Further memorandum by the Freight Transport
Association (RP 11A)
This document sets out Freight Transport Association's
(hereafter referred to as FTA) response to the questions posed
by the House of Commons Transport Committee as part of its inquiry
into road pricing.
ROAD PRICING
1. FREIGHT TRANSPORT
ASSOCIATION
FTA represents the freight transport interests
of businesses throughout the United Kingdom. Its membership includes
large blue chip multinationals, major third party logistics providers,
own account operators which carry their own goods, and small hauliers.
FTA has in excess of 10,000 members who between them operate over
200,000 heavy goods vehicles which account for approximately half
the UK fleet. In addition FTA members consign 90% of freight moved
by rail and 70% of goods shipped by sea and air. This unique multi
modal mandate enables FTA to speak authoritatively on all aspects
of freight based on the broader transport needs of the economy.
2. INTRODUCTION
Charging vehicles for the use of the road network
can offer a fairer system of taxation and the ability to better
influence road user decisions. FTA welcomed the Government's announcement
in 2001 that it was planning to introduce lorry road user charging
in the UK and remains a strong supporter of the principle of a
national charging regime.
The opportunity for road charging has reached
a key juncture. The cost of technology is reducing and the capabilities
of vehicle telematics are increasing as computing and telecommunications
technology improves. Furthermore, the European Commission has
issued directives and policy statements about the future means
and structures of charging systems to ensure a consistent approach
to the technology, the basis of charging and payment systems.
As a result it is likely, but no means certain, that road charging
will be the accepted means of taxing vehicles in the future. Other
member states have already pioneered various systems of lorry
charging, notably in Austria and Germany.
However, there are important business reasons
behind FTA's support for the introduction of lorry road user charging
and ultimately a road charge applying to all road users.
Differentiation between taxation of cars and taxation
of lorries
The inability to differentiate between essential
and non essential journeys during the 1990s meant lorry operators
were caught up in a fuel duty escalation policy aimed primarily,
at curbing car traffic growth. A distance-based lorry road user
charge was proposed in response to the campaign against ultra
high levels of fuel duty mounted by FTA and others during 1998-2000.
Throughout, FTA called for a review of the basis for taxation
of goods vehicles.
Road charging would enable Government to set
the level of tax for goods vehicles in the light of economic and
commercial considerations as well as environmental criteria. The
merits of such an approach are underlined by the current high
and volatile world oil price. FTA has argued in its pre-Budget
submission that the Government should introduce a temporary cut
in fuel duty until world oil prices fall and stabilise. A lorry
road user charge would allow the Government to target a lower
tax rate at commercial vehicle operators rather than facing the
high cost of having to cut fuel duty for all road users—which
is currently Government's only fiscal lever.
Competitiveness with foreign operators
A road user charge would make a vital contribution
to the "level playing field" sought by domestic hauliers
competing against foreign operators cabotaging on cheaper, foreign
fuel which they bring into the UK in their fuel tanks. The average
diesel price in the EU is currently 54.5 pence per litre compared
to 75.2 in the UK.
Basis for congestion management when applied to
all vehicles
Lorry road user charging on its own will not
reduce congestion but charging all road users at the time they
travel might. It is not the nation's 425,000 lorries that are
the primary cause of congestion, it is the 25 million cars. The
prospect of less congested roads offers long term benefits to
industry and the costs of transition to charging are a worthwhile
investment by Industry in order to obtain a solution to congestion.
However, FTA's support for Lorry Road User Charging
is not unconditional. FTA has set out the conditions that need
to be met at a policy and an operational level in two charters
during the past 12 months—one for Government and another
for suppliers currently bidding for the contracts to develop and
operate the scheme. These charters constitute the terms on which
FTA support for LRUC is given and the grounds on which FTA could
withdraw its support if they were not met.
