Road Pricing and its Effect on Tourism
by Chris Wood
Jan 2010
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Most leisure trips in the UK are by car, so what effect will an attempt to reduce car use or ease congestion have on tourism businesses? An important part of the Government’s plans for tackling congestion is road pricing, or congestion charging, ideally within a national scheme. This article looks at the reasons for introducing road pricing. Using examples of existing and planned city road pricing schemes, as well as the proposed distance-based Dutch national scheme, it explores the potential impact of revenue-neutral and revenue-raising options. The specific effects on rural and tourism interests, including National Parks, are also considered.
Road pricing, or road-user charging, is not new. Several bridges and tunnels, not to mention ferries, around the country are tolled, and there is a tolled motorway in the West Midlands (the M6 Toll). This reflects the way the UK’s main roads have developed – as turnpikes – roads with tolls collected at booths to fund their improvement and upkeep.
This century, economists began talking about road pricing to reduce congestion, before the wider environmental impacts of traffic were widely recognised. Today, whilst the economist’s congestion argument is still the dominant factor (some might even say an obsession), the potential has been realised for road pricing to manage traffic more strategically, indeed even to reduce it, as well as to raise money for the improvement of transport facilities.
Two city-centre congestion charges currently operate in the UK, in Durham and London. Several other towns and cities are considering such charges, notably Reading and Cambridge. Cambridge is a city of great tourist interest, encouraged by the Government’s Transport Innovation Fund (TIF) which seeks a demand-management system (preferably congestion charging) as part of the recipient town’s transport programme.
A national road pricing scheme has been talked about seriously in Government circles for some time, and the TIF criterion for demand management reflects a desire to try road pricing at a local level. The programme took a considerable knock with the rejection of road pricing in a local referendum in Manchester, and other cities considering the possibility, including historic cities like Norwich, have fallen by the wayside. Even Reading is testing the Government’s resolve on road pricing by seeking approval of a programme involving a Low Emission Zone (excluding the dirtiest vehicles) initially, with road pricing only coming in after improvements including new bus routes, and then only if congestion reaches a certain threshold [1].
The issue is particularly topical because the Dutch Parliament is currently considering a Bill to introduce a national road pricing scheme based on distance travelled, measured by a Global Positioning System (GPS) and an in-car device [2]. This scheme, if approved, will be introduced from 2012 and will replace current vehicle and fuel taxes in the Netherlands. The Dutch scheme is significant in that it not only shows that nationwide road pricing may be politically feasible, but also looks to goals beyond the management of congestion.
The effects of road pricing are not likely to be either exclusively good or bad, as far as tourism in aggregate is concerned, but the impacts on individual regions, places and businesses will depend on location, which kind of road pricing system is introduced, and, crucially, whether or not it is revenue neutral.
Economists in general do not like things to be free at the point of consumption. It offends the simple conception of the world where everything can be measured in terms of money. Sometimes they have a point.
Continental cities that have experimented with free bus networks, in order to reduce car use, have found bus capacity oversubscribed, with no revenue stream to pay for new vehicles, and no appreciable reduction in car use. Similar, although lesser, problems are already evident with the free concessionary bus pass in this country.
At other times, the maintenance of a safe, healthy and prosperous society demands provision, regardless of individual ability or willingness to pay, as with for instance clean air, the police, defence and, most would argue, education and healthcare.
Roads are somewhat more debatable. They are basic infrastructure on which everyone depends to some degree, but it is not affordable – financially or environmentally – to keep building them ad infinitum. The evidence is that new road capacity unlocks suppressed demand in congested areas or where there is the opportunity to develop land, thereby increasing traffic still further, and with it demand for more road space [3][4].
It is congested roads that most exercise the minds of economists who look at transport. Congestion is inefficient in economic terms, not just because people do not reach their destinations as quickly as they think they should, and not because engines operate less efficiently creating more pollution and using more energy [5]. Congestion is economically inefficient because a scarce resource (road space) is not allocated by the ‘laws’ of supply and demand.
This is not to say that there is no cost associated with driving in congested conditions. There is, in particular, the cost of time spent in addition to what is perceived as necessary. Economists argue that because one extra vehicle has a disproportionate impact on other vehicles (an ‘externality’), willingness to pay the time cost is not a satisfactory way of allocating road space.
Economists believe the only ‘fair’ way of allocating road space is by means of a price mechanism. This is where road pricing and, in particular, congestion charging comes in. This is also why it is considered important that road pricing is fiscally or revenue neutral (ie other taxes and duties are reduced such that the total, aggregate tax burden is unchanged).
On the other hand, road pricing can be used to reduce traffic beyond the less congested or free-flow conditions that economists might consider efficient. After all, free-flowing traffic leads to faster journey times, allowing people to travel further in the same time. The average daily amount of time people spend travelling is remarkably constant over time [6], so that people tend to travel further as journey times fall. This may be interpreted as economic growth, but its social, individual and environmental sustainability is decidedly questionable.
