10. A national road pricing system would move away from the current motoring taxation system, to a system in which drivers paid directly to use the road. The charges paid would vary depending on the degree of congestion and be calculated according to the distance travelled. It is likely that a national system would require a technology which could charge by time, distance and place, and take account of the costs imposed by the vehicle, including environmental costs. It is expected that the technology would include a 'box' on board the vehicle which could work out exactly where, when and over what distance the vehicle was being driven, possibly using a positioning system.[23] It would be a more sophisticated way of charging than fuel duty. The system would cover the entire road network, but would not necessarily impose charges on all roads at all times, and more than half of road traffic could pay less than it would under the existing fuel duty system.[24] Although there is a significant body of international experience as well as growing domestic examples which demonstrate that some forms of road pricing are practicable and achievable today; no road pricing system as ambitious as that being examined for the UK, exists anywhere in the world.

11. The economic principles of road user charging have been established for many years. The basic argument is that pricing would help allocate road space more efficiently. The theory - and experience where it has been undertaken - is that road user charging provides better price signals for road users, which influence their choice of journey and make road use more efficient. Within this framework car users will have to make a judgement about whether the journey they wish to make is of sufficient priority to outweigh the congestion charges, or whether a journey could be made at a different time, by a different mode, or using a different route. This will affect different people in different ways. For example, business traffic generally has a higher value of time than personal traffic, and should therefore enjoy a greater benefit from the time saved, although the impact will vary depending on the business sector and purpose of journey.[25] The rationale of paying more at peak times is already well understood in the context of telephone services, and rail tickets for example. The Secretary of State for Transport, Alistair Darling MP, told us he thought these new price signals would be effective in persuading people to think about their travel choices, and would be acceptable to the public:

What I do think people will buy … is the idea that if you choose to go down a road at 8 o'clock in the morning, then you might have to pay more than if you are choosing to go at 10 o'clock in the morning or at some other time... All we are proposing here and the work we are doing here is likely to be a far more effective way of managing demand.[26]

12. Congestion is clearly already an acute problem on some strategic trunk roads and on roads in several large urban areas. Much of the evidence we received, including that from the Department for Transport, accepted that simply building additional road capacity would not be an acceptable, effective, or affordable way of alleviating congested conditions throughout the road network.[27] There was agreement that some kind of demand management would be necessary to constrain traffic growth.[28] In the evidence we received, in professional and academic opinion, and from surveys of motorists and business people, it appeared there is widespread acceptance that road pricing holds the most potential to reduce congestion. Our evidence suggested that there is a sense that some form of road pricing would probably be introduced at some point in the future. The Government has indicated its commitment to explore the possibility of road pricing as a way of reducing congestion. The Transport White Paper states that:

The Government view is that the costs of inaction or unrestricted road-building are too high for society. The time has come seriously to consider the role that could be played by some form of road pricing policy.[29]

13. In July 2003, the Government established a Road Pricing Feasibility Study to advise it on practical options for the design and implementation of a new system for charging for road use in the UK. The study took into account that any new charging system should:

• deliver a more efficient approach to the structure of transport pricing
• be fair, respect privacy, and promote social inclusion and accessibility
• deliver higher economic growth and productivity for all regions of the UK
• deliver environmental benefits.

The findings of the Road Pricing Feasibility Study were published in July 2004.[30] The Study calculated that a national scheme that was designed mainly to reduce congestion by shifting the time and place of traffic, could reduce urban congestion by nearly half, even if the total volume of urban traffic only decreased by 4 per cent.[31] The study found that a well-targeted national road pricing scheme had the potential to make £12 billion worth of benefits to the economy in time savings and increased reliability. The Feasibility Study advised that a national system would be technologically feasible in 10-15 years. The Government has made a commitment to respond to the study, although a timeframe for this response has not been announced.

14. We welcome the Government's willingness to lead a debate on road pricing. We recognise that the way in which people pay for road use, and the cost of private road transport, are emotive issues which court controversy. The Government has been bold in stating that we must face up to the potential threat of growing congestion.

