Road user charging

CfIT's approach

Summary

• Doing nothing about traffic congestion is not an option - without some form of constraint, traffic congestion will grow until journey times are so long and speeds so low that making the trip will be impracticable
• We cannot build our way out of trouble - traffic is at its worst at the heart of our towns and cities where there is no more space for either parked or moving cars
• Roads are no different to other utilities - almost no other utility is free at the point of use. We are charged for our electricity, gas, telephone for the amount we consume and for the time we consume it. For all other transport systems - plane, ferry, train or bus - we pay each time we travel and pay more for travelling at peak times. This is the only way to manage demand when it exceeds supply
• Public transport must improve before congestion charging can be introduced - we cannot expect motorists to switch from their cars for some journeys if public transport is inadequate
• Delivery of the 10-Year Transport Plan urban congestion target is, in part, dependent on congestion charging being introduced in 20 UK towns and cities
• Congestion charging is one of a range of measures - it will not suit all towns and cities: it is for local authorities and local communities to decide whether it is appropriate for them
• No successful economy in the western world has reduced congestion without some form demand constraint. Good public transport alone will not persuade people to leave their cars at home. Without constraint other vehicles simply fill the gaps left by drivers who switch from using their cars
• Currently, motorists who drive on uncongested roads (such as rural motorists) subsidise drivers in congested areas (such as car commuters into urban areas)
• Congestion charging has an important role to play alongside improved public transport, not least by the generation of funds to improve it further
• For the longer term - a nationwide system of congestion charging (CfIT's Paying for Road Use approach) will produce a more equitable solution - cutting congestion nationally by up to 44% without charging motorists any more in aggregate (see Approach)
• This would be done by a balancing reduction in fuel duty and road fund taxes
• Motorists across the country who use quieter roads at quieter times of the day will see their motoring costs fall significantly. Drivers using the busiest roads at peak times will pay more but benefit from shorter and more reliable journey times

Approach

The Commission for Integrated Transport (CfIT), in conjunction with NERA and Oscar Faber, has produced research demonstrating that major benefits could result from the implementation of a countrywide congestion charging scheme:

• Congestion on the roads reduced by 44%
• Traffic reduced by almost 5%^[1]
• Shorter journey times
• More reliable, less congested and less stressful journeys
• No overall increase in what motorists pay

The congestion charging proposals include a different method of paying for using our roads on a daily basis. Based on this work, we are calling for a public debate on the future of how we pay for our growing use of Britain's limited road space.

Potential reduction in fuel duty and vehicle excise duty (VED) from revenue raised under the CfIT scheme

There are a wide range of views on the cost of motoring; some say we pay too much, others that we pay too little. CfIT has not taken a view on this issue. However, we do believe that, whatever the level of motoring taxation, there is a strong case for reviewing the way we pay for road use by focusing payment more on the impact our motoring has on congestion and on the environment.

CfIT's study is based on reducing the motoring taxes we currently pay (Vehicle Excise Duty (VED) and fuel duty), while introducing charges for driving on roads where and when congestion occurs. Where and when there is no congestion, no charges are made. Where there is congestion, drivers pay more, but they gain from reduced journey times and increased reliability. All revenue raised is returned to the road user through reducing existing taxes. It is, therefore, a fiscally neutral scheme with no increase in the overall tax burden on road users. Charges are based on the costs that road users impose on each other and their surrounding environment (this is known as Marginal Social Cost pricing).

NERA and Oscar Faber assessed the impact of the introduction of charges (at congested times) on travel patterns. We also asked the Freight Transport Association (FTA) to survey members about the impact of congestion and unreliability on journey times and journey planning.

Our study shows that £5.7 billion of revenue from existing motoring taxes could be transferred annually to the new charges. The £5.7 billion of revenue could be used to reduce the costs of fuel duty by 12 pence per litre, or to abolish VED and still have a further billion pounds to spend on reducing fuel duty by 2 pence a litre ^[2]. Road users in aggregate would be no worse off as a result of the transfer, but would be better off overall because of the benefits of less traffic congestion.

In suggesting a fairer and more efficient way to charge for road use, we looked at vehicles being charged a fee per vehicle-mile, based on the marginal congestion cost imposed. People who travel on the most congested roads at peak times would pay more than those who use roads that are less busy at off-peak times. 63% of vehicle miles would not incur any charge at all. Larger vehicles that cause more congestion, owing to their higher impact on traffic flow relative to cars, would pay a higher fee but would benefit from reduced congestion and time-related, operating cost savings.

Source: NERA Congestion Charging Model
Note: "Towns" have population of <100,000 people

For example, under the scheme those travelling into major conurbations at peak times where there is severe congestion would be charged, on average, 5.7 pence per car-mile; while motorists using a clear road would pay nothing.

