An idea whose time has (finally) come? Road user charging and cities

London Essays – Issue 2: Technology

An idea whose time has (finally) come? Road user charging and cities

Road-user charging – the principle that motorists should be charged more for driving on particularly expensive or crowded roads – has long been discussed and advocated by transport experts, economists and environmentalists. But it has few supporters among the public.

By Steven Norris

It is doubtful whether Londoners, in particular, would have approved of the Congestion Zone had Mayor Livingstone ever made the mistake of asking them before he introduced it in 2003. When similar schemes were put before voters in Edinburgh in 2005 and Manchester in 2008, the vast majority voted against them. It is not surprising, then, that it is hard to find many politicians ready to argue for road-user charging.

But the case for replacing our current simple system of fuel tax with something more advanced has never been stronger and there is good reason to think that its time might finally be coming. Above all in London.

The basic arguments for road-user charging have often been made. While private individuals and businesses should all be able to choose between a variety of transport modes, it is important that the costs of these choices to society, the economy and the environment are as far as possible reflected in their price. A simple tax on fuel internalises some of the ‘externalities’ – unintended consequences – that drivers impose on others but it is a very blunt tool. Road-user charging can achieve what fuel duty cannot: it can impose higher costs on journeys that have the greatest negative impacts – journeys on already busy roads, or journeys through highly built-up areas. Varying charge rates can be deployed to spread flows more evenly throughout the day or to encourage motorists to use more suitable routes.

A simple tax on fuel internalises some of the ‘externalities’ – unintended consequences – that drivers impose on others but it is a very blunt tool.

While road-user charging would be helpful to transport authorities everywhere, it could prove particularly helpful to London. Road space is in especially short supply in the capital and, with the capital’s population growing faster than at any time in its history, the pressures on road space are only going to intensify. Increasing provision for cycling and walking will help but will not solve the problem entirely.

If the case for road-user charging has always been logical if not popular, there are at least three reasons for thinking we could soon see its widespread adoption. First and most fundamentally, new technology makes charging an affordable proposition for governments. Vehicles are fast becoming conglomerations of data on wheels with every move they make monitored and recorded. The result is that the technical barriers to road-user charging, once formidable, have all but disappeared and the costs of implementing it are plummeting.

Second, public attitudes to road-user charging are likely to change, above all in London. London business groups – notably London First – have long made the case for extending road pricing across the capital. 11 But the views of voters could well start shifting too. Though more than half of journeys in London are still by car, the average age at which people acquire a driving license has increased significantly and car ownership is falling. 12 Today, more Londoners are using public transport or making use of car clubs and other forms of car sharing. These developments are likely to weaken public resistance to road pricing.

Finally, and perhaps most importantly, falling receipts from fuel tax mean that national government is simply not going to be able to push the road-user charging idea away as governments of all persuasions have done for so long.

A road fund financed by vehicle excise duty, hypothecated exclusively to road maintenance and construction, was introduced in 1920 but only six years later the then Chancellor of the Exchequer, Winston Churchill no less, noting that the fund was never wholly spent on roads, successfully argued for a proportion of the fund to be diverted elsewhere; a decade later the link to hypothecation was finally formally broken. It was predicted to raise £5.9 billion in 2013/14. Fuel duty had been first levied somewhat earlier in 1908 at a rate of three old pennies per gallon and as we all know has risen exponentially since, without ever being formally hypothecated. It raised £26.6 billion excluding VAT in 2012/13. This year the Department for Transport will spend £15 billion on both local and national roads so in effect around £18 billion of funds raised from motoring and road freight in the UK does not go to improving roads but to funding other forms of public spending.

But this is a situation not likely to last. The simple truth is that with the advent of lean burn, hybrid and all-electric propulsion, the next car you buy will be twice as fuel-efficient as the one you trade in. Both the Office of Budget Responsibility and the Institute for Fiscal Studies have identified this trend as posing new challenges to government. It may just about be politically expedient to cut road spending as revenues fall but as the rate of falling fuel duty accelerates there is the inevitable prospect of a very big gap emerging in the UK government budget – already running at a deficit of £100 billion a year – which will either require extremely unpalatable increases in other forms of taxation or even greater reductions in public spending. To put this in context, raising the basic rate of income tax in 2015 by one penny is estimated to raise £3.85 billion, so to cover the current shortfall would imply a rise of 4.7p. Not a prospect to appeal to any Chancellor.

The current London scheme may raise £130 million for Transport for London but its impact on congestion has patently been minimal.

Implementing an urban charging system will require careful planning and forethought. The current London scheme may raise £130 million for Transport for London but its impact on congestion has patently been minimal. Road speeds are now slower than ever, while air quality is at levels well below agreed government safe standards. This is in part because the current scheme has shed some of its most significant features.

The original concept was to make it difficult for drivers to pay the charge by requiring them to pay in advance each time they drove into the zone, failing which they would incur substantial fines. The laudable logic behind this was that it would cause drivers to consider whether they really did need to use their car that day and thus change commuting habits. Now, however, not only can drivers log their vehicles and payment details onto a TfL website, but they earn a discount for doing so. At a stroke a major plank of the scheme has been removed. Those who still pay daily now have extra time after the event to do so. The charge is now so easy to pay that a huge proportion of its deterrent value has been lost. When it was first introduced in 2003 at a rate of £5 per day Ken Livingstone promised the charge would not be increased for ten years. By 2005 it had been increased to £8 and is now £11.50.

My objection to the scheme, which I first voiced in 2000, was not against the idea of charging nor the need to reduce congestion but was that the charge would have a short term impact on congestion but would dissipate rapidly as it became absorbed into daily life. And so it has proved. In planning for road-user charging on all London roads the current crop of transport planners will need to think more intelligently about how to make a charging system sufficiently dynamic to respond to the ever changing needs of the world’s most dynamic city. But new technology means that they now have a tool in their box that simply would not have been there a decade ago.

Road-user charging will happen if not in this Parliament or the next, then at the point where a future Chancellor faces the precipice of lost receipts and concludes that there is, in Margaret Thatcher’s immortal words, no alternative.

  • 11 London First (2004) Memorandum submitted to Parliamentary Select Committee on Transport, November, available at
  • 12 In 1995/7, 43 per cent of Britons aged 17–20 held a full driving licence; this rate decreased to 31 per cent in 2005 and 30 per cent in 2013. Source: Department for Transport, Table NTS0201: Full car driving licence holders by age and gender: England, since 1975, available at