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Newsletter, July 2011 (Issue 184)

Roads, at a Price

As a nation we spend more than £100 billion per annum on road travel- a sum greater than the amount we spend on food, drink or clothing. Thus the building and maintenance of roads should be regarded as an activity that helps economic growth as valuable as any other nationwide investment.

We make the assumption that roads are free at the point of use but this belittles their true value and fails to differentiate between different roads and the different times these roads are used. We pay for roads, indirectly, through road tax (Vehicle Excise Duty) and the taxes on fuel and insurance premiums, and occasionally through other forms of taxation. Those taxes take no account of the time of day or the type of road we are driving on. Expenditure does not have a major influence on behaviour. The recent hike in the cost of fuel saw a reduction in the number of journeys made but this figure is already creeping back to the 2010 ayerage and morning rush hour congestion is just as bad as it was before the January VAT increase.

Congestion is a major problem that is proving difficult to solve, yet it affects the quality of life for a substantial proportion of the working population. It is also an unnecessary hindrance to economic growth.

The use of roads is rationed by queues (because of the inefficiency of the road to carry the demand in traffic) and because we cannot build more roads we therefore need to reduce demand. Budget airlines solved a similar problem by varying the cost of travel entirely dependent on demand. Popular times of travel and popular destinations are charged at a higher rate than flights that would otherwise be less than full. Thus they have been able to spread the demand to suit aircraft and flight crew availability.

Should we do the same with roads? We have the technology: we could fit a sat nav tracking system in every car and charge for the use of the road, at different rates dependent on the likely congestion predicted. Quiet roads in rural Suffolk would be free. Joining the queue on the docks gyratory system would attract a premium. Ideally, as the queues reduce, the road charge also goes down until the balance of freely flowing traffic is reached. Road charging would replace road tax and the duty on fuel; thus the cost of motoring is directly related to road use. Charging would be similar to that of mobile phones and credit cards; you simply receive a monthly statement of road use and pay by direct debit.

Importantly, road charging must be a cost neutral replacement for existing taxes, but it could have one further significant advantage. There could be reduced charges for disadvantaged individuals dependent upon their circumstances so that they are not priced off the road. This could include residents of rural backwaters without public transport, essential workers on their way to work and people currently in receipt of a mobility allowance. Investment in roads (and to a certain extent railways) is however a political decision rather than an economic one.

John Norman

    Front cover of issue 184 Cover, issue 184

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