15. Before a national scheme is designed, the objectives of road pricing must be clearly determined. Despite the Feasibility Study having a remit to examine a charging system which would meet the broad objectives outlined in paragraph 13, there is concern that the Department is focussing too heavily on congestion in its examination of road pricing.[32] The objectives of road pricing must reflect wider transport policy, such as the Department's Public Service Agreement target to cut greenhouse gas emissions from the transport sector.[33] Furthermore it must prove effective in the long-term, not just during the first few years of operation. The Campaign to Protect Rural England is concerned that pricing could lead to worse problems in the long-term:

The strategy seems to be to use a number of means to spread traffic levels temporally and geographically in order to tackle congestion... CPRE is concerned that the longer term implications of such an approach are not being properly considered... We fear that Government policy could simply turn an acute problem (of too much traffic leading to congestion on specific parts of the network at particular times of day) into a chronic one which afflicts a wider area and more people for more parts of the day. The latter problem would in all likelihood be even harder to address.[34]

16. Rigorous analysis must be applied to ascertain whether the benefits of introducing a national road pricing scheme outweigh the costs and the risks. It is not obvious that a national road pricing scheme covering all parts of the road network would be cost effective.[35] The cost of the technology could absorb a significant proportion of the revenue collected. The Department's Feasibility Study estimated that the costs of setting up a national scheme could be between £10 - 62 billion.[36] In addition, the running costs could be around £5 billion a year. With uncertainty on this scale it is impossible to come to a conclusion on whether road pricing would be value for money. Even though the price of technology tends to fall with time, the costs are likely to remain substantial.

17. It will be vital to secure public support long before a national system is implemented. The Netherlands recently proposed to introduce a system of electronic toll cordons around four major cities ('Rekeningrijden'). The initiative failed to gain sufficient support to enable implementation largely because of poor communication, fears that it would be ineffective (and no more effective than any other plausible alternative) and a perception that it would result in redistribution of income to the state.[37] The need for co-operation and public acceptability is crucial. But road pricing should not be used as a political battleground - its value as a method of reducing congestion and improving the transport system must be objectively evaluated. The Government is right to start a wide-ranging discussion that should involve as many voices as possible.

18. A national road pricing system provides an opportunity for a wholesale change in the way we pay for road use. If road pricing were to be introduced, the opportunity to ensure that the price of road transport meets the costs it imposes must be taken. The Government must set out the objectives of road pricing. These should include the Department's broader targets to reduce congestion, road death and injury and climate change emissions. However, before the Government commits itself to implementing national road pricing, there must be evidence to show that the scheme would be effective, fair and value for money.

Revenue from road pricing

19. Appropriate use of revenue from national road user charges would be critical in winning public acceptance of the scheme. The Government has indicated that with the introduction of a national road pricing scheme, the overall cost of driving would not change, because "the key is changing how, not how much, motorists pay for road use."[38] This implies that the Government expects a significant portion of the revenue to either be re-paid to motorists or to replace the current taxes on vehicle ownership or fuel. A 'revenue neutral' approach would no doubt be popular among motorists, as there is a view that road users already pay too much in taxes, despite the fact that overall costs of motoring continue to fall and do not cover the costs imposed. The Secretary of State told us that he planned to give the revenue back to the motorist:

If you were going to a road pricing scheme of the sort I have been describing … You may decide to put more money into public transport, but essentially the difference is that you are giving the money back to the motorist... I think it is terribly important if you are going to win hearts and minds here that people can see there is a difference to them. If it just looks as though you are paying a contribution and some unspecified third party gains from it, then it is rather more difficult to persuade people that it is actually a better deal for them.[39]

20. We heard a number of arguments both supporting and opposing the 'revenue neutral' approach to road pricing.[40] A revenue neutral approach would mean that the costs of driving on quiet roads and at off-peak times would be lower than they are today; in particular the cost of driving on rural roads would fall. But reducing the cost of travel is very likely to increase traffic and the distances driven. Care would have to be taken that such increased traffic flows do not result in increases in carbon dioxide emissions. Modelling by the ippr found that a revenue neutral scheme would cut traffic on the most congested roads, but this would be outweighed by growth in traffic in rural areas, and carbon dioxide emissions would increase by five per cent: nearly two million tonnes of carbon per year.[41] In contrast, congestion charges levied in addition to fuel duty would reduce traffic and congestion and cut carbon dioxide emissions by about eight per cent. A national road pricing scheme is unlikely before 2014; the Government must consider the potential effect of road pricing on greenhouse gas emissions in light of the vehicle technology and fuel in use at that time.

