at RPI-x so it decreases per vehicle over time. It is envisaged the maintenance charge will also cover minor improvements to the network such as safety enhancements, junction improvements, local cycling provision and public realm improvements etc.

67. The mitigation charge will be based on the emissions and noise outputs of vehicles by road type and location. It is envisaged to begin with that the charge will be relatively crude (ie just a few location emission and noise charge bands will apply to begin with based on existing air quality management areas and in the vicinity of schools and hospitals), but will be refined over time to a separate charge per link on the road network. The mitigation charge can also be used to discourage rat-running on unsuitable roads. The emissions charge will be based on tailpipe emissions as recorded at the vehicle’s MOT rather than on manufacturers’ data. With existing legislation to reduce tail pipe emissions and the change in behaviour the charge will facilitate, it is envisaged that the mitigation charge will diminish over time as vehicles become cleaner and quieter.

68. The monies from the mitigation charge will go to a Community Trust Fund which will invite bids from communities and their local authorities that suffer from the negative externalities of the road network. These communities will be initially identified on the basis of proximity to roads carrying above a set volume of traffic but over time as detailed air quality and noise monitoring is implemented then further fine tuning can be developed.

69. The regulator will be responsible for ensuring revenues from the scheme are spent appropriately.

The level of public support for road pricing and how the views of the public need to be considered in the development of any road pricing scheme;

70. Paying to drive is perceived to be an unpopular policy. In 2007, a then record 1.8 million people signed a petition against the then government’s road user charging proposals. In 2005, 75% of voters rejected Edinburgh’s road user charging scheme and in 2008, 70% of those who voted in Manchester voted against a similar scheme. However, since London’s congestion charge was introduced in 2003, there has been little opposition to it despite the daily congestion charge rising considerably. While there have been calls to extend London’s recently introduced Ultra Low Emission Zone which levies charges on vehicles that do not meet certain emission standards.

71. It is apparent that people’s views on road user charging are changing. Ipsos MORI have undertaken a number of opinion polls, on this topic, over the years.

72. In 2007 when national road user charging was being widely debated, opinion polls reported 33% in favour and 48% opposed, that is a net 15% opposed to the idea.[23] However, even then support shifted in favour of the scheme if the proceeds were to be spent on transport. A net 20% were in favour of road user charging if revenues were returned to motorists via reduced vehicle excise duty, net 28% support if revenues were used to reduce petrol costs and perhaps a surprising 40% net support if the money went to improvements in public transport. There was also support for linking charging to exhaust emissions.

73. A 2010 poll by Ipsos-Mori for the RAC foundation[24] found only 19% support for pay per mile charging on motorways and major roads with 65% against, net support being -46%. However, as with the 2007 poll, this changed when other measures were proposed as part of the package. So when asked if they supported a charge per mile for use of motorways and major roads if vehicle excise duty was abolished, excise duties on fuel were reduced and there was compensation for delays (broadly the same as our proposal) the situation reversed with 47% being in support and 35% opposed, that is net support of +12%.

74. By 2020 the situation has changed even more, now there is strong support for road user charging with paradoxically support diminishing if the revenues were returned to motorists through lower vehicle excise duty[25]. With climate change coming to the fore in peoples’ concerns, there is widespread support for using the money to tackle climate change as well as to improve air quality.

Figure 12: Public Support for road user charging based on how revenues are spent

Source: Ipsos MORI

75. As has frequently been found businesses are even more supportive of charging than the general public due to the benefits for business in terms of time saving and improved journey time reliability outweighing the costs.

Figure 13: Business and public support for road user charging

Source: Ipsos MORI

76. As mentioned previously the Climate Assembly UK also supported charging to use the roads, by 56% to 39%, net support of +17%, as one measure to address climate change.[26]

77. There are, still however, a number of issues surrounding public acceptability including privacy, trust and equity. These are dealt with in turn below.

Perception of trust

78. The new legislation will need to clearly set out that fuel and vehicle excise duties will be abolished as soon as the new scheme is introduced. The law will need to ensure that prices will be set by an independent regulator and not the government and that a clear aim of the scheme is to introduce guaranteed standards of service and to drive efficiencies in road maintenance.

79. The scheme will be operated by HMRC to provide assurance that data will be held confidentially and not used for commercial reasons unless people opt in to do so. We expect private sector companies will be prepared to pay for data and motorists could sell it to them if they wish. Data will not be forwarded to law enforcement agencies in relation to vehicle speeding or similar offences.

Mitigate impacts on low income groups

80. Older more polluting vehicles tend to be operated by lower income drivers who under the scheme will end up paying more to drive the same routes as those in more modern vehicles. Before the scheme is introduced a vehicle scrappage scheme will be introduced aimed at enabling individuals to replace older, more polluting vehicles with newer, more environmentally friendly vehicles. As highlighted above, a major beneficiary of the scheme will be bus passengers who are more likely to be from lower income groups.

