THE COSTS AND PRICE OF TRANSPORT
Nearly 60% of adults have access to a car1 although many authors prefer to quote the number of households with access, failing to note that other members of the household may be deprived of access when it is used by one member for travel, e.g. to and from work.
This means 40% of the adult population walk, cycle, rely on public transport or someone giving them a lift, for access between residence and facilities or employment.
Private car use dominates our society with the observable effect of severance and suppressing local walking and cycling as modes of access and personal mobility, since these have become difficult, dangerous and unpleasant. There is also excessive noise and air pollution that has damaging health effects 2. The road infrastructure uses a disproportionate area of land: 6 lane motorway 22 acres per mile, 4 track railway 10 acres per mile 3. Perhaps most significant it is now accepted that more road building generates traffic, making congestion worse not better 4 .
The car provides door-to-door travel (subject to ease of parking) over an infinitely flexible route network, at an infinitely variable frequency (the driver travel can when (s)he wants without waiting). The main costs of the car to the user are paid in advance: capital cost, tax, insurance, regular servicing, the driver only perceiving the cost of fuel and parking as costs of use of the car. Having paid such a large amount of money up front (varying from approximately £750 a year for driving a cheap second hand car to many thousands of pounds a year for a top-of-the-range luxury car), the marginal cost for each mile driven is in the range 7p to 20p (1997).
Users of public transport travel over a fixed route, to a timetable that limits the service frequency. The cost to the user of public transport, with the exception of travelcards and season tickets, is all paid at time of travel, typically 30p – 60p a mile by bus (for journeys over mile) and 11p – 65p a mile for journeys by train (for journeys over 2 miles)(1997).
Since some car journeys are very difficult or not feasible by public transport, people perceive a need for a car. Having made the heavy investment in a car, the marginal costs of using it are often less than the alternative public transport even when this is a feasible option. There is also the very strong psychological urge to make maximum use of the heavy personal investment made in the car, leading to many car drivers considering public transport an irrelevance. 51% of general public respondents in my survey never use public transport (see Appendix) .
It is now widely accepted that road users do not pay their full costs and there is not a contestable market between different modes of transport and not travel accessing needs locally. The market is distorted by different taxation regimes, subsidies (open and hidden) and externalities not charged to the user but burdened on the whole community.
Subsidies for rail use were reducing during the late 1990’s due to passenger rail franchise agreements, some franchises already paying a premium in 1999 (Gatwick Express and Thameslink).
Most bus services are now fully commercial with just a few subsidised by local authorities on the basis of social need, although it is important to note that bus companies receive a substantial subsidy in the form of fuel tax rebate.
Most public transport fares are exempt from VAT.
The rail infrastructure is provided by Network Rail that receives most of its income in the form of track charges from train operators. Immediately before privatisation Railtrack made an 8% return on its asset value.
The road infrastructure is the responsibility of the Highways Agency (motorways and trunk roads) and local authorities (other roads). The finance comes from general taxation including contributions from fuel tax and vehicle excise duty.
Most authorities are agreed on a figure of £16.4billion (excluding VAT) for total taxation on road users in the mid 1990’s 5. Road taxation has been increasing substantially each year due to the fuel tax escalator introduced by the previous Conservative Government, a policy terminated by the 2000 Labour Government. Road user taxation revenue had increased to £23.7billion by 1997/86. However, the true cost of road use is substantially higher as indicated by the following evidence.
The road network is an extremely valuable asset, however, much of the UK road network has been built on the basis of borrowing. This is inferred from Professor Newbery’s argument for commercialising the road network as “Roadtrack”, he notes:- “Roadtrack would inherit not only the assets but appropriate liabilities in the form of debt, the transfer of which would reduce the National Debt by 40%” 7
As the National Debt was nearly £370billion,8 Professor Newbery is implying that the provision of the road network has required borrowing of almost £148billion which is greater than the asset value Professor Newbery estimates for the road network, but is reasonable as a debt burden on the asset value I calculate below for the road network in the range £333billion - £354billion.
In 1997 interest, management and expenses on the National Debt amounted to
over £28billion (more than 7.5%); if 40% allocated to roads (£11billion) 7that is over £180 a year for every man, woman
and child in the UK.