21. Parts of the business sector support a revenue neutral approach, although Michael Roberts, of the CBI, told us:

"I do not think one should automatically assume that revenue neutrality must always be part of any charging scheme."[42]

Even those organisations which called for a revenue neutral approach viewed such a system in broad terms. The Institute of Directors, for example, suggested that the revenue neutrality could come not only from lower taxes, but equally from improved transport services which would benefit the motorist.[43] The RAC Foundation for Motoring's 2002 survey found that 71 per cent of drivers would find tolling acceptable without other taxes being reduced, if it was part of a package of better roads, public transport and traffic management.[44]

22. A revenue neutral approach to pricing would mean there were few extra funds available for investment in transport.[45] Revenue raising road pricing, as part of a package of measures to tackle congestion, could make funds available for transport improvements that would otherwise not be available.[46] For example, the proposals to introduce a £2 charge in Edinburgh were expected to raise around £760 million, which would have been allocated to a number of projects, including a new tram line, bus lanes, and plans to re-open a suburban rail line.[47] The proposed increase in the London Congestion Charge from £5 a day to £8 for private cars and £7 for commercial vehicles is expected to increase revenue for transport improvements by £35-45 million a year.[48]

23. The revenue collected could also be used to fund regeneration initiatives and to help those who would have most difficulty if road pricing were introduced. Denvil Coombe, a transport consultant, suggested the net revenues should be invested to generate local employment, and reduce the need to travel long distances to find work.[49] Other witnesses recommended the revenue be used to reduce local council taxes in low income areas.[50] As attractive as all the options set out above may be, the fact is that the revenue collected from road charging can only be spent once. If the costs of operating a national road pricing system are as high as predicted by the Feasibility Study there will be hard choices to make about how to use any residual revenue.

24. There are strong arguments behind introducing road pricing on a revenue raising, rather than a revenue neutral, approach, if a national system were to be implemented. A revenue raising approach would increase the likelihood of road pricing meeting two important priorities in the Government's transport strategy: reducing congestion and the transport sector's contribution to climate change. It is unlikely that the revenue from road pricing would be able to fully cover the costs of operating the scheme, improving public transport, reducing the cost of driving, and funding local economic regeneration. Road pricing must not be sold to the public on an unworkable promise of how much money will be available to be spent, and to what end. The Government must prioritise investment in the complementary measures - including public transport, traffic management programmes, and road improvements - that will help ensure road pricing is a success.

Setting charges in a road pricing system

25. How charges should be set and who should set them in a national road pricing system is another contentious issue. The Feasibility Study acknowledges that congestion, and air pollutants, with the exception of carbon emissions, usually have localised causes and that tackling the problems requires localised knowledge. It suggests that local authorities should have a role in determining the charges:

If the Government led with the introduction of a national distance charge as the core component of the price structure, it would then need to work with local authorities and other stakeholders to agree the calibration of variations, and establish where and when they should apply.[51]

26. The evidence we received supported this stance with the caveat that there should be a seamless system, and that prices should be understandable to occasional users and the haulage industry.[52] An overly complex system would be undesirable as drivers would not understand it and consequently would not change travel behaviour. This would undermine the very principles on which road pricing is based. There was support for a small number of road categories and a small number of time bands, on which to base the charge.[53]

27. There was some support for the appointment of an independent regulator who would set the price. The RAC Foundation for Motoring suggested that the Government would determine what level of congestion was considered acceptable, and the independent regulator would then be responsible for deciding what tariff would meet this objective.[54] In order to decide whether a national road pricing system would be acceptable, the public would need to know who would set the charges at a national and local level. Transparency and accountability would be paramount. The Committee has not been impressed by the role of many independent regulators in the transport sector, and remains to be convinced that an independent regulator would provide adequate accountability to the public.

INFLUENCE OF CHARGES ON LAND-USE

28. Witnesses representing rural interests were concerned about the potential impact of road pricing on the countryside. They feared that if road pricing were introduced on a revenue neutral basis and without complementary planning restrictions, cheaper road travel in rural areas could promote out-of-town land-use development, and would further reinforce car dependency, undermining public transport provision in rural areas.[55] The Countryside Agency identified the risks for rural areas:

The impacts of road pricing on rural areas could be significant, depending on the way the charging regime is set up and administered. It is, therefore, vital that the effects on rural areas are considered before any schemes are implemented… Charging schemes should not be introduced if their main impact is simply to displace traffic on to surrounding rural roads.[56]

Strong and effective land-use planning guidance and restrictions could be critical in reducing unintended impacts from charging schemes.[57] The Government's Road Pricing Feasibility Study has been criticised for failing to adequately address the potential impact on rural areas.[58]

29. The Government should undertake detailed research on the potential impacts of road pricing on both rural and urban locations. Road pricing must not undermine efforts to deliver urban regeneration, or threaten the character of the countryside. If road pricing inadvertently promoted dispersal of land use and economic activity this could work directly against the traffic demand management intentions of the policy. Complementary planning restrictions should be introduced if national road pricing is implemented.

