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More questions than answers

12th August 2004, Page 28
12th August 2004
Page 28
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Page 28, 12th August 2004 — More questions than answers
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Which of the following most accurately describes the problem?

Is Lorry Road User Charging just one more tax, or is it an effective cure for congestion? Colin

Barnett looks at the figures be-lind the hype.

Last week's review of the theory behind Lorry Road User Charging concluded hat apart from the motives there is little effective difference behind the schemes for heavy trucks and light vehicles.

The biggest imponderable so far is the numbers involved.

Although Customs claim to know what they are, they're keeping them close to their chest. Suggested figures for the LRUC vary between 2p and 80p/km. Whatever the figures arrived at, and there could he as many as 20 charging bands, we need to be aware that what may appear to be generous could in fact be punitively harsh.

Let's look at a couple of examples using some hypothetical figures. Starting with a 44-tonner doing 125,000km a year, we will assume a fuel consumption of lOmpg. Its current cost for fuel and VED will be £2,588 a month. If VED were to be abolished and fuel duty reduced by, say, 20p/lit, at first glance this seems a good scheme, reducing the figure to £1,896 a month.

But it only takes a seemingly small LRUC rate to wipe out this saving. In fact, on these assumed figures, the break even point is just 6.65p/km — a figure at the lower end of the suggested scale. Increase the LRUC figure to the middle of that scale, 39p/km, and the combined charge for fuel and road charging is £5,958, representing a monthly increase of £3,370.

Astronomical for vans

It gets even more worrying if you apply the same LRUC rate to one of the millions of light vans on the road.

For a van up to 3.5 tonnes GVVV doing 50,000 miles per year at 30mpg, the current monthly fuel and VED cost is £545 a month.AbolishVED and reduce fuel duty by 20p/lit with a 39p/km LRUC and the monthly cost would be £3,004. The break-even point for our van would be at 2.1p/km;just inside the lowest projected figure.

While promising that the scheme will be "cost neutral", the government apparently intends to justify higher front-end charges by the inclusion in its equation of the "economic welfare module" an assumed figure which will charge road users for the time saved by the magical elimination of congestion.

The proposed "welfare" charge has been valued at £8 per hour for commercials and £18 per hour for light vehicles.This is, at best, a theoretical 'avoided' cost, where in reality no cost currently exists. In future, therefore, road users will have to pay for a benefit with no guarantee that it will be delivered.

There are other, wider aspects of the social implications of Lorry Road User Charging.

An unforeseeable amount of traffic is likely to divert to minor roads,as drivers seek shorter, more direct routes to reduce their chargeable mileage. The proposals assume traffic reductions on major routes. These are the safest roads, but the proposals don't show any compensatory figures for traffic diverting to less safe roads.

And the offsetting of fuel duty will inevitably provide more benefit for those vehicles currently using more fuel, so diesels will be disadvantaged with greater cost increases per kilometre.

Apart from the opportunity to extract cash from foreign hauliers using UK roads, the case for replacing the current road user charging system doesn't convince everyone. In case anyone hadn't noticed, we currently have a two-part road user charging system.

The first part, once known as the -road fund" licence, is a fixed charge which has built-in flexibility. With it, the government can provide incentives for operators to use those vehicles which are deemed to be more socially desirable.

To prove that this facet works, you only have to look at the speed with which the UK road transport industry moved to the least damaging, 44 tonnes on six axles, configura tion when encouraged by favourable VED rates. With the advent of computer-enforced continuous licensing and number plate recognition systems this process has the potential to work better than ever.

Removing this part of the current system will not only waste the investment in this technology, but will also remove the annual check on insurance and MoT certificates at a time when insurance evasion is a growing problem.

One solution the government may have in mind is an annual registration fee, which sounds familiar.

Benefits of fuel duty?

The second part of today's system is, of course, fuel duty.While no more popular than any other tax, it is relatively transparent. Anyone who cares will know that around 75% of the money they hand to the fuel company goes straight to the government.

It has the benefit of punishing "gas guzzlers" the more fuel you use, the more tax you pay. It also offers as much encouragement to avoid congestion as any other system.

Crawling around the M25 in a low gear uses more fuel, hence the extra tax that people pay for making journeys at peak times.

At the other extreme, drivers who choose to drive at high speeds also pay more tax as they drive on the other side of the optimum speed for economy, which for most types of vehicle just happens to be between 50 and 60mph.

The fact that so many vehicle users choose to operate in these high tax scenarios leads to the conclusion that they either have no choice, or choose to pay extra tax.'There's no evidence to suggest that a high-tech tax collection system will alter these facts.

Better the devil you know? •

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