Presentation at the Commercial Vehicle Show, Birmingham March 2004
The Lorry Road User Charge:A Critique
Professor Alan McKinnon,
Logistics Research Centre,
Heriot-Watt University,
EDINBURGH, UK.
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Birth of the Lorry Road User Charge (LRUC)
Budget speech 2002:‘Hauliers from overseas should pay their fair share towards the cost of using our roads. I propose to go ahead with a road user charge for lorries that is distance-based with offsetting tax cuts for the UK haulage industry.’
Guarantee of tax neutrality:‘The Government remains committed to ensuring that the UK haulageindustry does not pay any more as a result of a new charge and will at the same time introduce offsetting tax reductions for the industry.’
Road Haulage Association:‘..if we really can arrive at a long term solution that will deliver road price per km for all, including our Continental friends, and a reduction in fuel duty to compensate all, geared to ensure that the overall tax burden does not increase, then 2002 really will go down in history as the most momentous year since denationalisation. Perhaps ever.’
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Economics of the LRUC
Fuel Duty + VED → 15p / km charge
Distance travelled by foreign trucks on UK roads (2003): 924 million
Total revenue = £139 million= 4% of total LRUC revenue
Current taxes on UK lorries:
VED = £280 million
Fuel tax = £3,040 million
Total = £3,320 million
Distance travelled by UK trucks on UK roads (2003): 22,159 million
Total revenue = £3,320 million= 96% of total LRUC revenue
Fuel tax rebate = £3,040
UK charge - VED = £3,040 million
Presentation at the Commercial Vehicle Show, Birmingham March 2004
‘We have decided to make the charge simple at first to ensure that it can be successfully implemented as soon as possible.’John Healey and John Spellar, 2002
Registers:•chargeable vehicles•exempt vehicles•authorised fitters•eligibility for fuel rebate
Distance calculation
Main scheme
Distance calculation
Occasional scheme
Security protocols
‘Back Office’
Trusted 3rd parties
Fuel duty debate scheme
Map Base
Charging Matrix
Enforcement Assurance Debt Management
Enforcement sites Database checks
Penalties
Frequent users
Occasional users
LRUC: 2nd Progress Report, 2003
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Electronic Road Tolling for Trucks
German Logistics Trade Association:
‘…..one of the biggest industrial / political flopssince the war.’
UK Lorry Road User Charging (LRUC):
Use of GPS
All roads
Trucks >3.5 tonnes
Variable charge by road and time of day
Tax neutral: tolls to be offset by fuel dutyrebates
Collection cost ?
German Maut:
Use of GPS and black box on truck
Only autobahns
Trucks > 12 tonnes
Fixed charge by road / time of day
Net increase in revenuehypothecated for transport
Collection cost = 20% of revenue
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Scope of LRUC: vehicle numbers and road length
50142
391653
3477
050000
100000150000200000250000300000350000400000450000
Motorways Motorways + trunk All roads
Kilo
met
res
All vehicles over 3.5 tonnes: 433,000
All lorries over 12 tonnes: 246,000
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Possible Cost of the LRUC Scheme
Annual cost of fuel rebate scheme% of revenue £50m £75m £100m
10% £380 £405 £43015% £550 £575 £60020% £680 £705 £730
Annual cost of fuel rebate scheme% of revenue £50m £75m £100m
10% 1.6 1.8 1.915% 2.4 2.5 2.620% 2.9 3.1 3.2
Annual Operating Cost
Additional charge (pence / km) to recover operating cost
+ Capital cost of creating the system, purchasing andinstalling on-board units (OBUs)
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Foreign Vehicle Activity in the UK
Average trip length = 644 km 12 trips per annum = 7,728 km
At least 60% of foreign vehicles in the ‘occasional user’ category
Eligible for ‘low use OBU’ - covered by a separate microwave system
0% 10% 20% 30% 40% 50% 60% 70%
less than once a month
1-3 times a month
1-2 times a week
over 2 times a week
% of Foreign Vehicles
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Case for Distance-based Taxation
• Closer correlation between km-taxes and environmental costs• VED insensitive to distance travelled• VED reductions since 2000: VED % of lorry tax: 1998 14%
2003 8%
