Economists and environmentalists have long made the case for the principle of charging drivers for the use of roads, with prices varying according to the full range of costs that vehicles impose on others. The problem with road user charging up to now has been that it is hard to invent a system that works in practice. Digital technology, however, is changing all of that. All new vehicles have in-built GPS devices. Most drivers also have smartphones that can track their movements and allow simple payment options. Establishing a sophisticated system of road user charging suddenly looks practicable.

By comparison with some of the technologies we use to pay for planes, trains and ride-hailing services for example, the way London’s road users are currently charged looks very crude. As already described, London’s drivers pay taxes or charges both to national government, through VED and Fuel Duty, and to London government through a variety of schemes across the city.

National taxation and charges

• Vehicle Excise Duty is an annual vehicle tax. The first-year amount is based on the vehicle’s emissions class. Thereafter, owners pay a flat annual rate, though there is a discount for hybrids and fully electric vehicles are exempt.
• Fuel Duty is included in the price paid for petrol and diesel, but not electricity. So the more a driver travels, the more Fuel Duty is paid, which encourages the use of fuel-efficient vehicles, but it does not reflect a vehicle’s contribution to congestion or other externalities.
• Central government also charges both UK- and foreign-registered lorries of 12 tonnes or more the HGV Road User Levy, to compensate for their greater contribution to the wear and tear of the road network. The levy amount varies according to the vehicle’s weight and emission class, and operators can pay one-off charges or through a registered account. ⁴⁵
• The Dart Charge for using the Dartford Crossing is also operated by central government. The charge varies by vehicle class (currently £2 per crossing for smaller vehicles with an account) and can be paid at retail outlets or via a phone account. ⁴⁶

London schemes

Ever since the Greater London Authority Act 1999 and the Transport Act 2000, London and other English cities have had the power to establish road user charging schemes. Cities are not required to hold local referenda or to obtain approval from the Secretary of State before introducing a charging scheme. ⁴⁷

The Congestion Charge

London is the only large city to have used these powers, with the establishment of the Congestion Charge (CC) in 2003. ⁴⁸ At the time, it was the world’s most geographically extensive levy on vehicles entering a city centre. ⁴⁹ It charges all petrol and diesel vehicles entering central London on weekdays between 7am and 6pm a set daily fee (currently £11.50). While the charge has recently been extended to PHVs, exemptions remain for black taxis, electric vehicles, motorbikes, the emergency services and vehicles used by disabled people. Residents within the zone, disabled blue badge holders and cleaner vehicles are eligible for a discount.

At the time of its launch, the Congestion Charge was ambitious and technologically advanced. It was initially successful, with a 30 per cent reduction in congestion and 15 per cent less circulating traffic. ⁵⁰ The scheme has also been credited with a significant fall in pollution levels in the year post-introduction and has allowed for the expansion of pavements and bike and bus lanes. ⁵¹ This in turn has added to overall transport capacity, as the city continued to grow, but it has also eroded earlier traffic congestion benefits.

The charge’s weaknesses have become more obvious with time. The flat daily charge means that drivers pay the same whether they drive in the zone for a few minutes or all day, with the perverse result that, once they have paid the charge, drivers may feel incentivised to drive more so as to get value from their payment. While it might have been politically expedient to offer residents a heavy discount, there is no particular logic to it – a car has the same impact whether it is driven by someone who lives in the zone or outside it. Likewise, while electric vehicles are less polluting, they still impose a cost in terms of congestion.

Moreover, the time-limited operation and geographical coverage of the charging regime have diminished its effectiveness. Traffic has increased out of ‘working hours’ when the charge does not apply, and along the perimeter of the zone, as drivers take a circuitous route to avoid it. ⁵² PHVs largely operate outside the reach of current charging: only 5.9 per cent of PHV trips are within the zone in charging hours, and 23 per cent of trips occur between midnight and 5am. ⁵³ More generally, as Figure 1 illustrated, congestion in the city now spreads far beyond the Congestion Charge Zone, particularly along busy strategic routes at peak times. ⁵⁴

Environmental schemes

In addition to the Congestion Charge, a number of environmental charging schemes have been introduced. The Low Emission Zone (LEZ) started in 2008, covering most of Greater London and operating 24 hours a day. The most polluting larger diesel vehicles are required to pay high daily charges to enter the city (£100 for vans and £200 for HGVs, buses and coaches). The standards are being tightened from October 2020 to Euro 3 for vans and Euro VI for lorries, buses and coaches.

