Written evidence submitted by the Centre for Policy Studies (EVP0067)

The Centre for Policy Studies is a leading Westminster think tank which seeks to apply free market solutions to public problems. We welcome the chance to advocate in favour of road pricing, to help improve motoring in Britain, while also delivering wins for the economy, climate, and air quality.

Summary

For the majority of goods and services in the economy, we use prices to determine who gets to consume them and when. Scarce resources are allocated in accordance to whoever values them the most, as expressed by their willingness to pay. This system of using prices to coordinate economic activity is fundamental to the proper functioning of our broadly capitalist economy, and ensures that supply meets demand for the near infinite array of goods and services produced each and every day.

But not everything in the economy is coordinated by price signals. Aside from a few notable exceptions, most roads in Britain are devoid of price signals. Instead of road space being rationed by willingness to pay, it is rationed by willingness to wait – which manifests itself as congestion and traffic jams. Just as individuals in socialist states would often queue to collect their daily essentials, drivers in Britain often find themselves queuing to access road space occupied by other drivers.

One policy which has been shown to largely solve congestion is road pricing. It harnesses the power of the price mechanism to allocate road space more efficiently – by which we mean that it ensures demand for road space better matches supply at any given time.

In doing so, we can be confident that road pricing would increasing average speeds and reduce journey times. This would help boost economic activity for those who rely on the road network to do their job, while also just making motoring more pleasant for everyone else. Road pricing would also make public transport cheaper and more reliable – improving mobility for all, while also helping to reduce greenhouse gas emissions and air pollution.

The case for road pricing – and how to implement it

Congestion represents an enormous, though often underappreciated, cost to British businesses. Estimates for the state of congestion in the UK vary, but INRIX – the respected transport analysts – estimated that in 2019, clogged up roads in Britain translated to a cost of £6.9 billion, or £894 per driver.[1] London had the dubious honour of ranking as the eighth most congested city in the world – despite its comprehensive public transport system, and network of bicycle lanes.[2] The Department for Transport’s (DfT) own forecasts state that by 2025, the marginal external cost of congestion alone will stand at 20.3 pence per kilometre travelled – 83% of motoring’s total external costs.[3]

Figures from the DfT show that, on average, a vehicle is delayed by 76 seconds per mile on English urban A-roads.[4] Meanwhile, average speeds on English A-roads have tumbled in recent years in all regions of England – and particularly so in major urban areas.

Source: https://www.gov.uk/government/statistical-data-sets/average-speed-delay-and-reliability-of-travel-times-cgn

Ridding the UK of congestion would help businesses by allowing both people and goods to flow more smoothly around the economy. For individuals, clearer roads would mean workers can devote more of their working day to being productive – actually generating output, instead of being stuck behind the wheel. Relatedly, plumbers, electricians and so forth might feel they can broaden their geographic horizons if they are confident that they can travel further afield without spending precious time immobilised in traffic.

In fact, less congestion would open up new opportunities for all individuals – as people do not limit themselves spatially, but rather temporally. Reduced travel times effectively bring larger urban areas and the job prospects they entail within reach for more communities. As long as traffic remains, mobility will be naturally stifled, and with that the economy at large.

For goods, clearer roads would mean businesses can know that whatever it is they are producing can get to customers in a timely fashion, or rest assured that equipment and materials they need to function will arrive as quickly as possible. Less congestion also reduces the costs associated with freight, because less fuel is required to move it, and less time is required to complete each trip.

Using road pricing to combat congestion

One solution which has been shown to be particularly successful in reducing congestion and increasing average driving speeds is the idea of road pricing.[5] Road pricing can take many different forms, though when most advocates discuss it, they imply a system which gets as close as possible to charging individual motorists to travel on public roads, usually on a per mile basis.

At the more basic end of the road pricing spectrum, tolls could be introduced on all of Britain’s motorways. Motorways would be relatively simple to reconfigure for road pricing as it is easy to monitor who is using them, owing to the clear and obvious entry and exit points. While the only motorway toll in the UK – the M6 Toll – uses a ‘plaza system’ with barriers at which vehicles need to pay in order to access it, other systems could be adopted. Automatic number plate recognition (ANPR) cameras, for instance, could be installed at every junction to scan when vehicles enter and exit the motorway, with motorists billed via an online system.

More comprehensive methods of road pricing are available beyond simple tolls, however. A truly sophisticated system would track every registered vehicle, charging it for the miles it covered and when. Costs for travelling could be altered depending on the time of day to manage demand during peak hours, or whether it was during the week or at the weekend. An even more advanced approach would vary the per mile charge on individual roads – depending on how many vehicles happen to be using one at any given time.

