the lorry road user charge: a critique€¦ · presentation at the commercial vehicle show,...

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.


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.’


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


‘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


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


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


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)


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


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


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


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’


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


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


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


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%


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


‘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


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


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%


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


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


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


‘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


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


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


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


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


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.


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…..


Source: European Centre for Infrastructure Studies, 1997

% of Road Links Congested for more than 1 Hour per Day


Logistics Research CentreHeriot-Watt UniversityEDINBURGH UK

http://www.sml.hw.ac.uk/[email protected]

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the lorry road user charge: a critique€¦ · presentation at the commercial vehicle show,...

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