18 January 2019

Miles better – why Britain should give the green light to road pricing


Britain is a country with a proud automotive pedigree, and over the decades has produced some of the fastest production cars in the world. But average driving speeds in the UK are anything but quick. In recent years, they have plummeted, and look set to fall further still. While this could be explained by a combination of different factors, one in particular stands out – congestion.

Indeed, when the boffins at transport data experts INRIX released their latest Global Traffic Scorecard, the UK fared abysmally – ranking as the tenth most congested country on Earth, and the third most congested in Europe. London was found to be the second most congested city in Europe and seventh most congested in the world. Other analyses point to a 15 per cent reduction in average speeds since 2010, with traffic in the capital now crawling along at just eight miles per hour. During peak times, it can be half that.

At the crux of this problem is an age-old economic conundrum – a ‘tragedy of the commons’. Popularised by Garrett Hardin in his eponymous paper, this idea refers to scenarios whereby scarce yet commonly held resources are overexploited by rational actors. Simply put, the benefit which they derive from doing so is large and concentrated to them, while the cost of doing so is small and diffused among many other actors. Applied to the road network, a situation arises in which too many people try to access the same roads at the same time, resulting in traffic jams and all the problems that go with them.

The question, then, is how to avoid that tragedy unfolding. For market liberals like myself, the answer usually lies in privatising the resource in question, so those seeking to access it are charged an equitable amount for doing so. In the case of roads, this could take many different forms, all of which could broadly be described as road pricing.

A crude example of road pricing would be a simple toll road, with drivers paying a one-off access charge each time they use the road in question. Somewhat more advanced, though still riddled with problems, are ‘cordons’, where drivers are charged to enter a zone such as a city centre, perhaps with different rates for different times – London’s Congestion Charge is a good example of this kind of system.

Thankfully, the rise of new technology means policymakers now have much more sophisticated road pricing structures at their disposal. Using spatial tracking, for instance, it is possible to map exactly where a car has driven – allowing for charging on a per mile basis. This accurately captures just how much of the road network a motorist has made use of, and can thus be reasonably expected to pay for.

Better still, when combined with the now copious amounts of transport data which are being collated by local authorities, different charges could even be levied for different roads. This would see drivers paying a premium to drive on the busiest roads – encouraging them to find alternative routes, or wait until traffic is quieter before heading out.

The implementation of an advanced road pricing system could be the intervention which unclogs Britain’s congested roads. By dynamically levying variable charges across the road network, motorists will know when (or when not) it is best for them to get behind the wheel. For those who can afford to defer their journey until a time when fewer people are using the roads, it will make financial sense to do so – thus reducing surges in demand for road space in the morning and evening rush hours, which ultimately bring down average speeds. For those who decide not to change their behaviour, they will enjoy clearer roads, and get to where they need to be quicker.

Importantly, road pricing would allow for the scrapping of other motoring taxes, which have been a blunt instrument in terms of managing road use. Fuel duty and vehicle excise duty (VED) would be abolished, as would primitive examples of road pricing such as tolls and cordons. Depending on how it is set, road pricing could result in driving becoming much cheaper for some people – allaying fears that this is just another money-raising measure being imposed by Whitehall. A more responsive pricing system could also help avoid the kind of scenes we’ve seen in France recently, with the gilets jaunes protesting against high taxes on petrol and diesel.

Indeed, the question of tax should not be overlooked within this debate. In the Treasury, anxieties abound about the steady disappearance of revenues as the electric vehicle revolution grows. Fuel duty, VED and a special charge on heavy goods vehicles alone amounts to approximately five per cent of total government income – a significant proportion. Road pricing, which simply charges for access to the roads, circumvents this problem, and guarantees that there will be a stream of income for the Government to call upon to fund road repairs and improvements.

Equally importantly, it ought not to escape the Treasury’s attention that gridlocked roads are quite literally slowing down British businesses. The aforementioned INRIX report estimates the cost of congestion to motorists at nearly £38 billion. Introducing a policy which helps alleviate such a problem could be a shot in the arm of the economy – increasing productivity, fostering growth, and delivering a helpful windfall of tax revenue as a result.

But the benefits of road pricing do not stop there. Again, by harnessing nascent technologies, other negative externalities which vehicles generate could be mitigated. For example, road pricing could include an environmental component which charges gas guzzlers more per mile than hybrids in terms of their carbon emissions, or charge a premium for driving into areas experiencing particularly poor air quality. This could relatively easily be achieved by aligning data on such variables with that which the motorist generates as they tot up the miles in their car.

There was a time when road pricing existed purely as a figment of the imagination of a handful of free-market economists. Now, helped by the march of technology, there is a real and feasible case to be made for the deployment of a sophisticated system of road pricing on a national scale. People voluntarily fit black boxes to their cars to lower their insurance premiums, and apps like Uber have allowed millions to familiarise themselves with ideas like surge pricing. Far from people being worried about ‘big data’, they rapidly warm to it – unsurprisingly – when they stand to benefit.

Doubtlessly, there are political concerns surrounding road pricing which will require further thought. Anxieties around privacy and the security of payment details cannot be dismissed (although emergent blockchain technology could help here). Any future system will have to be user-friendly, and not alienate those who are so acquainted to current arrangements. The costs of introducing a road pricing scheme will need to be monitored and kept justifiable.

The ‘market’ for driving is largely devoid of price signals and the coordinating power which they possess. Instead, motorists face a free-for-all, which creates a host of problems. Given the myriad benefits it would likely deliver – solving congestion, energising the economy, buttressing tax revenues, protecting the environment, ensuring equity for Britain’s motorists – the Government should embrace the future now, and give the green light to road pricing.

Eamonn Ives is a Researcher at the Centre for Policy Studies