The Toxicity Charge (T-Charge) was added in 2017, covering the same area and hours of operation as the Congestion Charge, and charging both petrol and diesel vehicles below Euro 4/IV standard £10 a day. In April 2019 this was replaced with the Ultra Low Emission Zone (ULEZ). Initially covering the same area as the Congestion Charge, an expansion to the North and South Circular Roads is planned from October 2021. It operates 24 hours a day, seven days a week and charges £12.50 daily for cars below Euro 4 petrol or Euro 6 diesel standards, £100 for vans below Euro 3 diesel standard, and £200 for HGVs and buses below Euro IV diesel standard.

The introduction of the ULEZ, tighter LEZ standards from 2020 and ULEZ extension in 2021 are certainly much needed. They will remove the most polluting vehicles from their respective areas of operation, and help improve concentrations of roadside pollutants, particularly NO2. However, these interventions will have little impact on particulate matters emissions because they are not expected to significantly reduce overall car usage. ⁵⁵ These environmental schemes will also do nothing to address congestion or other externalities.

Finally, like the Congestion Charge, the ULEZ is a blunt tool – a small proportion of drivers pay a flat daily charge regardless of how much they drive – while those outside the charging areas remain unaffected. Both the CC and ULEZ (and the plans for its extension) have also been criticised as unfair to users who may be unable to avoid the charges, such as people who live in areas without easy access to public transport, and those on low incomes who may struggle with the cost of replacing older vehicles.

River crossings

London’s river crossings have long been free to use, but this is beginning to change. As mentioned above, the Dartford Crossing has been tolled since it opened in 1991.

In addition, the Mayor of London is planning a number of new East Thames river crossings, including the Silvertown Tunnel linking Silvertown to Greenwich. As with Dartford, using the new tunnel when it opens (expected in 2024) will incur a charge to pay for construction and upkeep. At the same time, TfL is also planning to introduce a charge on the nearby Blackwall Tunnel to help manage demand in the area.

Other schemes

Stepping back, the picture is of a growing patchwork of rather blunt charging regimes, each with a distinct justification (construction and maintenance costs, congestion, pollution), and different rules, vehicle standards, hours of operation and charge amounts.

But this is not the end of it. For this picture is likely to be further complicated by various other schemes being proposed and discussed. The City of London plans to introduce its own charging regime, unless existing schemes are reformed at the London level. And a number of boroughs are said to be considering introducing road charges to deal with local congestion and pollution hot spots.

In short, at some point in the next five or so years a driver, whether behind the wheel of a private car, taxi, servicing or goods vehicle, could easily find themselves having to negotiate their way through a pack of different charging schemes (see Figure 3). And this is before taking into account other charges, such as parking permits and on-street parking fees. Replacing all charging schemes with a single comprehensive scheme would make the user experience much simpler.

Changing public attitudes

Public opposition has been a major barrier to the extension of road user charging in the past. In 2006, the Eddington Report recommended national pay-as-you-drive road user charging and the government of the day published plans for implementation. ⁵⁶ However, following a public petition against the plans, which attracted 1.8 million signatures, the proposals were shelved. ⁵⁷ Local plans have also been rejected. For example, a proposed charge in Manchester to leverage government funding and pay for public transport improvements was heavily defeated in a 2008 local referendum. ⁵⁸

More than a decade on, however, attitudes seem to be shifting. As more and more evidence of the health impacts of pollution has emerged, concerns have grown among the general public, as has acceptance of the ‘polluter pays’ principle. A majority across Britain now perceive exhaust fumes from traffic in towns and cities as a serious problem (63 per cent agree, 37 per cent disagree) and believe that for the sake of the environment everyone should reduce how much they use their cars (61 per cent agree, 11 per cent disagree). ⁵⁹ The proportion of respondents who believe that car users should pay higher taxes for the sake of the environment increased by 14 percentage points in the four years to 2017 (27 per cent agree, 45 per cent disagree). ⁶⁰

In London, more than half of residents believe that their health has been impacted by air pollution, while the proportion of Londoners who said they had suffered symptoms from poor air quality increased from 54 per cent in 2016 to 67 per cent in 2018. ⁶¹ Londoners have also long been supportive of the idea of a more sophisticated charging system. A 2016 survey found that 50 per cent of Londoners supported (and only 20 per cent opposed) charging based on how much you drive (for instance per mile, or per hour) as an alternative to the flat Congestion Charge, and 60 per cent agreed that introducing a mileage or time-based charge in congested parts of the road network in London would be fairer (13 per cent disagree). ⁶²

There is also growing support for road user charging from a variety of campaign groups who represent drivers and businesses, as well as pedestrian, cyclist, health and environmental charities.