Insight

Road-user charging – the answer to everything or nothing?

By Richard Sallnow, Ben Plowden

Sep 27, 2022

The funding and decarbonisation of road transport in the UK continues to be a hot topic. The Treasury anticipates a £35 billion hole in the budget owing to lower fuel duty and vehicle excise duty (VED) as the fleet electrifies. But vehicle electrification alone will not be sufficient to hit net-zero targets. The number of miles driven needs to fall too, as some policymakers in the devolved administrations have recognised.

Is introducing road-user charging the answer?

A number of authoritative voices – including the House of Commons Transport Select Committee and the Climate Change Committee – have argued that a national road-user charging scheme is the answer to these challenges. And in principle, it could be. But the political and technical complexity of introducing a scheme that simultaneously manages congestion, raises revenues, incentivises low- and no-emission vehicles – and does all equitably as household budgets are under unprecedented pressure – is too big a mountain to climb. Twinned with the existing web of disconnected schemes including congestion zones, tolls, and clean air zones, alongside unique policy priorities in different regions of the UK, the implementation challenge becomes truly daunting.

Despite these challenges, the £35 billion funding shortfall is likely to lead the Treasury to look at a ‘revenue collection’ scheme in the first instance. But how would we ensure any revenue collection scheme introduced in the near future facilitates broader policy ambitions in the long term and allows enhancements to tackle regional policy goals?

Understanding the potential road-user charging evolution is key

Understanding now how road-user charging may need to evolve will enable transport policymakers to develop a solution that enables a wider range of policy positions later on.

Here are three potential phases of maturity that road-user charging could go through – and which an early-stage solution will eventually need to accommodate.

Phase 1: Introducing a distance-based charge

The first phase could see the introduction of a distance-based charge, with an annual odometer inspection to evidence a pence-per-mile cost of motoring as the simplest and potentially cheapest way of implementation. This could apply to electric vehicles (EVs) in the first instance, with petrol and diesel vehicles still paying fuel duty and VED, establishing the principle that EVs also need to cover their wider ‘external’ costs. It could also help offset the risk of congestion induced by much lower mileage costs of EVs relative to fossil-fuelled vehicles. This could operate alongside existing congestion and emission charging schemes, and, through its introduction, help offset loss of revenues from electrification.

Whilst termed ‘simple’, the design of the scheme still poses significant complexity. How will the government continue to incentivise the shift to clean vehicles whilst ensuring all road users contribute to the ongoing costs of the road network? How will driving on private land, driving abroad and foreign vehicles in the UK be managed? What will be the penalties for fraudulent behaviour and how will it be monitored? Alongside this, government will also need to decide how the scheme will operate, who will be responsible for collecting funds, how funds should be invested, the commercial terms for an odometer inspection, and the legislative instruments needed to enforce them.

Phase 2: Adding emissions-based charging to the mix

The next stage of maturity could see the introduction of a distance and emissions-based per-mile charge, with a discounted rate for low and no-emission vehicles. An annual odometer inspection would continue to be available. Or, as an alternative, drivers could opt for an onboard unit and/or mobile phone apps to enable GPS tracking and allow for a daily, weekly or monthly charge. Digital channels would offer drivers a convenient way to pay, together with seamless and integrated payment of other clean air and congestion zone charges.

This digitally enabled solution would create additional challenges. Can GPS tracking be relied on through major cities such as London? How could enforcement work should users not comply with the rules? What consideration needs to be given to GDPR factors? And should the digital channels that enable this more sophisticated solution be owned and operated by the government or outsourced?

Phase 3: Introducing a single road-use account for each motorist

A single road-use account for each motorist would support distance, emissions and congestion-based charges. With this solution enabled by an app, phone or onboard unit, motorists would receive an automated charge to their road-user account and a regular digital update on their charges. There would be no need to interact frequently with the charging system, but instead notifications set at the user’s discretion (be it per trip or per month amounts). Linked to navigation and/or transport platforms, a planned journey can be costed and considered alongside alternatives such as bus and rail.

Many of the challenges tackled in previous phases will resolve those that exist with phase three. However, a mature solution like this will require road users to trust the charges made to their account. This, in turn, will demand a cultural and behavioural shift.

Phased implementation points the way forward

As we face an unprecedented cost-of-living crisis, any road user charging scheme requires careful consideration. Policy makers need a forensic understanding of the financial impact on households – based on different types of motorists, road users and the wider economy. The challenge we face is that the fiscal and environmental issues facing road transport are not going away.

Road-user charging holds real promise for policy makers looking to drive decarbonisation of the fleet and reduce miles travelled. The delivery challenge is undeniably substantial but, with a phased approach, is achievable. Careful design of the implementation of each phase – with thinking that considers the long-term vision before creating a reactive solution to today’s burning platform – will result in road-user charging solutions that are more convenient and more appealing for motorists. This, in turn, will help change the choices that motorists make about what type of car to drive and how much and when to drive.

About the authors

Richard Sallnow PA transport expert
Ben Plowden PA transport expert

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