8 September 2021

If we want road pricing, let’s start with HGVs

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Last week, the Tony Blair Institute became the latest in a long line of think tanks to come out in favour of road pricing. In their excellent paper, authors Tim Lord and Christina Palmou note that changing how we tax motorists – by moving away from blunt instruments like Fuel Duty and Vehicle Excise Duty, and towards more accurate, usage-based fees – would help to ease congestion, improve the environment, and help pay for maintaining and improving Britain’s road infrastructure. 

One of the report’s more perceptive points is that if we don’t act soon on road pricing, the opportunity could pass us by – or at least make it far harder to introduce later down the line. Why? Sales of electric cars are skyrocketing, but at the moment they pay nothing towards the maintenance of the roads on which they drive. We have a situation, therefore, where drivers are buying electric vehicles on the implicit promise that doing so will help them avoid motoring taxes. This might be tolerable to the Treasury for now, but soon millions of cars will be whizzing around on roads they’ve paid nothing for.

Trying to implement an equitable solution to this challenge will inevitably be harder ten years from now. It’s therefore incumbent to have policies which can take effect gently and gradually, and not be forced onto drivers retroactively once the proverbial horse has bolted.

To a certain extent, politicians’ wariness towards road pricing is understandable. It represents a big change from the status quo, and, if botched, could entail serious political repercussions. Even so, a carefully managed approach could help us to navigate the roll out of road pricing in a way which maximises the benefits while minimising the downsides. 

One way in which road pricing could be tested is to pilot it through discrete, voluntary trials, per specific classes of vehicle. A great place to start would be with heavy goods vehicles – for a number of reasons. 

First of all, there is a fortuitous quirk in the way HGVs are currently taxed which presents an opportunity to try a new approach. Since 2014, HGVs weighing 12 tonnes or more have had to pay the HGV Road User Levy in order to drive on Britain’s roads. This tax is in addition to the Fuel Duty and VED they would normally pay, because it is only fair that heavier vehicles should pay extra, given they cause a disproportionate amount of wear and tear to our roads.

How much an HGV pays depends on variables such as its weight, axle configuration and emissions rating – and can be as high as £1,200. However, the HGV Levy is currently suspended in order to help hauliers through the pandemic, and the Treasury doesn’t plan to restart it until at least August 2022. At a minimum we have a little under a year, then, to consider whether we could refine the taxation of HGVs – or default to the old system.

There’s a second, more straightforward reason, to trial road pricing with HGVs. Lorries are commercial vehicles, which should make it much easier to configure them for road pricing. The most advanced road pricing schemes rely on black boxes to track where a vehicle is and when, to calculate how much it should pay. Some opponents of road pricing argue that people won’t accept government-mandated tracking technologies in their own cars, but this argument is much less convincing when applied to commercial vehicles, many of which have such devices installed already. Moreover, by starting with commercial vehicles, it should be simpler for the Government to communicate and administer the scheme, as they can talk directly to the haulage companies or trade associations themselves. 

How might the scheme work?

HGVs would be charged a variable, per mile rate to use any given road at any given time. Rates should be determined in advance and made clear to anyone participating in the scheme, and should be relatively lower on less congested roads, during less congested hours, and relatively higher for the inverse. As information floods in about how HGVs respond to the rates, they can be further fine-tuned to strike an optimal level. HGVs will no longer pay any VED or the HGV Levy, and while they will still pay Fuel Duty, they should be able to reclaim the amount in full from the Treasury on an ex post basis with valid receipts. 

Rather than forcing this on hauliers, HGV road pricing could start as a voluntary scheme. What we ought to see among those who do opt in, however, is that they change their behaviour in response to their new charges – by driving when the rates are low, which would be when the roads are quiet. This would immediately ease congestion, speed up average travel times and probably save companies money into the bargain.

After, say, a year of the trial, the Government should assess the effectiveness of the scheme. Hopefully it would show that road pricing is perfectly possible to implement and delivers the expected results. In doing so it would build familiarity around the notion of road pricing, and provide further real-world evidence that it can indeed be rolled out successfully. It would also offer a good chance to iron out any unforeseeable niggles which would be intolerable if foisted upon millions of drivers.

Nor would it be unthinkable to design pilots for vehicles other than HGVs. Good candidates might be taxis or delivery vehicles for all the groceries, takeaways and Amazon packages we now get dropped to our doorsteps. 

The momentum behind road pricing has never been greater. Without giving it the green light soon, we might miss the chance completely. Trials of the sort mapped out above could provide yet more evidence of the benefits of road pricing, but it’ll be down to politicians to step on the accelerator to ensure the opportunity doesn’t slip through our fingers.

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Eamonn Ives is the Head of Energy and Environment Policy at the Centre for Policy Studies.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.