Crucially, whilst the Government is committed
to introducing lorry road user charging on a tax neutral basis
for UK operators, no such commitment exists regarding the cost
of introducing and operating the scheme. FTA members are already
deeply concerned about who bears the cost risk. For example if
the scheme's introduction slips further behind or the specification
of the scheme requires significant changes once contracts with
suppliers have been signed.
FTA is also concerned at the net cost of lorry
road user charging and whether Government spending on developing
the scheme represents good value for money, given the urgent need
for investment in the trunk road and motorway network.
The debate about the introduction of the lorry
road user charge has also revealed a deep mistrust of Government's
intentions by many goods vehicle operators. The Government has
so far failed to convince the road transport industry that it
can or will deliver a fiscally neutral charging regime and even
if it does, most operators presume this to be a transient arrangement
until the scheme is bedded down. The Government's action's during
the early years of the lorry road user charging will deeply condition
the public's reaction to the eventual introduction of charging
for all road users.
3. ANSWERS TO
SPECIFIC QUESTIONS
POSED BY
THE TRANSPORT
COMMITTEE
3.1 Should road pricing be introduced for
certain sections of the road network in the short term?
FTA members have consistently reported deteriorating
journey time reliability and slower overall journey times on the
road network. The most effective way to turn around the problems
of congestion that industry is facing, particularly on its key
trade routes—the M1, M4, M6, M25, M62 and M60—is to
widen key stretches of the network. The July 2004 Comprehensive
Spending Review provided an important opportunity for Government
to commit sufficient funds to the Highways Agency to make early
progress on its widening plans. The transport settlement falls
far below what FTA had identified was needed.
This set-back to providing congestion relief
through road widening places greater emphasis on increasing the
capacity of the existing network—for example through Active
Traffic Management—and managing the use of the most congested
sections of the motorway network through price.
3.2 If road pricing is introduced, what factors
should determine which roads are priced and what technology should
be used?
The introduction of road pricing for certain
sections of the road network in the short term should focus on
industry's most congested trade routes, where the benefits to
the economy would be greatest.
FTA and other road user organisations have demonstrated
with the "12 feet wide" campaign that the public recognise
the need for motorway widening. We also believe that the Government
is convinced that this should happen. What the Government has
failed to do is to provide sufficient money to get the job done
expeditiously. FTA believes that road transport infrastructure
is a necessity of modern business and society and should not be
treated as a favour. As it is, we will have to wait until 2010
before the majority, not all, of the M25 is widened, 2011 before
the most congested parts of the M1 get their extra lane and beyond
2016 before there is any relief to the M16 north of Birmingham.
If transport remains cash starved, then other ways of paying for
the improvements will need to be considered.
FTA considers a microwave system of charge activation
to be unattractive and costly. It would be unacceptable for industry
to have to administer a parallel mechanism of road pricing for
certain sections of the road network, already covered by the lorry
road user charge. A microwave system would therefore have to interface
directly with the vehicle on-board equipment and charge administration
system. This functionality is not, as far as FTA is aware, built
into the outline specification for lorry road user charging. Changing
the functionality of the on-board equipment mid-stream in its
development would increase the cost of lorry road user charging—a
cost that the Government has, so far, failed to underwrite.
FTA believes that the plans for electronic road
pricing for all should be "fit" rather than "fast".
The technology used must therefore be fully interoperable with
the lorry road user charge under development and compatible with
other European systems. It must be integrateable with other vehicle
telematics functions, ie the digital tachograph, fleet information
systems, traffic information systems and other on-board systems.
The technology should also require minimal user input, and limit
the operational and administrative burden for the road user.
The introduction of road pricing in the short
term should not be as a substitute for, or a reason to, delay
the introduction of road pricing for all road users covering all
roads. FTA believes that the introduction of lorry road user charging
should be accompanied by a migration of payment systems for road
tolls and estuarial crossings and urban zonal congestion charges
to a single charging system for lorries. Road pricing for all
vehicles should obviate the need for separate toll and congestion
charge mechanisms altogether.
3.3 How "hi-tech" does road pricing
need to be?