To achieve this, it would probably be necessary to install telematic black boxes in all registered vehicles. Many motorists are now voluntarily using black boxes of their own, to benefit from insurance policies which reward safer driving. Heavy goods vehicles have long been fitted with them, while delivery vans and taxis also use tracking technologies. Thus, equipping all vehicles with black boxes might not be quite the ordeal which it first might appear. For any remaining vehicles without them, the Government might just have to mandate their installation at the vehicle’s next MOT – or whenever a vehicle goes into a garage for work.

Even more sophisticated road pricing systems still could soon be a reality, thanks to the development of smart phones and other digital advances. Some supporters of road pricing envisage a future where individuals use apps to plan their journeys in advance – whereby users are presented with a suite of options and costs before they set off.[6] The app could inform people whether it might be more economical to travel at a different time, or to use public transport, or to take a slightly different route which avoids roads currently in high demand, thus smoothing out congestion.

Other benefits of road pricing

The greater adoption of road pricing would help British businesses in lots of different ways. Evidence from the few primitive road pricing schemes which already exist in the UK, plus those from further afield, clearly show that road pricing reduces congestion, and increases average road speeds.[7] In the dense city-state of Singapore – widely regarded as the best poster child of road pricing – vehicles still average speeds of around 20 miles per hour in the central business district.[8]

The benefits do not end with reduced congestion, however. For motorists, one of the best facets of road pricing is that it depoliticises road maintenance and construction. At the moment, central government holds significant sway over spending on roads, with decisions about where and how much funding gets allocated largely the preserve of Whitehall.

By introducing road pricing, however, a mechanism is created which better signals where road space is in greatest demand. Some have suggested that revenues raised by road pricing should be hypothecated to the specific roads – or perhaps more feasibly the area – on which they were raised, allowing funds to be reinvested into their upkeep or to construct newer roads nearby.[9]

Following on from this, lots of road pricing proponents argue that its implementation should be coupled with the abolition of existing motoring taxes – notably Fuel Duty and Vehicle Excise Duty.[10] Indeed, this would probably be vital for building public support for road pricing. Road pricing would ensure that there is revenue to pay for road funding as receipts from these taxes inevitably dwindle as zero-emission vehicles proliferate. It also means that driving could actually become cheaper for some drivers, while those for whom it becomes more expensive would probably be happy to pay a premium for clearer roads – such as couriers or tradespeople, as they can get more done in a day, improving their productivity.

A final point on cost is how road pricing would make bus travel far more appealing than it currently is. A perennial issue with buses in many places is their infrequency and low average speeds. But these problems can in large part be attributed to traffic. Under road pricing, congestion would be lower, and buses would be much faster and more punctual. This fact means that road pricing need not necessarily be an unavoidable stealth tax, because its very existence would create an attractive alternative – which in all likelihood would actually be cheaper than driving even without road pricing, thus bringing down a significant cost to living for many people.

An ideal system of road pricing could also to tackle social ills other than congestion. To mitigate air pollution and climate change, for example, an environmental multiplier could be factored in – whereby the per mile charge is multiplied in line with the average emissions of a vehicle. Here, a gas guzzler would be liable to pay an additional amount for the pollution it is responsible for, while a zero-emission vehicle would be exempt. This would incentivise motorists to carefully consider the environmental footprint of their next car purchase.

Doing so would not only be good in and of itself, but it could also massively boost the economy, largely through improved productivity. In 2012, analysis found that air pollution cost the economy £2.7 billion, because of things such as employee morbidity and premature mortality.[11] By using road pricing to encourage both the procurement of cleaner vehicles and modal shift, the Government could take steps towards purifying the UK’s polluted air, while improving public health and ensuring that workers are contributing to a growing the economy, instead of being a burden on the NHS.[12]

Not unrelated to the above point, road pricing could also have benefits for UK plc. by positioning the country at the forefront of emergent sustainable industries. Automotive manufacturers, for example, would be implicitly incentivised to cater to the new domestic arrangements by increasing production of zero-emission vehicles. Consequently, the UK might find itself in the not too distant future as an industry leader. Similar benefits might accrue in nascent sectors which provide alternatives to conventional vehicles – such as e-bikes and delivery drones, or entirely new business models which revolutionise transport as a service provided by third party companies. As more and more countries inevitably adopt stricter environmental regulations to assuage climate change and air pollution, on this logic, British businesses would be ahead of the curve and in an advantageous position to export their products and expertise around the world.

Conclusion

Despite traffic virtually vanishing during the height of the Covid-19 pandemic, it is now back to pre-crisis levels. If the UK is to truly get its economy firing on all cylinders, it cannot revert to the congested malaise of yesteryear. The Government speaks of having a vision for a cleaner, smarter, more futuristic transport system – it can deliver on all of that by putting road pricing in the fast lane.

February 2021

Endnotes