Blue badge holders

81. The charging app could offer a wide range of services to those with mobility impairments and it is proposed that blue badge holders will be entitled to a discount on the congestion charge in line with the disabled person’s rail card.

Hypothecation

82. In very broad terms the level of taxes collected from road users equals the level of expenditure on transport by national and local government (pre-pandemic). It is proposed that all revenues raised through road user charges will go back into the transport network or on related expenditure, for example, to pay for traffic policing and road safety measures.

Traffic displacement

83. The road network being so comprehensive, it offers a vast range of alternative routing between any two locations. The advent of satellite navigation devices has seen situations of vehicle flows increasing on routes that may not be designed for such flows or that previously were relatively quiet.

84. The scheme addresses this issue in two ways. The first is through the environmental element of the scheme, sensitive roads can be priced accordingly reducing their attractiveness for rat-running. Secondly the community compensation package will enable impacted communities to be compensated.

Incentive schemes

85. There are opportunities to use the on-board black box to monitor driver behaviour and offer suggestions on how to improve driving. Cars which always stay within the speed limit and those that are well driven – smooth manoeuvring, breaking, accelerating - could be entered into a weekly prize draw or rewarded with points. This gamification of driving provides an extra nudge to drive better, safer and more environmentally friendly.

Pay not to drive

86. Highway authorities can potentially encourage people who make regular trips not to drive at congested times if it reduces the risk of having to pay other users’ compensation for delays. For example, if 1,000 people commute every day from A to B at 8am causing fluctuating levels of congestion, by offering a random 10% of them every day a discounted bus/train ticket or paying them if they travel earlier/later could reduce severe congestion and the cost of compensation to everyone.

The lessons to be learned from other countries who are seeking to decarbonise road transport and/or utilise forms of road pricing.

87. We are seeing increasing worldwide interest in the use of road user charging to tackle both congestion and climate change. New York is on the cusp of introducing a London style cordon charge of $8 for cars (the scheme has been held up due to the need for Federal approvals which were not forthcoming under President Trump) while other North American cities including Vancouver, Chicago, Portland and Seattle have undertaken studies into the feasibility of introducing such charges. We are also presently advising Qatar, on the feasibility of road user charging.

88. Outside London the longest running major road pricing schemes are those in Singapore, Stockholm and Norway.

Stockholm

89. The scheme in Stockholm was introduced as a seven-month trial and then residents were asked to vote whether to retain the scheme or not. Initially public support for the scheme was low, however, when the public started to see the benefits of road pricing support gradually grew as shown in Figure 14. In the referendum 53% voted in favour of retaining road pricing and since then support for the scheme has continued to grow.

Figure 14: Percentage of people who would vote “yes” in a referendum on introducing/ maintaining road pricing, excluding “don’t know”

Source: Jonas Eliasson, (2014), The Stockholm congestion charges: an overview, No 2014:7, Working papers in Transport Economics, Centre for Transport Studies Stockholm

90. Stockholm’s scheme is similar to London’s in that it is a cordon based scheme but unlike London different charges apply depending on the time of day a vehicle enters the charging zone with higher charges during the morning and evening peaks as shown in Figure 15.

Figure 15: Original charges (2007) and revised charges introduced in 2016 by time of day

Source: Jonas Eliasson, (2014), The Stockholm congestion charges: an overview, No 2014:7, Working papers in Transport Economics, Centre for Transport Studies Stockholm

91. As a result of the charge, queuing fell by 30-50% and there was a reduction in traffic of 22%.[27]. Despite population, economic and car ownership growth, traffic levels have remained relatively constant since the introduction of the charge, with charges only rising in the peaks. Revenue from the scheme originally went to road infrastructure projects but is now used to fund transport infrastructure generally.

92. The Stockholm congestion charge has not only been a mechanism for reducing congestion but also a way of tackling pollution. This was evident by the exemption made for cars using alternative fuels. The share of alternative fuelled cars in Stockholm increased from 3% in 2006 to 15% in 2009. The exemption was removed in 2012 because of a debate over exactly what constituted a ‘greener car’. Nonetheless, it showed that a charging system favouring less polluting cars is an effective way of changing fleet composition.

Singapore

93. To tackle a growing congestion issue, a road pricing system to manage the demand for road space was introduced in 1975, this was the Area License Scheme (ALS) and later evolved to become the Electronic Road Pricing (ERP) scheme. It was first introduced as a cordon scheme managing traffic into the CBD. Originally just applying to the morning peak it was later extended to all hours with differential peak and off-peak pricing.

94. The ERP was implemented in 1998 and enabled prices to be varied at different times and places according to traffic conditions. Prices are reviewed and changed if required every few months. From the user perspective all they need is to have a smart card on their car dashboard, charges are deducted automatically. Singapore is moving over to a satellite-based system where the “black box” that needs to be installed in every car is paid for by the government. In part, this is due to the existing charging infrastructure becoming life expired and, also to enable a move to distance based and dynamic charging. These latter elements are presently on hold.