Top
(2.1.1) Cost of Roads – Capital Costs
Table (2.1) ASSET VALUE OF THE ROAD NETWORK 1993 (Three Estimates)
|
|
Km 1993 |
£m/km |
£m/km |
£m/km |
Value £million |
Value £million |
Value £million |
|
ROAD |
(I) |
(I) |
(ii) |
(iii) |
(i) |
(ii) |
(iii) |
|
Motorway |
3,140 |
6.0 |
4.58 |
5.9 |
18,840 |
14,381 |
18,526 |
|
Dual Carriageway |
5,991 |
4.0 |
3.06 |
4.3 |
22,766 |
18,332 |
25,761 |
|
Other Trunk & |
42,141 |
2.2 |
2.29 |
2.1 |
83,439 |
33,113 |
67,426 - 88,496 |
|
B Roads |
30,320 |
1.8 |
0.15 |
1.0 |
27.833 |
4,548 |
30,320 |
|
C Roads |
81,713 |
1.4 |
0.15 |
0.8 |
91,516 |
12,257 |
65,370 |
|
Unclassified |
210,172 |
1.0 |
0.10 |
0.6 |
160,937 |
21.017 |
126,103 |
|
TOTAL |
373,477 |
|
|
|
405,331 |
146,000 |
333,506 - 354,576 |
Annual Return @ 8% of Road Asset Value shown in table above.
(i) £32,426million. Calculated from: - Bradbury and Nalty, "The Great Transport Subsidy", 1996 9, based on work by the Tory Green Initiative 1991.
(ii) £11,681million. Calculated from:- Newbery "Reforming Road Taxation", 19955. £0.67million per km lane plus 14% land for Motorways, Dual Carriageways, Trunk Roads and Principal Roads, £0.15million per km for B and C Roads, £0.1million for unclassified roads. The total asset value for the road length of £146billion is consistent with the length of the road network calculated by Bradbury and Nalty if Principal Roads are broken down 14,460km Trunk Roads, 27,681km other principal roads.
(iii) Department of Transport, "Trunk Roads in England Review", 1994 10 for Motorways and Dual Carriageways calculated by taking a random sample of estimated cost for building and dividing by length. West Sussex County Council, Review of Road Schemes, 1995 for Principal Roads, calculated from the total cost of schemes in the structure plan £125million-£140million less the Dual Carriageways at cost calculated from DOT, 1994), less estimated cost of improvements to existing roads, deduced from the few schemes where an estimated cost was given, less the Petworth Bypass where cost given extremely high due to tunnel and so would distort the result. £45million-£60million divided by length of road less above exclusions 28km, giving range of £1.6million/km-£2.1million/km. Due to lack of information for B,C and unclassified roads, the average of (i) and (ii) has been used in this column.
"Transport Statistics, Great Britain" 1998 6 suggests a slightly smaller road network than shown above; I believe they have not included all of the public unclassified roads .
Table (2.2) Asset Value of the Road Network based on Revised Road Length 1997 from Transport Statistics, Great Britain.
|
Road |
Km 1997i |
£m/kmii |
Value £million ii |
|
Motorway |
3,295 |
5.9 |
19,440 |
|
Dual Carriageway Trunk |
3,871 |
4.3 |
16,645 |
|
Dual Carriageway other |
2,580 |
4.3 |
11,094 |
|
Single Carriageway Trunk |
8,398 |
2.1 |
17,636 |
|
Single Carriageway Principal |
33,254 |
1.6 |
53,206 |
|
B Roads |
30,364 |
1.6 |
53,206 |
|
C Roads |
82,907 |
0.8 |
66,326 |
|
Unclassified |
205,199 |
0.6 |
123,119 |
|
TOTAL |
369,868 |
|
337,830 |
Annual Return @ 8% of Asset Value of Roads £27,026million
(i) Transport Statistics Great Britain 1998 6
(ii) Value per km calculated as follows: - Department of Transport, Trunk Roads Review, 199410 for Motorways and Dual Carriageways calculated by taking a random sample of estimated cost for building and dividing by length. West Sussex County Council, Review of Road Schemes, 1995 11 for Principal Roads, calculated from total cost of schemes in the structure plan £125million-£140million less the Dual Carriageways at cost calculated from (DOT,1994) 10, less estimated cost of improvements to existing roads, deduced from the few schemes where an estimated cost was given, less the Petworth Bypass where cost given extremely high due to tunnel and so would distort the result. £45million-£60million divided by length of road less above exclusions 28km, giving a range of £1.6million/km - £2.1million/km. I have arbitrarily allocated higher value to Trunk Roads and lower value to Principal Roads. Due to lack of information for B, C and unclassified roads, the average of Newbery (1995) 5 and Bradbury & Nalty (1996) 9 has been used.
This asset value must not be considered definitive and would only be confirmed by the sale price of shares following a stock market flotation based on the price purchasers are prepared to pay.
As the variation with the Asset Value calculated earlier is small and the
uncertainty extremely large, I have not updated my original calculations; it is
the principle that is important.
Top
(2.1.2) Cost of Roads – Road Maintenance
This is almost self-explanatory. However, it is worth noting that LGV’s cause many thousands of times the amount of road damage that can be attributed to the private car.