• Increase in relative importance of fuel duty: more distance-related• Distance-based taxed could be achieved more simply• Planned functionality of LRUC only justifiable if the charges are to
be varied by:- road type- time of day- geographical location
• Ideal of varying charges in line with marginal social costs
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Environmental Case for New Charging Regime
• Cut overall level of lorry traffic:
– tax neutrality no net increase in haulage costs
– distance-based taxation creates greater incentive to cut empty running and raise vehicle load factors
• Promote the use of cleaner vehicles:
– VED reductions for vehicles with RPCs: limited leverage
– tightening Euro-emission standards
• Reduce impact of lorries on sensitive environments
–‘second generation’ development of LRUC
– need for detailed evaluation of environmental costs at local level
Presentation at the Commercial Vehicle Show, Birmingham March 2004
050
100
150200250300
350400450
1953 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01
tonn
e-km
s pe
r veh
icle
per
ann
um
Five-fold Improvement in Truck Productivitysince 1953: tonne-kms per vehicle per year
Source: Dept. for Transport ‘Transport Statistics Great Britain 2003’
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Decline in Empty Running: 1970-2002
22
24
26
28
30
32
34
361970 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0
'02
% o
f ve
h km
s ru
n em
pty
Had empty running remained at the 1973 level:
• annual road haulage costs would be £1.3 billion higher
• an extra 1.05 million tonnes of CO2 would be emitted annually by lorries
Source: Department for Transport
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Average Payload Weight: lorries over 3.5 tonnes
0
1
2
3
4
5
6
7
1953 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01
Tonn
es
Includes empty running
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Average Payload Weight on Laden Trips: 1970-2002
6.00
6.50
7.00
7.50
8.00
8.5070 72 74 76 78 80 82 84 86 88 90 92 94 96 98
2000 02
Tonn
es
Laden trips
Presentation at the Commercial Vehicle Show, Birmingham March 2004
69%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
vehicle fleets
% o
f max
imum
util
isat
ion
deck area utilisation weight utilisation average deck area utilisation average weight utilisation
Mixed Primary Secondary Tertiary
Variation in Vehicle FillTransport KPI Survey in the Food Supply Chain 2002
69 %
53%
Presentation at the Commercial Vehicle Show, Birmingham March 2004
0
10
20
30
40
50
60
70
80
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
Kto
nnes
PM
10
MotorcyclesBusesHGV RigidHGV ArticVans DERVVans PetrolCars DERVCars Petrol
0
200
400
600
800
1000
1200
1400
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
Kto
nnes
NO
x
MotorcyclesBusesHGV RigidHGV ArticVans DERVVans PetrolCars DERVCars Petrol
Reduction in vehicle noise levels
Greening of LogisticsTightening Emission Standards
Decline in vehicle emissions
Source: DfT
Presentation at the Commercial Vehicle Show, Birmingham March 2004
‘Stress’ Maps for 2000 and 2016
% of trunk road with serious congestion 14% (1996) 26% (2016)
% of traffic using ‘stressed’ road links 26% (1996) 46% (2016)
2000 2016
Presentation at the Commercial Vehicle Show, Birmingham March 2004
0
20
40
60
80
100
120
140
160
1990 1991 1992 1993 1994 1995 1996 1997 1998 2002
Con
gest
ion
Inde
x (1
990
= 10
0)
London - Leeds 186 → 213 mins + 14.5%Birmingham - Bristol 102 → 116 mins + 13.7%Oxford - Southampton 74 → 85 mins +14.8%Cambridge - Ipswich 56 → 67 mins + 19.6%
Predicted increase in average transit times 2002-2006 (Trafficmaster)
Trafficmaster Congestion Index
Traffic Congestion Trends
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Contribution of Freight Traffic to Congestion
Financial Times: 13th December, 1999
Composition of traffic on UK roads (PCUs)
Source: Dept. for Transport
0%10%20%30%40%50%60%70%80%
Cars Vans Lorries Buses
% o
f tot
al ro
ad tr
affic
Lorries 14%
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Deliverie s to Distribution Centres(Primary Distribut ion)
0
500
1000
1500
2000
2500P AmbientP Ch illedP Fro zen
De liveries to Shops(Secondary Distribution)
0
1000
2000
3000
4000
5000
6000
7000
8000
0:00
1:30
3:00
4:30
6:00
7:30
9:00
10:3
0
12:0
0
13:3
0
15:0
0
16:3
0
18:0
0
19:3
0
21:0
0
22:3
0
0:00
1:30
3:00
4:30
6:00
7:30
9:00
10:3
0
12:0
0
13:3
0
15:0
0
16:3
0
18:0
0
19:3
0
21:0
0
22:3
0
Hours
S AmbientS Ch illedS Fro zen
num
ber o