A short-term road charging mechanism which is
designed to use price to regulate the use of the most congested
sections of the motorway network, need not be high tech. However,
it must avoid unduly adding to the administrative burden placed
on road users.
The key to its introduction is that it should
be interoperable with lorry road user charging. A microwave-based
or camera-based charge activation system for parts of the motorway
network would require far reaching changes to the outline specification
for lorry road user charging and necessitate a significant capital
cost for technology, which would be superseded with the introduction
of road user charging for all.
In the long-term, road charging for all road
users should be based on the charging technology and charge administration
systems that have been developed for lorry road user charging.
This suggests a satellite based tracking system installed on the
vehicle. Technology used for road user charging for all, as with
lorry road user charging, should be based on technology specified
at an EU level to ensure interoperability throughout Europe.
3.4 What role should local highway authorities
play in introducing road pricing?
The introduction of road pricing should be developed
and managed at a national level. Industry is already concerned
about the lack of a consistent approach to toll payment systems.
Similarly there is no single approach to congestion charging.
FTA would be opposed to the devolution of powers for establishing
the mechanism and basis of charging for the national road network.
FTA believes that the introduction of lorry
road user charging and road charging for all should be used as
an opportunity to consolidate disparate charging technologies,
payment and administration systems into a single charging technology
and interface for road users.
3.5 How easy will it be to move from individual
toll roads and local urban congestion charging schemes in the
short-term, to national road pricing in the longer-term, and what
needs to be done to ensure the transition is a success?
Current charging systems in the UK are based
on different technologies, serve different purposes and are managed
by different companies. This represents an unacceptable level
of bureaucracy for industry. FTA believes that operators of toll
roads and local congestion charging should engage now with HM
Customs and Excise and with bidders to establish a seamless way
for industry to pay for the roads it uses and the access to urban
areas that it requires. Achievement of this for lorry road user
charging will make a single approach to road pricing for all more
straightforward.
3.6 How will the lorry road user charge fit
into any national road pricing and motorway tolling developments?
Lorry road user charging provides an opportunity
to develop a national approach to road pricing that will enable
the technology needed for road pricing for all to be tested and
the charging systems to be established.
It will also establish the basis for a future charging
regime for all vehicles. This includes:
— road type—charges will be set
to encourage the use of motorways by trucks
— vehicle type—commercial vehicles
taxation can be differentiated from tax paid by private motorists
— environmental impact of the vehicles—road
charging will play a vital role in establishing output-based tailpipe
emissions criteria against which the charge can be varied.
The introduction of lorry road user charging
will not deal with congestion. Only when road pricing is introduced
for all vehicles will sufficient change in road user behaviour
be created to relieve congestion. Whilst FTA supports the use
of lorry road user charging to encourage the use of trucks out-of
hours when the roads are less crowded, operators must not pay
a premium charge for using the road at peak times. Peak time congestion
charging can only be effective, and should therefore only be introduced,
when road pricing is applied to all vehicles.
3.7 Are there other measures which could reduce
congestion more effectively?
Road pricing is an attractive way to tackle
the UK's congested roads, but it must not be introduced in isolation.
Road pricing, either in the short-term or long-term, should form
part of a mix of supply-side and demand management actions to
reduce congestion on the roads.
Plans to managing demand for road space cannot
replace the urgent need for investment in the UK's road and rail
transport infrastructure. FTA's national and regional trades routes
identify key parts of the road and rail network where only by
providing extra lanes and extra track capacity or tackling bottlenecks
can congestion be relieved. Equally, it is clear that on many
parts of the road network much more can be squeezed out of the
existing infrastructure using smart technologies and innovative
ways of adding extra lane capacity at busy times of the day.
Road pricing and infrastructure investment should
also compliment other Government policies, such as innovative
approaches to school transport and flexible working hours for
schools and businesses, and should be backed up by continued efforts
to improve public transport.
Simon Chapman
Chief Economist
November 2004
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