The formula most widely used 12 13suggests road damage
is proportional to the fourth power of axle weight . 
Where D is the proportional road damage Al is
the number of lorry axles Ac the number of car axles,
Wl the weight of each lorry axle, Wc the
weight of each car axle. A simple calculation therefore suggests that a
36 ton, 6 axle lorry causes more damage than 60,000 one-ton cars. 
The New Zealand charging regime reflects this. The charge is distance
related by a sliding scale e.g. 1ton 2 axles $13.61 per 1,000km, 30 ton 2axle
$9,867.9 per 1,000km, 30ton 4 axle $564.64 per 1,000km.
Top
(2.1.3) Cost of Roads – Environmental Costs
The pollution one must remember is not created by the transport itself, but by the energy provision for transport, and must be treated the same as energy provided for other purposes.
These costs are also imposed on others across national boundaries and in the UK we incur costs imposed us from overseas pollution.
Pollution imposes many costs, the most significant being the Health Service treating people with respiratory problems caused by pollution. This also loses productive time at work.
Pollution affects agriculture, acid rain damages trees and crops, runs into streams, rivers and lakes damaging fish stocks.
Particulate pollution soils buildings entailing massive cleaning costs as well as spoiling their appearance.
Climate change is producing a change in sea level and increase in storms. The Environment Agency is so overwhelmed that it is having to consider abandoning some coastal areas to the sea e.g. they have warned that land around Selsey, West Sussex including a caravan park and farmland may have to be given up and Selsey may even become an island.
Noise pollution can affect the well being of individuals causing illness that is a burden on the NHS and when time taken off work, a burden on the economy. Noise costs also are reflected in property prices, soundproofing, how much people are prepared to pay to avoid noise, or how much compensation received for them to put up with noise.
These together with property and crop damage are all discussed in much greater detail elsewhere. The most respected research is “The True Cost of Road Transport”, David Maddison, David Pearce et al, Earthscan, 1996. Also see “Capital Killer, Air Pollution from Road Vehicles”, London Boroughs Association, 1990.
There are also the costs imposed by severance
where traffic splits communities, reducing communication between neighbours
etc. The road supplier in some circumstances provides pedestrian crossings,
bridges or underpasses. There has to my knowledge been no thorough evaluation
of the costs of severance as an externality – crossings provided on the basis
of quantity of traffic and pedestrians, not on potential movement of
pedestrians if traffic were not there. If this externality were evaluated and
charged there would be many more convenient pedestrian crossings.
Top
(2.1.4) Paying for Pollution
Taxpayers funding the National Health Service and individuals through private health insurance have to bear the burden of treating people ill with pollution-induced illness.
This is wrong! The polluter should pay the health costs and also all the loss of earnings, social care costs etc that are incurred when these people are made ill.
The problem is identifying how much of the cost is incurred through pollution and how much of this disease would have been incurred anyway? This problem is especially difficult to resolve with cancers.
Research is required, which would compare health levels of the pollution induced illnesses with people from cleaner air areas to calculate the amount of illness that is pollution induced. From these calculations a formula should be developed to show a ratio of causes for different illnesses; pollution; smoking; other. When health care provider draw up their costs they would allocate the proportion in accordance with the ratio to pollution and charge the polluter for payment – charging the other causes to the relevant inducers of illness leaving taxpayer or insurance to pay only for that portion of illness to be deemed unavoidable according to the ratio.
Similar ratios should be developed for damage to crops, forestry, fisheries, buildings etc.
The NHS and others bearing the cost of pollution should charge the polluter
in respect of the ratio of costs due to them from a Pollution Fund.
Top
(2.1.5) Proposal for a Pollution Fund
The pollution fund will receive payments from all polluters. Whenever fuels are sold for whatever purpose a fee will be paid to the pollution fund that will be itemised on fuel sale invoices. The pollution fund will be responsible for calculating the different costs of different fuels – e.g. burning of petrol may cause more respiratory diseases than diesel, but diesel may cause more cancers and damage to buildings. Electricity generated from wind turbines causes virtually no pollution, generated hydro-electricity may damage fisheries, but coal will produce considerable health damaging pollution, while gas will produce smaller amounts of health damaging pollution but still generates substantial carbon dioxide with climate change implications.
The pollution fund will pay the National Health Service and other bearers of the costs of pollution according to agreed formulas. Also to be paid will be the Environment Agency and local authorities for the effects of climate change. E.g. where the rising sea level and increasing frequency of storms is threatening the coast of West Sussex at Selsey, the pollution fund will pay for the necessary sea defences to protect the coastline, or if there is no alternative other than retreat, provide compensation to the farmers for the loss of agricultural land, and the owner of the threatened caravan site for losing the business plus the building of the necessary infrastructure to keep Selsey connected with the rest of West Sussex if the sea forces the town to become an island.