We suggest implementation beyond 2010 when we would expect the improvements promised in the 10 Year Transport Plan to have been delivered; and that public transport in urban areas, including London, will have been significantly enhanced by using the hypothecated revenues from the current urban charging policy.

How would I benefit from CfIT's approach?

CfIT's proposals for a national congestion charging system have been estimated on the basis of the existing road network and current traffic levels. The calculations for the projected impact on congestion have been made using the same measure of congestion that the Department for Transport used of the 10-Year Transport Plan.

Even though the scheme cannot be introduced for some years, the impact of congestion charging has been modelled in this way to make clear the changes that would be made to traffic conditions with which people are familiar.

By the time such a charging system is introduced, car ownership will have grown but implementation of the 10-Year Transport Plan should have led to improvements in the road network and in provision of public transport services.

The following examples look at the expected changes for a variety of people drivers across a representative range of driving patterns:

Urban:

Molly runs her two small children to school twice a day in Bristol. She pays 30p a day in congestion charges, which is £60 over the school year. She does, however, save £1.50 every other week when she fills up with petrol. Molly discusses the cost of the school run with the other parents and they decide to set up an informal car-sharing group. On average Molly now only needs to do the school run every third day, when she also takes her neighbours' children in the car. This idea catches on and the school governors decide to set up a more formal system. Overall trips to the school reduce by 30%, considerably reducing the local congestion and pollution.

Molly finds that she doesn't need the car all the time, as she no longer has to pick the kids up every day; now she is able to go to her computer class by bus.

Paul commutes daily into Central Manchester from Altrincham, a distance of 10 miles. The journey normally takes an hour in the morning, though sometimes it can take more than 80 minutes. The return trip not usually as bad, so the average journey time is 45 minutes; but it can take an hour. Paul has to spend £6 a day on parking charges near his office. The congestion charge would be £3.00 there and back. There would be a reduction in petrol costs of £6 a month. Paul would save about 10 minutes a day on average and there would be fewer really bad journeys when the traffic gets heavily clogged up. Over a year, Paul pays £675 in congestion charges, offset by a £66 cut in fuel tax on his commuting journey and he and his wife save a further £100 through reduced fuel costs for their leisure journeys.

Paul is now paying £500 a year more. But the improved journey conditions make his commuting drive much less stressful and he saves about five working days a year that would otherwise be spent sitting in traffic jams.

Having had their first child, Paul's wife Sarah decides to give up work. As money is tighter, Paul leaves the car at home for Sarah and uses the Metrolink light rail system to get to work instead. He gets an annual ticket costing £832, but he saves £625 in car running costs, £1320 in parking charges, and the £675 congestion charges. Overall he is £1788 better off.

Motorways and trunk roads:

Louise, an IT consultant, makes a 95 mile journey, mainly along the M1 motorway, from Rugby to Sheffield every Monday morning. She sets off at about 8am to travel to the regular team meeting. The motorway is quite congested, and she incurs a congestion charge of £7, partly offset by a £1.40 reduction in fuel duty. Average journey time is reduced by a small amount, but the journey time is now much more predictable because the motorway is less prone to extremely heavy traffic and serious flow break-downs. Consequently, the meeting can start 30 minutes earlier and still be confident of arriving on time. The journey to her first client is less congested but there is a charge of £4.50, with a £1.40 saving in fuel duty. Louise makes the journey 40 times a year and she pays an extra £348, but saves over three working days a year on the road. Since Louise charges her clients £100 per hour, she is able to generate £2400 extra income for her company a year.

Peter, a retired bank manager, drives 140 miles from Norwich in East Anglia to Dudley in the West Midlands to visit his daughter. He makes the journey in the middle of the day, mostly along trunk roads. The route is relatively uncongested, so there is only a 10p charge along a short section of the route. He makes the journey there and back once a week. If, as a result of the introduction of charges, fuel duty is reduced, Peter would be £190 better off in a full year. On the other hand, if VED were to be abolished as well as a smaller reduction in fuel duty, Peter would be about £180 better off.

Derek is a travelling salesman who drives around 30,000 miles a year for his firm. Derek's work takes him all around the North East, including Newcastle and other congested areas, mainly during the working day. With his present pattern of travel he would incur £1,800 in congestion charges and save about £600 in fuel tax. Time spent travelling would be reduced by over 40 hours - 5 working days. This would increase his productivity considerably. He can make lots more calls and be able to predict when he will arrive for appointments with greater certainty. Derek earns an extra £2000 for his company and his commission goes up.

In fact, once the charges are introduced Derek changes his pattern of travel to avoid the highest charged times, while still managing to take on extra clients. As he now drives less in congested conditions, Derek finds his job less stressful than before.

