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Impact of Toll Policy in the United Kingdom

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Impact of Toll Policy in the United Kingdom TRANSPORTATION RESEARCH RECORD 1107 55 rate, reliable, and robust enough to be extended to a full enabling road users to pay for maintaining and strengthening system. their road network. The transport studies indicated that ERP is the fairest and most efficient restraint policy option open to the Hong Kong REFERENCES Government for dealing with the continued problems of traffic congestion that are expected to be associated with continued 1. J. A. L. Dawson and F. N. Brown. Electronic Road Pricing in Hong economic growth. Kong: A Fair Way To Go? Traffic Engineering and Control, Vol. 26, The Hong Kong project brought together a number of sig­ No. 11, Nov. 1985. nificant technological advances and combined these with estab­ 2. I. Cading and B. J. Harbord. Electronic Road Pricing in Hong lished theory to demonstrate the practicality of road pricing as Kong: The Technology. Traffic Engineering and Control, Vol. 26, No. 12, Dec. 1985. an important method of dealing with traffic problems. 3. B. Harrison. Electronic Road Pricing in Hong Kong: Estimating Public reaction to the scheme has been mixed. ERP was and Evaluating the Effects. Traffic Engineering and Control, Vol. often perceived as an additional, rather than an alternative, tux 27, No. 1, Jan. 1986. on the motorist. It was certainly not regarded as a price for 4. J. A. L. Dawson. Electronic Road Pricing in Hong Kong: Conclu­ sion. Trqffic Engineering and Control, Vol. 27, No. 2, Feb. 1986. using roads. Its reception by the public, and particularly by 5. A Fair Way To Go. Government of Hong Kong, 1985. motorists, might have been more favorable if it had been 6. G. Roth. A Self-Financing Road System. Research Monograph 3. designed not only to restrain traffic but also as a method of Institute of Economic Affairs, London, England, 1966. Impact of Toll Policy in the United Kingdom KENNETH J. BUTTON Historically tolls played a significant role In financing the such a way that the user is fully cognizant of the resource costs development of roads In the United Kingdom, but, with the involved in each journey, In a world where annual taxation and exception of a limited number of estuarial crossings, they have other less direct means of road user charges abound it is now fallen Into disuse. This paper is concerned with two issues. difficult to devise the appropriate second-best pricing rules on First, the role that tolls played in the early growth of the road which tolls should be based. Simply "tacking" tolled facilities system is discussed and lessons that may be learned from this on to an existing road network is seen to be potentially distor­ are considered. Second, current official policy with respect to tive. existing tolled facilities is examined. Attention is particularly focused on the financial problems that have arisen because of the presently favored "accountancy" approach to tolling and The road system in the United Kingdom is funded almost cost recovery. Some evidence is also offered that there are exclusively from central government taxation revenue and effects on industrial location and traffic patterns when only monies generated by local authority rates (i.e., property taxa­ specific links in the road network are subjected to tolls. The main conclusion of this work, which itself stems from a much tion). The designated trunk road network (including motor­ larger study of the tolling of estuarial crossings In the United ways) is the direct responsibility of central government, and the Kingdom, is that there are serious problems In Initiating lll­ secondary and local road network comes under the local thought-out toll policies. Although on first-best economic prin­ authorities (although there are substantial transfer payments ciples there is a logical case for charging the road user the from central government to supplement local rates in the relevant costs of the infrastructure provided, and doing it in financing of the system). Road users are not directly charged for using the vast majority of the road network and, indeed, Applied Micro-Economic Research Group, Department of Economics, although there have been attempts at assessing the relationship Loughborough University, Loughborough, LEU 3TU, England. between the aggregate level of user charges (e.g., fuel taxes, 56 TRANSPORTATION RESEARCH RECORD 1107 vehicle excise duty) and broad categories of road investment national division found in the United Kingdom. The traditional and maintenance costs, attempts at hypothecation remain crude federal view that the Interstate system is a genuine network and (1, 2). that tolling of any part of it is therefore inappropriate conflicts This situation has not always existed and in bygone days with the situation in the United Kingdom where users of small direct charging for use was widespread across the road m:L­ fragments of the system are subjected to direct user charges. work. There are still a limited