The pollution fund will be required to generate enough revenue and keep
sufficient funds to cover all future liabilities.
Top
(2.1.6) Pollution is International
Sea level rise, acid rain etc is caused throughout the world. Pollution from the USA affects Britain; pollution from Britain damages Scandinavia etc. It is correct that Britain does not have direct control over other countries’ pollution. However, this is not an argument to do nothing. If the pollution fund charges British polluters for the pollution effects incurred in Britain, we will not be paying for our own pollution damaging other countries. However, we will be paying for other countries’ pollution that damages Britain. This will be a far from perfect balance, but is the best we can achieve unilaterally in Britain.
This may not appear completely fair, but other countries will observe how best practice in Britain can reduce pollution with all the benefits economical and environmental. This should encourage other countries to follow suit and eventually treaties between countries worldwide can be signed to cover the costs of international pollution.
The worst transport polluter in terms of passenger or ton miles is air transport, which by its very nature is substantially international.
Fuel for aircraft entering or flying over British airspace is normally purchased overseas. Therefore it will be necessary to find a mechanism to ensure all aircraft that use British airspace pay the British pollution fund in proportion to the pollution generated until such time as international treaty is drawn up to charge pollution on the basis of fuel purchased world wide.
All road vehicles entering Britain will be charged at the port of entry the
pollution charge on the basis that their fuel tanks are full, until such time
as treaty agreed that pollution is charged for at time of fuel purchase
internationally.
Top
(2.1.7) Consequence of the Pollution Fund
All individuals and businesses will know the effect of their pollution in monetary terms, will choose for themselves how much they are prepared to spend on pollution and in the long term will tend to influence a change to more environmentally sustainable lifestyles.
The balance of electricity generating costs will be adjusted to make
non-polluting electricity generation much more economically viable. In the long
term this will massively reduce the pollution generated by electric railways,
industry and domestic buildings.
Top
(2.1.8) Cost of Roads
There are a wide variety of conflicting accounts of the true cost of roads the most respected are tabulated below.
Table (2.3) Total Cost of Road Use £billion
At 1996 use level £ per litre of fuel sold (Please note this is not a recommendation that this is how road use should be paid for, just an illustration of how much roads cost)
|
|
||||||
|
|
£Billion(i) |
£/ltr(i) |
£Billion(ii) |
£/ltr(ii) |
£billion(iii) |
£/ltr(iii) |
|
DIRECT COSTS |
|
|
|
|
|
|
|
Road Infrastructure @ 8% |
11.7 |
0.335 |
32.4 |
0.927 |
27.0 |
0.773 |
|
Road Maintenance |
4.8 |
0.137 |
5.0 |
0.143 |
1.5 |
0.043 |
|
COMMUNITY EXTERNALITY |
|
|
|
|
|
|
|
Congestion |
19.1 |
0.546 |
2.6 |
0.074 |
17.5 |
0.501 |
|
Accidents |
5.5 |
0.158 |
17.4 |
0.498 |
9.4 |
0.269 |
|
Police |
0.4 |
0.001 |
3.0 |
0.086 |
NE |
NE |
|
ENVIRONMENTAL EXTERNALITY |
|
|
|
|
|
|
|
Air Pollution |
2.4 |
0.068 |
19.7 |
0.563 |
19.7 |
0.563 |
|
Climate Change |
1.8 |
0.051 |
0.1 |
0.0003 |
0.1 |
0.0003 |
|
Noise |
1.2 |
0.034 |
3.1 |
0.089 |
2.6 |
0.074 |
|
Water Pollution |
NE |
NE |
1.6 |
0.046 |
NE |
NE |
|
Severance |
NE |
NE |
NE |
NE |
NE |
NE |
|
TOTAL COST OF ROAD USE |
46.9 |
1.34 |
84.9 |
2.43 |
77.8 |
2.23 |
|
Road Users Subsidy |
23.1 |
0.66 |
61.1 |
1.75 |
54.0 |
1.55 |
The Road user subsidy is calculated by deducting the fuel duty and vehicle excise duty paid by road users of £23.8billion 1997/8 from the total cost of road use.
Key to table
NE Not Evaluated
(i) Road Asset Value and Costs calculated by Professor David Newbery “Reforming Road Taxation”, Automobile Association, Basingstoke, 1995.
(ii) Road Asset Value and Costs calculated by Norman Bradbury and Graham Nalty, “The Great Transport Subsidy”, Railway Development Society, LONDON, 1996. They also calculated the cost per litre of fuel used. I used their method to calculate the costs per litre of fuel in the other columns of the table.