The productivity savings are just as great as had originally been predicted. Derek's company covers the cost of his charges, but they are still overall £1,000 better off.

Joanne commutes from Brighton to Croydon each day to her job as a recruitment executive. There is serious congestion at the Croydon end of the trip, so her 43-mile journey takes an hour and a half. For the return journey, the congestion charge will be £14. Joanne will have to pay an extra £2,300 in congestion charges (less reduced fuel costs), but because of the improved journey quality, she will save five working weeks over a year in reduced travelling time. Joanne can now get to the office half an hour earlier each morning and because she works flexi-time, she decides to leave 10 minutes later each evening, allowing her to have every other Friday off. This means that her congestion charges are now £2070. Joanne also benefits from the extra time this gives her with her family, and her employer has noticed that her work has improved as a result.

But the congestion charge makes her think about whether to try the train. Joanne's annual season ticket costs her £2,200, but she saves £2,150 in running costs, £860 in parking charges and is now not paying congestion charges. As she is able to work on the train with her laptop, her boss has agreed that she can now have every Friday off, as long as she meets her deadlines. Overall she is £2880 better off.

Rural roads:

Joe drives a milk tanker 50,000 miles a year in the North of England, collecting milk in rural areas. He never drives in congested city centres or on a busy motorway. His route through some busy town centres and trunk roads means that he pays around £500 a year in congestion charges. However, because of his high mileage he gains from a significant reduction in his fuel costs, over £4,500 in a full year. His overall operating costs are reduced by about £4,000 a year. This extra profit allows Joe to expand his business by buying another tanker and employing another driver. He takes on more customers, but is still able to spread the workload a bit, meaning that Joe can take an extra holiday with his family.

Sarah lives in a village in the East Midlands and works in a medium-sized town around 16 miles away. There is not much congestion in the area and the congestion charge is small. Over the course of the year, she spends around £60 in charges for this journey, but saves around £200 in lower fuel costs.

Barbara lives in a small village in the South West of England. She doesn't drive a great deal - under 3,000 miles a year - mainly for short trips in or near the village. Occasionally she travels further but, as Barbara is retired, she can avoid travelling at busy times of day. She does pay some congestion charges amounting to around £14 a year, although these are more than compensated for by £100 or more savings a year, if the congestion charges were used to fund reductions in VED.

Freight:

Bill drives an articulated lorry from Southampton Docks to Luton, starting in the afternoon and arriving in Luton just after 6pm. Most of his journey is along motorways, the M271 and M27 in Hampshire, the M3 towards London, round the M25 and then up the M1. Traffic is particularly heavy on the M25 and the M1 at this time of the day. The congestion charge is £21, though the charging scheme improves traffic flow so that the average journey time falls by 20 minutes. In addition, uncertainty about arrival times is reduced because the system is less prone to chronic congestion. This is particularly important for Bill as he must reach Luton by 6.30pm to meet the customer's deadline.

The improved traffic flow means that while Bill previously had to leave the docks at Southampton with 45 minutes in hand, he now needs to allow a margin of only 15 minutes - saving 30 minutes. In addition fuel duty for the journey is reduced by £8. Bill makes this trip around 30 times in a year. While he pays £630 in congestion charges, he saves £240 in fuel duty and reckons the journey time and reliability savings are worth £750 to his haulage business.

The congestion charges also encourage him to rearrange his schedules to make the trip earlier in the day when the M25 and M1 are less congested, and when the congestion charge will only be £4, adding to his profitability and reducing pollution.

Stan drives an articulated lorry 120 miles from Liverpool Docks to Coventry, setting off at around 8.30 am on a weekday. This is a motorway journey, and the main section involves the very busy M6 through Cheshire and Staffordshire. The congestion charge is £10.50, but the average time saving is 10 minutes and there is a saving of £9.40 in fuel duty. Before the introduction of the congestion charge the journey time is very difficult to predict because high traffic volumes can trigger serious traffic jams. After charging has been introduced, Stan is able to leave Liverpool 35 minutes later than before and still be sure of reaching Coventry in time for his delivery. In the course of a year Stan makes this trip 50 times, he pays £530 in congestion charges, but £470 less in fuel duty. Overall his employer pays £60 a year more, but the time saving (29 hours in total) is worth £600, more than compensating him.

Ahmed's lorry is used by a distribution business based in Yorkshire. It runs some 55,000 miles, all around England, about average for this type of medium-size artic. It incurs congestion charges of some £3,600 in a year, but this is more than offset by fuel duty savings of £4,400, a net saving of £800. Overall journey times are reduced by 3 per cent and there are further benefits from greater certainty in collection and delivery times.