Memorandum by FaberMaunsell (RP 35)
ROAD PRICING
INTRODUCTION
FaberMaunsell is an international consultancy
working at national, regional and local levels in the delivery
of transportation solutions across the world.
Since the passing of new legislation to allow
local authorities to introduce road user charging schemes, FaberMaunsell
has been at the forefront in providing advice to scheme providers
and stakeholders.
In recent major commissions FaberMaunsell has:
— Provided recommendations on the feasibility
of road pricing strategies—including the ROCOL feasibility
study that underpinned the central London congestion charging
scheme.
— Provided advice to a private sector
consortium bidding for the implementation of the Lorry Road User
Charging scheme.
— Modelled and measured the traffic
effects of the central London congestion charging scheme.
— Undertaken system engineering advice
for the DfT's DIRECTS project.
— Used data derived from satellite
tracked vehicles for monitoring the performance of transport networks.
— Provided advice to several local
authorities on the practicality, effectiveness and acceptability
of road pricing policies.
— Completed a major policy study for
the Commission for Integrated Transport on "Paying for Road
Use".
The company is therefore well qualified to respond,
from the perspective of experienced transportation planning professionals,
to the road pricing questions posed by the select committee.
Question 1 Should road pricing be introduced
for certain sections of the road network in the short term?
The fundamental economic rationale for road
pricing is that charges to the consumer should be designed in
accordance with the principles of "fair and efficient"
pricing.
The efficiency argument is underpinned by long-established
micro-economic theory indicating that road users should be charged
for the additional costs that their use of the road network imposes-the
"polluter pays" principle. Typical these marginal road
use costs include congestion-related delay, accident costs, local
environmental impacts (such as noise and air pollution) and global
environmental impacts (climate change).
Research by the University of Leeds has estimated
that congestion-related impacts are by far the largest costs in
terms of the overall contribution to external costs. Due to the
effectiveness of policies for fuel efficiency and emissions, transports
contribution to environmental pollution has been falling. However,
the external costs of congestion have continued to grow.
Therefore, it is logical that road use charges
should be introduced for "certain sections" of the network;
the "certain sections" being the parts of the network
that suffer most from congestion.
The biggest market failures with respect to
current levels of congestion include:
— The centres of major combinations.
— The centres of major freestanding
towns and cities.
— Certain parts of the motorway/trunk
road system.
— Certain other strategic routes that
feed traffic into major centres.
Should this market failure be tackled in the short
term?
The central London scheme has illustrated that
road pricing policy can be effective in tackling congestion. Arguably
other cities could readily follow this example, but the practicality
of embarking upon such a strategy will depend upon a number of
inter-related factors, including:
— the ability of an individual city,
when acting alone, to withstand the economic impact (diversion
of trade); and
— the ability of the local authority
to capture sufficient net revenues (from charging) to provide
resources for investment in alternatives to the use of private
vehicles.
One other factor is crucial to the consideration
of the short-term application of road pricing policies. If a number
of different schemes came into operation users could be faced
with an immensely complex regime of transport charging. Take the
example of a lorry distributing goods in London and Manchester.
There could be a requirement to pay; the central London congestion
charge, a charge for the use of congested sections of M1, a charge
for M6 toll and a further charge for a congestion scheme in Manchester.
This could represent a considerable administrative burden for
both operators and private users.
Hence, it appears crucial that any further short
term roll out of road pricing should be backed by at least some
degree of centralised system for key road pricing functions such
as billing, payment, customer care and enforcement.
Question 2 If road pricing is introduced,
what factors should determine which roads are priced and what
technology should be used?
A considerable amount of research has been completed
over the past five years to address this question. See for example
the CfIT report on "Paying for Road Use" and the Leeds
University research in "The Economic Efficiency Case for
Road User Charging".
Essentially, there is a need to assess how well
current revenues from transport balance against transport costs
for each mode, geographic area and time period. The economic efficiency
argument suggests that the transport system works optionally when
revenues from transport match marginal social costs (congestion,
environmental pollution, accidents).
In this situation, users will adapt their travel
behaviour in recognition of the total private plus external cost
of motoring. In a heavily congested urban areas for example, prices
should be set to reflect the extent of delay costs incurred at
different times of day.