(iii) Road Asset Value used table 2.2
,Other Costs Calculated by Chris Bowers, “The Real Costs of Motoring”,
Environmental Transport Association, Weybridge, 1996.
Top
(2.2) ANALYSIS AND EVALUATION
The road network is a valuable asset, but users have unlimited use free of point of use charges. The rail network is a valuable asset, the train operators paying track charges prior to privatisation, to provide Railtrack an 8% return on asset value. My original paper about rail privatisation argued there should be free fair competition between road and rail – and roads should be privatised raising their revenue from charges collected at time of travel, to provide a level playing field with private railway infrastructure charging the companies running trains in proportion to how much they use the track’ .
Following rail privatisation, the railway infrastructure was owned by Railtrack, suggestions for a road organisation set up to charge for road use have been made; “the simplest solution would seem to be to establish an agency, called Roadtrack for the moment, exactly paralleling Railtrack, to set and collect these charges.”5 “an appropriately named organisation ‘Roadtrack’, with the responsibility (comparable to Railtrack on railways) for managing the roads, meeting all external obligations, including accident/insurance and balancing its books by charging the users the appropriate Road Access Charges”.9
The Current Situation above indicates what the costs of roads may be, but more research is needed to identify the full externality costs of railways. The asset value of the railway infrastructure had a market value, the value of Railtrack shares on the stock market. The value of the road network is extremely difficult to calculate. However, table 2.1 indicates an asset value between £146billion and £405billion. Both (Newbery, 1995)5 and (Bradbury and Nalty, 1996)9 in suggesting the setting up of Roadtrack recommend a return of 8% on the asset value should be sought. The true value of the road network is only likely to be established when a future Roadtrack PLC shares are being traded on the stock market.
What would be the effect of all these charges to transport? And how can they be charged to the user?
Bradbury and Nalty9 argue that road charges should replace all road taxes, collected when fuel is bought. They have calculated that for every litre of fuel purchased there would be a road charge of £2.74 which, added to the 20p/litre cost of fuel means a litre of fuel at the pumps would be priced £2.94 an increase 0f 390% (1997 prices). My survey suggests this would encourage people to walk more 60%, cycle more 34%, use public transport more 60%, purchase a travelcard if available 51%, fulfilling some of the objectives set out in this paper. However, the survey was unsatisfactory giving stated preference rather than revealed preference for the answers. Other research suggests that there would be very little transfer to public transport but large changes in where needs are accessed that reduces the distances travelled.
The survey result would be different using Newbery’s, road use cost, which I calculate would translate into a road charge of £1.34 a litre, leading to a fuel price of £1.54 a litre. However, Newbery argues for examining the mix of road taxes and charges, and suggests moving to a system of charging that leads to better balance between rural and urban charging, noting that charging entirely through fuel will overcharge for the use of inexpensive rural roads while undercharging for expensive urban roads. 5
The Appendix
indicates that, even with the large price increase for the road network use, it
may be politically acceptable to eliminate transport subsidies. 61% of replies
welcomed the scenario of fuel priced at £2.94, (36% to reduce taxes, 33%
subsidy paid to user, 9% said yes to both). Only 21% would not welcome either
scenario, the rest 18% Don’t know.
Top
(2.3) The Motorist Says (S)he Wants More Road Capacity
Motorists put considerable pressure on Government and local authorities to build more road space (extra lane) and procure local communities to campaign for bypasses and relief roads to relieve local communities of oppressive traffic, in the belief that the extra road capacity will relieve congestion enabling traffic to flow better.
The SACTRA report4 showed beyond any doubt that building extra road capacity induces traffic and by implication causes increased incidents of traffic congestion at the origins and destinations of journeys. So overwhelming is the evidence that it brought about a U-Turn in the roads policy of the mid 1990’s Conservative Government where they slashed the road building program.
The DOT on behalf of the Conservative Government went on to commission a
report “Traffic Impact of Highway Capacity Reduction: Assessment of the
Evidence” 14 . This report builds on the anecdotal evidence that suggests
that when road capacity is reduced the often-predicted traffic chaos rarely
materialises. The report studies almost 100 locations and suggests that a
scheme to reduce road capacity tilts the decisions of certain individuals in
the natural development of their lives and although much traffic may divert to
alternative routes with spare capacity, in many circumstances some vehicle
mileage is reduced, hence the gridlock does not occur.
Top
(2.4) CONCLUSIONS
Charges that should be allocated to road users are very difficult to ascertain and different research has produced widely varying results. However, all research, even when sponsored by the Automobile Association, suggests that contrary to conventional wisdom, the road user nowhere near covers the costs roads impose on society, which is subsidised out of general taxation.