95. To increase acceptability there were various adjustments made to the vehicle tax structure. There was a concern the ERP could be viewed as just an extra revenue stream for the authorities. To prove the ERP was a genuine attempt at better managing road usage some of the upfront vehicle taxes, registration fee, additional registration fee and road taxes were reduced.

96. Due to the ERP being a replacement for an already existing road pricing scheme, the impact upon traffic levels would not be expected to be as high as other schemes. In spite of this the ERP still led to an immediate 15% reduction in traffic entering the charging zone and in 2015 traffic was still below pre-1975 levels as seen in Figure 16. More noticeable was the 34% drop in repeat trips into the zone, a result of the removal of the day pass. Drivers must now plan their journeys so as not to re-enter the zone.

Figure 16: Effect of road pricing on traffic volume to the city. Index, 1975 pre-ALS = 100

Source: Menon G. & Loh N. (2015), Singapore’s Road Pricing Journey– Lessons Learnt and Way Forward’

97. The nature of the ERP being a semi-dynamic charge which can be varied on regular basis, means that the Singapore Land Transport Authority (LTA) can, within reason, deliver the target journey times they want by increasing the price whenever traffic speed gets too low. This is why the LTA has consistently met their target of keeping speeds between 20-30 kph on CBD roads.

Norway

98. Norway has a system of both tolled roads and cordon charges around its major cities. The tolls operate only to cover the construction cost of the infrastructure and when this is done the tolls are removed, electric vehicles are generally exempt from tolls. The cordon charges are permanent. In Oslo, the charges vary according to several factors as shown in figure 17. While the charges are low compared to London’s congestion charge (£1 is broadly equivalent to 12 Norwegian kr) there are three cordons around Oslo, plus tolled roads, so the level of charges can accumulate. Charges are around four times higher for goods vehicles depending on their Euro emissions standards. It is notable that the discount for electric cars has been decreased (they were free at one time) although electric vans do not presently have to pay the charge. Bergen has also scrapped its free charge for electric vehicles. While differential pricing encouraged the take up of electric vehicles, they are still a cause of pollution and congestion.

Figure 17: Charges for cars entering Oslo Inner Ring 2021.

Source: Fjellinjen

99. While now rather dated, figure 18, shows how public acceptability of the Oslo cordon charge gradually changed over the first few years of its introduction. Opposition to the scheme was extensive before it was introduced but it has gradually reduced over time. Revenue from the charge was allocated to road schemes but now covers public transport schemes as well.

Figure 18: Attitudes to Oslo cordon charge

Source: Schade J & Schlag B 2000 Acceptability of Urban Transport Pricing

100.          The RAC Foundation[28] provides some more up to date information. By 2009 there was little change in the level of support, with 43% in favour and 54% opposed to the Oslo cordon. However, when respondents were shown the projects financed by toll road receipts this changed to 74% supporting charging and only 24% opposed. In both Bergen and Trondheim, which have similar cordon charges, public opinion moved from opposition to the charges before they were introduced, to support within a couple of years after their introduction.

101.          There are four key conclusions to be drawn from the case studies:

         Pricing works – all the case study cities have been successful in reducing congestion by using charging. Importantly the flexibility of a price-based system means that the level of traffic and its composition can be kept at any desired level.

         Public acceptability – the public find it easy to understand the costs of road pricing but difficult to believe the impacts on journey times and reliability. They are so used to peak period congestion that it is difficult to envisage how the road network could ever operate at free flow speeds in the peak. The case studies show that once road users and the wider public see the benefits of road pricing it becomes acceptable.

         Cordon or link based charging – all these examples are cordon based which is not the most effective form of charging. They charge to enter a defined area but not for the distance driven nor the costs imposed on others. If cordons can deliver 20-30% reductions in user demand, then pricing across a whole network could do it so much more efficiently i.e. at a lower price.

         Charging for environment and maintenance costs – some effort is made in all the three examples to include environmental costs within the charging system. This is good politics as well as good economics. Those charges both changed driver behaviour and choices of vehicles and fuels.

Conclusion

102.          A lot has changed since the last national debate on road user charging. Public support has greatly increased, the need to address climate change has become more acute, and the public finances are in a far worse state due to the pandemic.

103.          What has changed even more is the technology. Pay as you drive insurance, monitored by a “black box” is now widely used with more than 12m in place in Europe[29] and around 1m in the UK[30]. Slovakia has had a nationwide satellite-based truck tolling system in place since 2010, when it covered 2,400km of motorways and major roads, split into more than 1,100 tolled sections. In 2014, over a 3-month period, this coverage was extended by 15,000km and more than 3,000 additional tolled sections ,without the need for extensive gantries[31]. Satellite tolling for HGVs is in operation in seven European countries, whilst as highlighted above, Singapore is moving over to a satellite charging system for all its vehicles.

104.          Road user charging is needed to ensure motorists continue to pay a fair contribution towards the maintenance and operation of the transport network, to effectively manage congestion, to address poor air quality and replace fuel excise duties in a rapidly decarbonising road transport system.

February 2021

Endnotes

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