The argument above points to a charging system
that needs to be sensitive to:
— the relative efficiency of different
modes of travel;
— the elements of the network subject
to delay (or other external costs); and
— the time of day when congestion occurs.
Arguably, the approach taken in central London,
with a flat fee across a wide area within the Inner Ring Road,
was defensible since severe congestion was widespread across this
area during much of the day-time period.
However, in other towns and cities and on other
parts of the strategic road network, congestion effects may be
considerably more variable in both space and time. This argues
for a greater degree of sophistication in charging technology
compared to the area-based system used in central London. Such
technology already exists and is relatively commonplace in motorway
tolling. However, urban areas would be highly sensitive to imposition
of the current short-range communication systems used on motorways.
The solution rests with the application of satellite and mobile
communication technologies that avoid the use of extensive roadside
infrastructure (see Question 3 response below).
Question 3 How hi-tech does road-pricing need
to be?
As noted above in response to Question 2, the
big issue here is the necessary sophistication of technology to
deliver the levels of sensitivity and locate specific types of
vehicle (in both space and time) on congested sections of network.
Our experience in using data from vehicles equipped
with GPS in urban areas for both navigation and network monitoring
shows that:
— this technology is accurate enough
for area pricing—for a town centre for example;
— its data can be manipulated to overcome
known errors; and
— handling such large volumes of data
requires care.
However, such data is not currently accurate
enough to enforce pricing on a particular road section without
reasonable doubt. There are significant variations in coverage
and the lack of knowledge of accuracy at any point in time is
an issue, Our work for the European Commission shows that the
Galileo system could overcome many of these issues. The key here
is to match the granularity of the pricing strategy with the accuracy
that is available—100% coverage with 100% accuracy is not
possible and a reasonably effective system could be put swiftly
into place using existing technology, providing the requirement
for positioning vehicles were relaxed to an area wide basis.
A key issue here is complexity of operation.
The charging system may be very high tech but the service provided,
and its means of use by drivers, has to be very simple.
Question 4 What role should local highway
authorities play in introducing road pricing?
The local authority role is crucial to the deployment
of practical, effective and acceptable local schemes. Whilst elements
of a centralised national charging system, such as systems supporting
common payment and billings procedures, may be fundamental to
the wide roll out of road pricing, local highway authorities have
a vital role in developing local transport policies that are "in
tune" with local problems and specific socio-economic circumstances.
It is highly unlikely that local road pricing
schemes would emerge in isolation from wider local policy interventions.
Local authorities will almost certainly view road pricing as part
of a wide-ranging package of measures designed to reduce congestion,
improve accessibility and foster more sustainable mobility. Typically
a local authority would seek to make significant improvements
(as was the case in London) to both the quality and quantity of
the public transport services that provide the alternative to
car use. To fail to embrace such a strategy exposes the responsible
authority to charges of levying punitive taxes without offering
suitable transport alternatives.
Local authority input will also be crucial in
developing local stakeholder consensus for transport strategies
embracing road pricing. The Local Transport Plan process represents
the key mechanism for consulting the local community on transport
policy direction. For any local authority contemplating the use
of road use charging powers, there will be a need to demonstrate,
through the LTP process, that revenues from road pricing are allocated
wisely to tackle the most urgent problems and priorities in the
local area.
The local highway authority also has an important
role in developing practical road pricing solutions. A congestion-charging
scheme could, for example, induce a range of transport impacts
including:
— diversions away from the charged
area;
— changes in timing of journeys;
— changes in mode of travel; and
— changes in travel destinations.
All of these impacts need to be dealt with through
sensitive local "tuning" of transport policy.
Question 5 How easy will it be to move from
individual toll roads and local 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?
This question is partly addressed in our response
to Question 1.
The first point to note is that charging for
the use of individual toll roads arises from fundamentally different
rationale to that of marginal social cost pricing (the "polluter
pay"). The rationale for true toll roads is to deliver new
transport infrastructure that cannot be funded through conventional
public funding channels. Toll road schemes are normally built
and run by the private sector for a concession period (typically
20 to 30 years) over which the costs of providing the new road
are recovered through toll charges. Although most UK tolling schemes
are restricted to major estuarial crossings, the recent opening
of M6 Toll adds complexity to the roll out of a national road-pricing
scheme. It would be possible, although probably very costly, to
buy out the existing concessionaire. M6 Toll could then revert
to a conventional motorway route. The alternative would be to
retain M6 Toll but then exclude the tolled section from any national
charging system, thus avoiding users being charged twice for the
use of the same section of motorway. It could be argued that drivers
should in fact be charged twice, once for an infrastructure charge
and once for a national "efficiency" charge. However,
this is likely to be unpalatable to a driver that has already
chosen to pay a toll to avoid a congested route.