Table (2.4) Cost of Road Use Summarised
|
|
£billion (i) |
£billion (ii) |
£billion (iii) |
|
Asset Value of Road Network |
405.3 |
146.0 |
337.8 |
|
@8% Annual Return |
32.4 |
11.7 |
27.0 |
|
Cost of Road Use |
52.5 |
35.2 |
50.8 |
|
Total Road Charge |
84.9 |
46.9 |
77.8 |
|
To illustrate cost of roads only, not an indication of how roads should be paid for |
£/litre |
£/litre |
£/litre |
|
Road Charge £/ltr of Fuel Sold |
2.43 |
2.22 |
2.22 |
|
If Charge Added to Fuel £/ltr Price |
2.63 |
1.54 |
2.42 |
(i) Bradbury and Nalty 19969 , less car parking that I assumed included in asset value of road network, and various tax rebates, allowances paid to a few road users. It would be more acceptable to abolish these rather than charge them to all road users.
(ii) Calculated from Newbery 19955
(iii) Bowers 1996 for cost of road use Table 2.2 for Asset Value of Road Network 15
Note: I have excluded a number of Bradbury and Nalty costs, notably car parking because I feel they included much of this cost in the 8% return on asset value of the road network. Full analysis of these figures would require another paper.
The rail network direct costs are now more transparent following privatisation. However, full examination of externalities still need to be studied and allocated.
It is clear that to pay for all the costs incurred by road use, there needs to be significant increase in charges to road users. Since all fuels produce external costs the pollution part of the environmental externalities needs to be charged to the users of all fuels whatever the use e.g. heating of buildings.
More research is required to discover the externality costs of public transport and to charge appropriately for them.
By charging for road use – in effect removing subsidies – if all subsidies were removed from public transport, and their externalities charged for there would be a free market in transport where consumers would make their travel and access decisions on the basis of price, convenience, speed, comfort etc. The survey (Appendix ) indicates that if private transport price increased to a level in excess of that of public transport there would be an increase in walking, cycling and use of public transport, thus fulfilling an objective of this book. However other research suggests that there would not be a significant transfer from road to public transport, the current large growth of public transport use is fuelled by regulation and subsidies holding the price below the economic price and is generated journeys.
The politicians therefore have a problem. The motorist is a large
constituency that can influence the results of elections. The conventional
wisdom of the motorist is that (s)he is over taxed and getting a raw deal of
over congested roads, with local communities suffering from the oppressive
impact of traffic. The motorist wants to see what (s)he believes is the surplus
of road taxation over road expenditure spent on increasing road capacity to
relieve congestion and new roads to take traffic away from oppressed
communities. However, if the politicians do build more roads, this will
generate traffic causing worse congestion at the origins and destinations of
the traffic, and as the overall costs of roads exceeds the tax revenue from
roads, a road building policy is economically unviable and would inevitably
lead to a dissatisfied electorate.
Top
(2.5) RECOMMENDATIONS
Further research is needed to establish as accurately as possible all external costs of transport for all modes.
Where externalities incur costs on organisations and individuals, a system should be set up to calculate and pay those concerned. e.g. Health services need to be paid for the treatment of those who are ill through air pollution: Households need to be compensated if they suffer noise through being situated in the vicinity of the highway: Environment Agency and others need finance to pay for costs imposed by climate change e.g. sea defences.
Whenever fuel, for whatever purpose, is sold there should be a pollution charge itemised on the sales receipt for money to be distributed to organisations and individuals who bear the cost of the pollution externality. This pollution charge should be in direct proportion to the pollution created by the fuel, e.g. electricity generated by fossil fuels should have a higher pollution charge than hydroelectricity. Imagine the incentive this would give the electricity industry to develop renewable energy and phase out fossil fuels.
Charging for road use through fuel is inefficient as it does not take into account the much higher cost of providing road capacity for peak commuting flows whilst it severely overcharges use of lightly used rural and residential roads. It also fails to take into account the much higher costs of providing and maintaining roads for Heavy Goods Vehicles than would be necessary just for cars. Therefore road fuel duty should be abolished.
As described in Part 4 a commercial road company would use Global Positioning System to calculate and charge for road use that is flexible enough to increase charges at peak times, reduce charges at quiet times so that road users whose journeys were not time sensitive would re-time their journeys whilst road users whose value of journey were sufficient to pay the high price would provide the income flow necessary to provide the finance to enable road capacity provision that would meet the demand at the price the user prepared to pay.
All road taxes should be abolished except for general taxes that apply at the same rate to all products.
The costs for road use should be collected as shown in the following tables.