Road pricing and social inclusion

30. The Feasibility Study suggests that a carefully constructed road pricing system could promote both social inclusion and accessibility.[59] It suggests road pricing would lead to better bus and public transport services and access to a vibrant car sharing market. There could also be advantages for travellers in uncongested and rural locations.[60]

31. While improvements in public transport and car sharing options would undoubtedly be an advantage to many people, there will still be disadvantages for people with low income who have no option but to continue to drive on congested roads at peak times. David Metz, at the Centre for Ageing and Public Health, suggested that low income motorists may struggle to pay charges in the range of those that have been introduced in the UK to date:

Motoring expenditure for households with cars falls in the range £30-50 per week for the lower half of the income distribution. This expenditure may be compared with current road charges in Britain: £25 for weekly entry into the London congestion charging zone and £30 for the weekly use (5 days) in both directions of the M6 toll road. Arguably, most motorists in the lowest half of the income distribution are likely to experience difficulty in affording charges of this magnitude, even if there were to be partial relief of vehicle excise duty.[61]

32. There is no escaping the fact that road pricing would have 'winners' and 'losers' and that low income motorists who continue to drive would experience a disadvantage.[62] David Metz told us that the negative impact of road charging on low income motorists could be lessened by having a 'yield management' approach to prices, like for air and rail travel, where early bookings have discounted fares.[63] The sheer number of journeys travelled by car would make this approach to road pricing extremely complex to administer and enforce. If road pricing were introduced across the country, the impact on equity and social exclusion should be carefully monitored. Measures should be taken to promote social inclusion and accessibility. Nonetheless it may not be possible to directly compensate through transport policy alone all the people who lose out as a result of road pricing.

24   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport. Para 14, page 6. Back

25   The Federation of Small Businesses opposes all types of congestion charging where there is no toll-free alternative for small businesses, RP40  Back

26   Q720 Back

27   The following witnesses stated it was impossible to build out on congestion: RP 01, RP 06A, RP 10, RP 10A, RP 14, RP 11A, RP 17A, RP 21A, RP 41. The following witnesses thought it possible to build out of congestion: RP 17, RP 19. The following witnesses opposed road charging: RP05, RP19, RP42. Back

28   The following witnesses agreed that demand management was required: RP 01, RP 06A, RP 10, RP 10A, RP 11A, RP 15, RP 17A, RP 20, RP 21A, RP 24, RP 26, RP 27, RP 31, RP 33, RP 35, RP 36, RP 37, RP 38, RP 41, RP 43, RP 44, RP 46, RP 47, and RP 50. In addition a letter by 28 professors of transport called on the Government to recognise the need for active demand management of traffic which might be road user charging. Back

29   DfT (July 2004) The Future of Transport: a network for 2030. Cm 6234. Para 3.23  Back

30   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport. Back

31   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport, p6 para 14 Back

32   RP06A Back

33   RP06A, RP 10A, RP 37. The Public Service Agreement included in DfT, (July 2004) The Future of Transport: a network for 2030. Cm 6234. Back

34   RP 06A Back

35   RP10A, RP 30, RP 40, RP 42, RP 43. Back

36   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport, page 174 Annex J Back

37   RP46 and TIPP (2004) Transport Policy Implementation and Government Structure, Deliverable 5, www.strafica.fi/tipp Back

38   RP21A Back

39   Q740 Back

40   The following memoranda supported a revenue raising approach: RP 01, RP10A, RP26, RP 43, RP 44, 49, and the following memoranda supported a revenue neutral approach: RP15, RP21A, RP 29, 31, 40, 47. Back

41   ippr Grayling, Sansom, and Foley (2004) In the Fast Lane: fair and effective road user charging. Back

42   Q444 Back

43   RP 15 Back

44   RAC Foundation for Motoring (2002) 'Motoring towards 2050' Back

45   Q390 Back

46   Q400 Back

47   Transport Briefing 23/02/05 www.transportbriefing.co.uk  Back

48   Local Transport Today 17 February 2005. Back

49   Q419 Back

50   Q493 and RP 17A Back

51   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport. para 4.54 Back

52   RP44, Q496 Back

53   RP46 Back

54   RP31 Back

55   RP41 Back

56   RP41 Back

57   RP41 Back

58   RP06A, RP41. Back

59   DfT (July 2004) Feasibility Study of Road Pricing in the UK: A report to the Secretary of State for Transport. p34 and Annex E. Back

60   Our recent report on Rural Railways emphasised the importance of ensuring people in rural areas had access to vital services and employment. House of Commons Transport Committee Fifth Report, Rural Railways, HC 169-I Back

61   RP 23 Back

62   RP 49 Back

63   RP 23 Back