The transition from local urban congestion charging
schemes to national road pricing represents a more straightforward
path in terms of the underlying economic rationale. However, the
major challenge is inter-operability of potentially a range of
different charging systems. The nightmare vision is the one in
which a user is forced to engage with numerous individual systems
with differing charging technologies and differing payment/billing
systems. Setting aside the on-road charging technology for a moment,
part of the solution lies in developing a national system for
handling charge payments so that a user engages with one central
point of contact. Such common payment systems already exist in
other fields such as banking and telecoms, so the application
to an easy to use and understand national road pricing system
should not represent a major challenge.
The more difficult challenge is that of the
on road charging technology that is required to calculate distances
travelled by vehicles and communicate charging details between
vehicles and central payment systems. The DfT charging trial (DIRECTS)
is seeking to address this issue by developing and testing a common
specification for interoperable on road charging equipment. There
is a wider European and International perspective here, as systems
will not be developed solely for the UK and visiting vehicles
will need to be charged.
Question 6 How will the Lorry Road User Charge
fit into any national road pricing and motorway tolling developments?
Response withheld pending guidance from HMCE
concerning confidentiality.
Question 7 Are there other measures which
could reduce congestion more effectively?
As transportation planning professionals responsible
for delivering transport solutions over the past 10-15 years we
have been closely involved in the deployment of policies that
have sought to tackle rising levels of traffic congestion.
During the 1990's, transport policy shifted
significantly away from road building to focus more on strategies
designed to reduce dependence on private vehicle use. Typically
local policies included a mix of:
— Parking strategies designed to discourage
long stay commuters.
— Pedestrianisation of sensitive central
areas.
— Application of urban traffic control
techniques.
— Improved facilities for walking and
cycling.
— Travel planning strategies.
— Planning controls to restrict parking
levels.
Despite this roll out of such measures, we reached
the turn of the century facing ever-growing congestion pressures.
In particular:
— person car vehicle-kilometres increased
by 40 billion between 1989 and 1999;
— ownership of two or more cars has
risen from one in six households in 1985-86 to one in four households
in 1997-99;
— education-related car journeys increased
threefold over the past 20 years;
— the distance travelled by the average
car has increased by over 40% since the mid 1980's;
— cycle use declined by over 35% since
the mid-1980's;
— walking trips have reduced by 20%
since the mid-1980's; and
— outside London, local bus patronage
in England has consistently declined during the period 1997-8
to 2003-4.
Concerted efforts have been made by local authorities
during the first five year local transport plan period, but in
the face of continuing upward pressures of car ownership and use,
trends for car dominance and congestion remain. In the transportation
planning profession there is new widespread acceptance that road
pricing is a necessary tool for effectively tackling congestion.
In our view, local road pricing should only
be considered as part of a package of integrated measures, carefully
designed to tackle local transport problems. This sensitive design
should help to ensure that policies are well-targeted and equitable.
The hypothecation of charging revenues to support the improvement
in both the quantity and quality of alternatives to private vehicle
use should help to ensure that users are presented with acceptable
options for reducing car use.
Moving from a local to a national scale, similar
issues prevail. The current national road building programme seeks
to tackle the most pressing congestion problems through targeted
improvements, but again the pressures of continuing car ownership
growth suggest that greater lengths of the national network will,
over the next 10 years, become subject to congestion stress.
Other measures, at the national scale, currently
focus on the more efficient management of congestion, largely
through the provision of better driver information. Measures such
as variable message signing can be very effective in dealing with
local congestion problems arising from incidents, but depend to
a great extent on the availability of increasingly scarce capacity
on other parts of the network.
In conclusion, at both the local and national
scale, we consider it unlikely that other measures could be more
effective in reducing congestion. Rather, road-pricing strategies
need to be integrated with other measures to provide drivers with
a combination of appropriate pricing signals, reflecting true
external costs at the point of use, and acceptable alternatives
to car use.
November 2004
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