Column - April 2018
It is time to go the distance with a new HGV charging system
The current Government revision of the HGV Levy could reduce road congestion and pollution as long as it incentivises more efficient use of lorries in order to reduce lorry miles. The existing time based system, introduced in 2014, was designed to make foreign hauliers contribute and is largely revenue neutral for UK hauliers; it bears no direct relationship to the amount of use of the network so the system does not incentivise more efficient use of the road network.
Currently, the industry is competitive but not efficient. The existing time based system has neither led to efficiencies, nor reduction in emissions and collisions in the UK; Empty running is now at 30 per cent, the highest level for years and load utilisation has not improved significantly, either. Therefore, the single most effective change to achieve all the Government’s stated objectives of improving efficiency, reducing exposure to collisions and reducing air and CO2 pollution would be to replace the existing time based lorry charging system with a distance based system which could relate charges paid to the real impacts HGVs have on other road users and the road network. To improve economic efficiencies there should be a direct relationship between the taxes per mile travelled and the marginal costs which a distance based charging system can provide. It is the calculation of these marginal costs which is crucial and controversial in the HGV Levy revision.
Evidence from western countries, using distance based charging is that these systems can reduce lorry miles and are starting to address the problems associated with trucks. Whereas, time based vignette solutions and tax regimes only cover a fraction of infrastructure costs and hardly incentivise a more sustainable purchase and use of vehicles.
The German distance based system 1 reduced empty running by 11% to around 18% and reduced tonne kilometres because of better loading rates. Prior to its introduction, Germany had similar empty running levels similar to the UK 2. In Austria, per km charging for trucks reduced the percentage of empty vehicles from 21 per cent to 15.77 per cent and average loads grew by 0,6 tonnes to 14,7 tonnes between 1999 and 2004 3.
DfT chart shows registration figures by size of large HGVs
Current industry practice is to buy the biggest lorry available and use for all jobs, big or small as the chart shows.
There is no question that using bigger lorries save operators money, but this is because HGVs are currently only paying for around a third of their external costs for which the taxpayer picks up the bill. Differentiating charges by lorry size could also prove that that ever bigger trucks only reduce emissions and congestion if they are almost fully loaded.
The latest MTRU research 5 we commissioned, which used DfT Mode Shift Benefit values, found a high level of distortion of the market across modes - which equates to an annual subsidy of around £6 billion for HGVs. These conclusions are in line with two separate pieces of research:-
a) MDS Transmodal study in 2007 which found a very similar amount of underpayment: £6 billion.
Lorry road user charges need to reflect the costs of climate change, collisions, road infrastructure damage as well as the costs of congestion to the economy. HGVs account for around 21% of road transport NOx emissions while making up just 5% of vehicle miles in the UK. So, as well as incentivising better load utilisation a distance based lorry charging system can encourage the use of less polluting lorries to reduce CO2 and air pollution and measure accurately lorry track costs. In terms of road infrastructure damage, the standard 44 tonne 16.5 metre HGV, the industry workforce, is 136,000 times more damaging than a Ford Focus 7. Reducing lorry miles will also improve road safety significantly as HGVs are currently almost seven more times likely than cars to be involved in fatal crashes on local roads 8.
Moving to distance based charging could also lead to a shift to rail which would have further socio-economic benefits. Currently, it is difficult for rail to compete, especially in the consumer market, because HGVs are so heavily subsidised. However, a distance based charging which starts to make HGVs pay their real costs could resolve this lack of parity between road and rail as the lower external costs of rail could be properly recognised. Rail freight operators already pay distance-based charges, which varies per vehicle type and by weight. A distance based HGV charge would place the competing modes on a more similar basis.
Congestion costs the UK £30 billion in 2016 with the UK ranked the fourth most congested developed country and third most congested in Europe. Campaign for Better Transport supports resolving network bottle necks and carrying out all the road maintenance needed but building more roads alone will not solve the problems as it creates new traffic. When a new road is built, new traffic will divert onto it, a well-known and long-established effect ‘induced traffic’. Therefore more efficient use by lorries of existing roads is part of the answer 9.
Introducing a distance based system will improve the quality and efficiency of the UK logistics industry increasing its competitiveness against foreign competition and have wider socio-economic benefits.
3. VCÖ-Factsheet 2013-16 - Lkw-Maut in Österreich ausweiten (2016)
4. Source – Energy and Utility skills report 2013
7. Fourth power law
9. CPRE: The end of the road? Challenging the road-building consensus (March 2017)