Table (2.5a) Paying the itemised costs of roads (Insurance and Road Offenders)
|
Allocation of Road Costs |
Newbery 16 |
Bradbury & Nalty 17 |
DOT, WSCC & Bowers 18 |
|
Paid by Insurers |
£5.5billion |
£17.4billion |
£9.4bllion |
|
Paid by Road Lawbreakers |
£0.4billion |
£3.0billion |
Not Evaluated |
|
Vehicle Excise Duty |
Abolish |
Abolish |
Abolish |
Table2.5b) Paying the itemised costs of Roads (Road Users)
|
Road User Itemised Charge to appear on fuel receipts until economic (probably electronic) road charging introduced |
Newbery 16 |
Bradbury & Nalty 17 |
DOT, WSCC & Bowers 18 |
|
Road Infrastructure |
£11.7billion |
£32.4billion |
£27.0billion |
|
Road Maintenance |
£4.8billion |
£5.0billion |
£1.5billiom |
|
Congestion |
£19.1billion |
£2.6billion |
£17.5billion |
|
Air Pollution |
£2.4billion |
£19.7billion |
£19.7billion |
|
Noise |
£1.2billion |
£3.1billion |
3.6 |
|
Water Pollution |
Not Evaluated |
£1.6billion |
Not Evaluated |
|
Climate Change |
£1.8billion |
£0.1billion |
£0.1billion |
|
Severance |
Not Evaluated |
Not Evaluated |
Not Evaluated |
Similar itemisation should be imposed to cover externality costs of all energy use. Imagine the incentive this would give the electricity industry to develop renewable energy and phase out fossil fuels.
Table (2.6) Congestion Externality
|
Based on Costs Calculated by |
Newbery 16 |
Bradbury & Nalty 17 |
Bowers 18 |
|
Congestion per person per annum |
£335 |
£45 |
£307 |
In part 4 with commercial road pricing there will be no congestion externality as excess demand will push the price up and suppress and move demand to less busy time and provide the funds to increase capacity so that supply and demand are matched.
See (2.6) below “Use to be made of Road Use Revenue” for a brief discussion of congestion externality, full details explained by David Newbery in “Reforming Road Taxation”.
Table (2.7) Returning Transport Subsidy to the General Public
|
Based on Costs calculated by |
Newbery 16 |
Bradbury & Nalty 17 |
DOT,WSCC, Bowers 18 |
|
Annual Transport Subsidy per person returned to the public if road use paid for entirely by user, fiscally neutral compared with 1997/98 |
£70 |
£1,027 |
£640 |
If it were thought that even after returning the transport subsidy to the public perhaps as increased personal allowance to reduce income tax, that some people we going to suffer hardship from the increased price of transport at point of use it may be decided to subsidise people.
A simple subsidy system would be as follows: -
To prevent hardship from an increase in transport costs political judgement may decide a basic £500 per person annual subsidy plus an extra £250 for any dependants: - Pay people on zero income basic £500 (if no dependants), reduce this by £1 for every £40 of income e.g. income £10,000 transport subsidy £250, income £20,000 transport subsidy zero.
Political judgement may consider necessary a higher base transport subsidy for rural areas.
Political judgement may decide to call this a transport tax allowance to offset against income tax or as a tax credit for very low earners.
Whatever system of subsidy or tax allowance / credit introduced, it MUST adhere to the principle that subsidy / tax allowance /tax credit is paid to the user who then chooses whichever is the most appropriate mode of transport in balanced free market, obviously the simpler the system the better.
In the long term preferably there should be no transport subsidy once the system of sustainable transport established, transport subsidy could be allowed to whither without causing damage. Transport would be operating in a sustainable market environment where demand and income from users would provide the basis for future investment (subject to planning laws) immune from the vagaries of Treasury priorities and Government interference which have starved so much of the current transport system of desperately needed investment while inappropriate investment which users would never have paid for has undermined roads, public transport, walking, cycling and local access within local communities.
The only exceptions I would make are where access is required which never
can be commercially provided, e.g. the installation of disabled lifts at
railway stations, or the adaptation of a car for a disabled driver.
Top
(2.6) Use to be made of Road Use Revenue
As with Railtrack before privatisation, the Government should receive an 8% return on the asset value that should be used to service that part of the national debt attributed to the provision of roads. Any surplus should be retained for future investment or paid as a dividend to shareholders i.e. a tax credit for the public.
