A level playing field across freight modes would benefit the economy and society
Manager | Freight on Rail
Recent research carried out for the Campaign for Better Transport1, which used existing Government criteria, found that HGVs pay less than half of the costs associated with their activities in terms of road congestion, road collisions, road damage and pollution. The Government’s average cost across different road types is 83.9 pence for mile based in 2010 prices; for example on A roads congestion is 76 pence, accidents 6 pence, infrastructure damage 11 pence, pollution 3 pence and climate change 4 pence.
The scale of subsidy to road makes a compelling case for supporting sustainable freight modes, which impose much lower costs on society and the economy, equivalently. The Government’s mode shift grants are designed to recognise the wider advantages of water and rail but currently support less than 15% of rail traffic, for example.
The report focuses on what HGV costs are and to what extent taxes and charges cover these costs. It evaluated the different accepted Government methods, marginal external cost and fully allocated cost model, and assesses the scale of undercharging using different economic assumptions. It highlights a number of areas where the Government’s understanding of the costs and impacts of lorries is flawed or outdated. These include:
Once all these factors are reviewed and recalculated using updated values, the likelihood is that the real subsidy to HGVs will be shown to be even greater than this research calculated. This would also show that modal shift to rail is even more beneficial to society and the economy.
The Government’s current HGV charging regime causes this imbalance which leads to poor economic efficiency across road freight, even though it is highly competitive. Currently almost 30% of HGVs are driving around completely empty and almost half of HGVs are partially loaded either by weight or volume2.
By introducing a time-based, rather than a distance-based system this year, the Government has missed an opportunity to create a level playing field for UK hauliers and make road freight more efficient and sustainable. A proper distance-based system would have provided an incentive to logistics operators to get better efficiency out of their HGVs, resulting in safer, cleaner and less congested roads and provided an opportunity to charge foreign lorries on the same basis as UK hauliers.
The German Maut lorry charging system, which covers lorry track costs, resulted in empty running reducing by 11% in a four year period to below 20%. It has also seen a 2% increase in loaded runs and rail freight increase by 7% in the same period. A proper distanced based lorry road user charging system would encourage more efficiency in the road freight sector by providing a direct stimulus to improving utilisation (load factors) and allow rail and water to compete with road and aviation.
Worryingly, as a result of this economic distortion caused by a lack of internalisation of HGV costs, not only is there is poor economic efficiency but also scarce Government resources could be misallocated as funding decisions are made on flawed premises. This research contributes to a reasoned debate about the value of different freight subsidy choices for the economy and society, which allows the Government to take into account all the costs associated with the different modes. As Government moves to reform the Highways Agency and to take Network Rail back into the public sector, the opportunity to progress this debate could not be more timely.
Posted on: September 10th 2014