number of estuarial crossing The objective of this paper is to see what impact tolls had links in the UK network where charges are levied. These historically in the United Kingdom and, in more detail, to historical and contemporary applications of pricing mecha­ examine the current official policy of govermnent on tolling nisms to directly recover the costs of road provision afford estuary crossings. In a sense it is a negative approach that seeks insights into the merits and difficulties of applying market to determine whether many of the long-espoused arguments principles to the financing of the road system. against charging directly for road use stem from valid, intrinsic Discussion of the appropriate method for funding road flaws in the policy or are due to a poor appreciation of history infrastructure (including bridges and tunnels) is currently being combined with an overemphasis on the effects of contemporary resurrected in the United Kingdom. Several forces are stimulat­ policies that are being applied incorrectly and inconsistently. ing the debate. To begin with, however, it is appropriate to briefly outline First, the politics of the Conservative administration in the economic theory that underlies the debate about tolls policy. power since 1979 strongly favor market forces and the strength­ This becomes particularly relevant when assessing current ening of the private sector. Privatization of several large, for­ bridge and tunnel tolls in the United Kingdom. merly publicly owned companies and liberalization of market regulation in fields as diverse. as urban bus licensing and bank­ ing are manifestations of this. With regard to road infrastruc­ ECONOMIC PRINCIPLES ture, desk-top studies have already been conducted to examine the possibility of a privately financed trunk road and the Secre­ The economic debate surrounding the appropriate methods of tary of State for Transport has gone on record as arguing: "I pricing infrastructure services extends, at least, back to the belie.ve that there would be great advantage in future in getting seminal paper of Dupuit (6). The problem is most easily han­ these tolled crossings constructed by the private sector" (3). dled if it is divided into two separate issues (5): Second, the European Econornic Community, in its attempt to develop a common transport policy, has become increasingly • The toll level on potential new crossings (i.e., involving concerned with coordinating the provision of and charging for the investment decision about whether to build the facility and infrastructure (4). This has been coupled with the adoption, by the question of the method of finance) and nonmember countries such as Switzerland, of tolling policies • The toll on "historic assets" if the facility is already in designed to recoup from transit traffic the costs of the rlamage place. inflicted on the national road network. Because toll roads are already common in France and Italy, there is in existence a For simplicity, the basic public expenditure theory of tolling body of knowledge relevant to the design of harmonized sys­ will be examined first. It is assumed that the long-run marginal tems of charging and an empirical basis around which the cost (LRMC) of providing a bridge facility is invariate with debate is focused. respect to the amount and type of traffic carried (Figure 1). It is The financial cost of maintaining the UK road system, and in particular the need for considerable resources to essentially reconstructed large sections of the motorway system now E reaching or exceeding their original design life, is causing the government to seek new sources of funding. Contracts for maintenance have already been privatized with considerable incentives offered for work completed within specified ccmtract SRMC* periods. Also, several of the estuary crossings that are tolled have been encountering financial problems, and the position of SRMC I several others has been reviewed because their controlling I I bodies wish to raise tolls. The need to expand the capacity of at I / least one crossing (the Dartford Tunnel) combined with ques­ / ,/ tions about the durability of another (the Severn Bridge) have / provided specific focal points for debate. LRMC In some ways these issues parallel those currently concern­ ..... ... ~ \ ing policy makers in the United States. There are differences, \ however, that stem in part from historical factors but that are \ Demand also the product of differing institutional arrangements (5). \ Many of the United States already have extensive tolled turn­ \ pike systems that are physically comparable to the untolled MR trunk roads in the United Kingdom. The separation of this system from the tax-supported 42,500-mi Interstate highway 0 q q Q system is an arrangement significantly different from the local- FIGURE 1 Public expenditure theory of tolling. BuJton 57 also assumed that demand is known and that it is constant over crossings, are open to some debate the outcome of which is not time (i.e., there are no peaks or troughs).
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