Road Infrastructure should be privatised as soon as possible (see Part 4 “Commercialisation of the Road Network”) , also proposals by Newbery (1995)5 and Bradbury & Nalty (1996)9
(2.6.2) Road Maintenance
(2.6.3) Congestion
Everyone suffers from congestion; pedestrian and road user times are extended, price of produce is higher for everyone as consumers due to delays to road haulage; and costs each person annually between £45 (based on Bradbury & Nalty)9 and £335 (based on Newbery5). Commercialising roads a described in Part 4 with economic road pricing will increase the price of road use when congested, moving journeys to less busy times and suppressing demand. The forecast of future revenue from demand beyond capacity will finance increased capacity that will enable supply and demand to be matched..
(2.6.4) Accidents
Distributed between Health Services, Social Security, Employers (due to lost output) all victims (including dependant families), repair of damage etc at cost. The insurance industry (whether or not the individual concerned insured) being responsible for the entire payment of these costs ensuring that the burden of this payment falls on those who create the greatest risk and does not become a burden on the general taxpayer.
(2.6.5) Police
The entire costs incurred by police and courts relating to road incidents to be paid for by the road lawbreakers through the award of costs. The usual punishment having the most effective deterrent effect should be driving bans. Why should the rest of us law abiding citizens pay for the selfish minority who continually flout road and parking laws putting our lives in danger?
(2.6.6) Air Pollution
The costs of air pollution quoted refer entirely to the health effects which should be paid to the health services, Social Security and employers due to lost output and dependency that results from people unable to work to full potential due to pollution related illness. Air pollution also inflicts costs not yet verified with sufficient rigor, e.g. costs to agriculture of reduced crop yield, and costs to property owners of cleaning pollution grime and repairs where pollution has damaged the fabric of buildings. 2 20 21
(2.6.7) Climate Change
Pay to Environment Agency and others who have to pay costs related to climate change e.g. extra sea defences.
(2.6.8) Noise
Calculated on willingness to pay to avoid basis. Formula needs calculating to pay those in vicinity to noise. Also health services, social security and employers need paying for costs imposed due to lack of sleep and psychological effects.
(2.6.9) Water Pollution
Pay Environment Agency and others who incur these costs.
(2.6.10) Severance
Provide convenient walking and cycle routes with convenient crossings
allowing pedestrian and cycle priority, bridges with gentle gradients etc so
that walkers and cyclists no longer feel intimidated not to go out and no
longer have to take circuitous routes to avoid intimidating traffic.
Top
2) Tolley Rodney (ed), “The Cost and Price of Transport” including “The Impact on Health: an open public meeting”, Chartered Institute of Transport, North Staffordshire Section, Staffordshire University, 1994
3) Chartered Institute of Transport, “Rail Transport Management” Module of Diploma in Transport, London, 1993
4) Standing Advisory Committee on Trunk Road Assessment (SACTRA), “Trunk Roads and the Generation of Traffic”, HMSO, London, 1994
5) Professor Newbery David, “Reforming Road Taxation”, Automobile Association, Basingstoke, 1995
6) Department of the Environment, Transport and the Regions, “Transport Statistics Great Britain 1998”
7) Professor Newbery David, “Fair and Efficient Pricing and the Finance of Roads”, The 53rd Henry Spurrier Memorial Lecture, 5th May 1998, Proceedings, Volume 7, No. 3, Chartered Institute of Transport, London, 1998
8) Office for National Statistics, “Annual Abstract of Statistics, 1999
9) Bradbury Norman & Nalty Graham, “The Great Transport Subsidy”, Railway Development Society, London,1996
10) Department of Transport, “Trunk Roads in England Review”, HMSO, London, 1994
11) West Sussex County Council, “Review of Road Schemes”, West Sussex County Council, Chichester, 1995
12) Roth, “Roads in a Market Economy”. 1996
13) Watson John, “Highway Construction and Maintenance”, Longman Scientific & Technical, 1994
14) Cairnes, Hass-Klau and Goodman, Traffic Impact of Highway Capacity Reduction: Assessment of the Evidence”, Landor Publishing, 1998
15) Bowers Chris, The Real Costs of Motoring”, Environmental Transport Association, Weybridge, 1996
16) Road Asset Value and costs calculated from:- Professor Newbery David, “Reforming Road Taxation”, Automobile Association, Basingstoke, 1995
17) Road Asset Value and costs calculated from:- Bradbury Norman & Nalty Graham, “The Great Transport Subsidy”, Railway Development Society, London,1996
18) Road Asset Value from Table 2.2 , Other Costs from :- Bowers Chris, The Real Costs of Motoring”, Environmental Transport Association, Weybridge, 1996
19) Bourne Richard, “Transport Trends and Transport Policies”, Transport 2000, London, 1994
20) Maddison David, Pearce David et al, “The True Cost of Road Transport”, Earthscan, 1996
21) London Boroughs Association, “Capital Killer, Air Pollution from Road Vehicles”, 1990