Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Supplementary memorandum by Freight on Rail (RH 19B)

WEIGHT-DISTANCE TAXATION

BRIEFING FOR THE ETRA TRANSPORT SUB-COMMITTEE

What is weight-distance taxation?

Also known as capacity-distance tax or vehicle-kilometre charging, this is a pay-as-you-go system of taxing vehicles according to their weight and the distance they travel. The tax is calculated so as to reflect the external costs which HGVs impose upon the road network.

What are the advantages?

  Weight-distance taxation is not perfect but it is certainly a more accurate way of charging road users for the costs they impose upon society, the economy, and the environment. The rate of taxation can include externalities such as, for instance:

    —  road maintenance costs;

    —  new building requirements;

    —  air pollution;

    —  CO2 emissions;

    —  noise;

    —  accidents;

    —  health;

    —  congestion.

  The system is eminently fair because it taxes the heaviest road users—the most loaded vehicles travelling the longest distances—the most. Fuel duty is also a pay-as-you-go system but it only reflects one (albeit very important) externality—fuel use and hence CO2 emissions. VED, by contrast, is a one-off flat payment and therefore, in order to recoup the costs of that payment, it "pays" to make the maximum use possible of the vehicle.

How does the tax effect the rail industry?

  A weight-distance tax would benefit the railways because the longer the road journey in question and the heavier and bigger the lorry, the more expensive it is, and hence the most cost-effective, by contrast, the rail option becomes.

  Ultimately, it would only be fair that weight-distance taxation were introduced across all modes of transport, with the costs per tonne-kilometre varied to reflect the external costs which each mode imposes.

Is weight-distance taxation currently legal?

  No. It obeys the spirit of the recent EU Directive (1999/62/EC)[38] but not, as yet, the letter. At present, according to this Directive, charging is only permitted on motorways and major roads. However, it is arguable that this half-way approach to charging is worse than nothing at all. The social and environmental damage caused by using the motorway network (for instance in terms of accidents and congestion) is in fact less than for using other roads—it is better to route a lorry down a motorway than through an environmentally sensitive area or a small Cotswold village. Motorway tolling can encourage hauliers to take alternative, often longer routes, in order to avoid them, so actually generating higher tonne-mileages.

  This said, there is much in the EU White Paper Fair payment for Infrastructure Use (1998) which sends the right signals. For instance, paragraph one states:

    "The elimination of distortions of competition between transport undertakings in the Member States calls for both the harmonisation of levy systems and the establishment of fair mechanisms for charging infrastructure costs to hauliers".

  Paragraph 7 says: "The use of road friendly and less polluting vehicles should be encouraged through differentiation of taxes or charges, provided that such differentiation does not interfere with the functioning of the market".

  And Paragraph 15: "The rate of user charges should be based on the duration of the use made of the infrastructure in question and be differentiated in relation to the costs caused by the road vehicles."

Where has weight-distance tax been implemented?

  Oregon, New Mexico, New York, Kentucky and Idaho, as well as New Zealand and Australia operate weight-distance related charges. Switzerland will have a system in place as from next year, which will take into account the following externalities: road infrastructure costs, health costs, accidents, noise, damages to buildings, with CO2 and other forms of air pollution being notably absent.

  Germany is planning to introduce weight-distance charging for the motorway network, possibly before the end of 2002. Austria currently operates an eco-points system which is (as far as I understand it) a rudimentary form of weight-distance charging.

  Sweden and Norway used to have kilometre charges on diesel fuelled vehicles but they abandoned this system on entry to Europe in order to harmonise their charge structures.

  Five countries—Belgium, Denmark, Luxembourg, Germany and the Netherlands—have introduced the Eurovignette—a fee for using the motorway network. France, Italy, Portugal, Greece and Spain have motorway tolls.

How would a weight-distance tax work?

  The system would need to:

    —  quantify and reflect, in so far as this is possible, the marginal social, environmental and economic costs of road use;

    —  be reliable—ie not break down;

    —  be resistant to fraud and evasion;

    —  be cost-effective to operate;

    —  be interoperable across the EU;

    —  avoid disrupting freight flows.

  Initially the tax could be revenue neutral, which would mean that vehicles carrying lighter goods and travelling short distances would pay less than under the current regime. But as HGVs currently only pay60-70 per cent of their costs it would need to rise in time so as to reflect more accurately the externalities they impose. Adjustment would also need to be made—perhaps through subsidy and/or regulatory measures—to prevent lorries from taking the shortest route where this is through an environmentally sensitive area. Subsidies would also protect hauliers operating in rural areas which are not served by other modes of transport.

  Weight-distance taxation could co-exist with, or replace VED and fuel tax. As fuel tax is actually a better instrument for measuring CO2 there may be an argument for operating the two taxes in tandem.

THE TECHNICALITIES

  An electronic charging system could be designed either using dedicated short range communication (DSRC) microwave systems (as in Switzerland) or else GPS. Vehicles would need to be fitted with on-board units and tachographs. The latter will, in any case, be mandatory for all new EU vehicles from July 2000. It is of course possible that some people will be able to avoid tax by fiddling with the electronics, but the system need be no more prone to abuse than the current one.

April 2000


38   On charging of vehicles of over 12 tonnes. Back


 
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