f pa
llets
Delivery Profile over 48 hours
48 hours
Primary distribution
Secondary distribution
frozen
chilled
ambient
UK Food Supply Chain
2002 Transport KPI survey
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Growth of Night-time Delivery
% of Lorry-kms Run between 8pm and 6am
1985 1996 2001
Strengthening case for relaxation:
• tightening vehicle noise standards
• porous asphalt road surfaces
• conversion to CNG fuel
Constraints:
• production / distribution cycles
• night delivery curfews
• working time directive
0
5
10
15
20
25
1985 1996 2001
% o
f lor
ry-k
ms
70% of supermarket vehicle fleet operate over 24 hours (IGD)
40% of grocery chain stores subject to a night delivery curfew
if half of curfews relaxed:• 10% fewer vehicles• 63 million fewer vehicle-kms per ann
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Rescheduling Trips to Avoid Higher Tolls
0% 5% 10% 15% 20% 25% 30% 35%
< 25 km
25-50 km
50-100 km
100-150km
150-200 km
200-300km
>300 km
% of Tonnes Lifted
70% of road freight moves less than 100km
• Longer journeys: complex rescheduling within drivers’ hours regulations and WTD
• Likelihood of ‘parking-up during peak periods’
• Short trips: reschedule start times
Source: DfT
• Logistical cost trade-offs in rescheduling production and distribution activities
• Hauliers forced to absorb higher charges within slim margins
Presentation at the Commercial Vehicle Show, Birmingham March 2004
‘Actions taken specifically as a result of congestionin the past two years’
Source: Lex Transfleet / FTA survey 2002
0 10 20 30 40 50
Changed routes
Altered delivery times
Introduced telematics
Changed truck type
None
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Time Utilisation of Trailers / Rigid Vehicles
idle(empty & stationary)
28%
maintenance/repair 7%
awaiting unloading/loading 4% pre-loaded, awaiting
departure 15%
loading/unloading 16%
on the roaddaily rest 2%
running onthe road 28%
2002 Transport KPI Survey
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Time Utilisation by fleets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fleets
Vehicle HourUtilisation
OTHER
RUNNING
IDLE
Mixed Distributi
Primary Distributi
Secondary Distribution
Tertiary DistributionMixed
DistributionPrimary
DistributionSecondary Distribution Tertiary Distribution
53 FLEETS
Variation in the Vehicle Time Utilisation
2002 Transport KPI Survey
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Transit Time in Context
Results of process mapping
Value-adding time =
5.9% of total manufacturing time(Warwick Manufacturing Group, 1995)
Opportunities for Time Compression
Source: Taylor and Hines, 2000
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Promoting the Diffusion of Telematics
The LRUC ‘will help to bring the latest technology into the cabs of the UK’s lorries, where it can be a valuable aid for the haulage industry, offering fleet management and navigation services.’ (John Healey and John Spellar, 2003)
• real time fleet management• dynamic re-routing of vehicles
0 20 40 60 80 100
Reduction in transport costs
Improved customer service
Improved reliability
% of freight operators
• confirmation of delivery times• enhanced security
CST/Cranfieldsurvey of 122 European hauliers
Presentation at the Commercial Vehicle Show, Birmingham March 2004
A Worthwhile Spin-off Benefit of LRUC?
• Will the OBU be compatible with systems already installed in thousands of lorries?
• Is it necessary for government to incentivise the uptake of thistechnology?
• Already evidence of ‘over-selling’ - increasing scepticism about the true benefits.
• Under-estimation of the system changes required to exploit the telematics.
• Operators need more guidance on installation and use.
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Alternative Ways of Reducing the Impact of Congestion
• modal shift
• freight-only lanes on motorways
• better traffic management: network-based telematics
• expand road infrastructure
• reduce car dependency
• relocate to Denmark…..
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Source: European Centre for Infrastructure Studies, 1997
% of Road Links Congested for more than 1 Hour per Day
Presentation at the Commercial Vehicle Show, Birmingham March 2004
Logistics Research CentreHeriot-Watt UniversityEDINBURGH UK
http://www.sml.hw.ac.uk/[email protected]
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