Road pricing can, therefore, also be seen as a way of cutting down traffic and travel in order to reduce its environmental, social and health impacts. It is for this reason that road pricing is often advocated by environmental pressure groups. From this perspective revenue neutrality and congestion reduction are considered inadequate – road pricing will only have strong environmental benefits if it aims to tackle the emission of pollutants, particularly carbon, and increases the cost of motoring [7].
In this context road pricing is often taken as a central element in what has become known as Travel Demand Management (TDM). However, it is not essential to TDM. Other techniques used to manage demand for travel by car include the following, although their detailed consideration is outside the scope of this article:
- fiscal (eg vehicle taxation)
- discretionary (eg permit schemes for entry into certain areas with a vehicle)
- physical (usually capacity reduction to make congestion itself discourage general traffic, concentrating it into a smaller area, with public transport, cyclists and pedestrians given their own routes)
- planning (eg ensuring shops and services are available close at hand)
- persuasion (especially travel planning for employers, schools, stations and visitor attractions, and 'Individualised Travel Marketing' as promoted by Sustrans).
Road pricing, if properly managed, can provide a revenue stream to fund transport infrastructure, operations and maintenance (unless fiscal neutrality is required). This investment may be road based as in the Norwegian city tolls. Oslo is making wider use of its revenue, but Trondheim’s scheme has done its job and has ended (see below).
On the other hand, it can be a way of raising money for the provision of alternative means of transport, something that interests a number of UK cities in developing bids for the Government’s Transport Innovation Fund. Money raised from road charging could be used directly for improvements locally, rather than being controlled by central Government. London’s congestion charging scheme raised £137 million net in 2007/8, most of which supported bus service improvements [8]. Revenue-raising schemes are by definition not revenue-neutral.
The world’s first urban road pricing scheme began in Singapore in 1975. An unusual case, being constrained in terms of physical expansion and therefore choice of destinations, Singapore also restricts vehicle ownership by taxation and a quota system. Whilst the desire is to move away from vehicle tax dependence, it is clear that restraint on car ownership is a major factor in Singapore’s traffic management [9].
Attention was on Norway in the 1980s and 1990s, where Bergen introduced a toll ring in 1986, followed by Trondheim, Oslo and Nord-Jaeren (greater Stavanger). The clear aim has been to raise money for new road construction, especially in Trondheim where sufficient was raised and the scheme ended in 2005, whereas Oslo uses the money for public transport investment as well.
Whilst schemes are under development around the world (notably a new scheme in Stockholm in 2007 after many years of studies and trials), attention has focussed on London for the last decade.
London’s congestion charge began operation in 2003, with the area covered expanded in 2007. Operating from 7am to 6pm, Monday to Friday, at a charge of £8 per day, the scheme has four priorities [8]:
- congestion reduction
- radical bus service improvements
- car journey time reliability improvement
- more efficient distribution of goods and services.
It also generates income to fund transport investment and has reduced direct environmental impacts of traffic in the charged area. Congestion was initially cut by 30%, but this has since fallen significantly due to the effective size of the network being reduced, either temporarily (road works) or permanently (eg bus lanes). Retail and leisure businesses do not appear to have been hurt by the charge, and office rental values may have benefited [8].
Less well publicised is the small scheme introduced in Durham in 2002 [10][11]. This covers the single access route (Saddler Street) to the historic peninsula, a World Heritage Site. Three thousand vehicles were mixing poorly with 17,000 pedestrians a day, which was considered unacceptable. Charging is by payment of £2 on exit from the area, from 10am to 4pm, Monday to Saturday, and a bus service has been enhanced to provide an alternative option for motorised access into the area. The main results of the scheme are as follows [10]:
- 85% reduction in vehicles
- 10% increase in people walking
- 48% reduction in delivery vehicles (daytime)
- 10% increase in people thinking Durham is a safe place to visit.
The scheme is considered such a success that expanded road pricing for Durham is a real option as part of a wider strategy for traffic management in the historic city [11].
As already mentioned, another historic city considering road pricing is Cambridge. The current proposition is for a cordon charge operating just in the morning weekday peak as part of a TIF package [12]. This is unlikely to affect tourism directly.
There are already places in the countryside where people are only able to drive by payment of a fee or toll. Most of these are actually tourist attractions. Many country parks, country houses and estates with famous beaches charge people coming in by car. Mostly this is a parking charge, where the car park is down a private access road although many properties that charge for admission roll the parking fee and entrance charge into one.
In some places there is a charge for driving on a particular road itself, such as Marine Drive, around the Great Orme’s Head, Llandudno, or the Forestry Commission’s Kielder Forest Drive in Northumberland [13], or large wildlife parks where people tour the facility in their cars.
Road pricing has, however, been proposed to deal with traffic pressures in larger areas, particularly National Parks or key ‘honey pots’ within them. No-one is surprised to be asked to pay to drive into a safari park, and Llandudno does not seem to be afraid of losing tourists because they have to pay to drive around the Great Orme’s Head in summer, but a National Park is different.
The dilemma is, perhaps, similar to that facing an attraction considering the introduction of parking charges. People coming by car may choose to park elsewhere (causing bad feeling in neighbouring villages and possibly making the parking charge system financially unsustainable) or not to visit at all. A National Park’s economy would suffer if people simply went elsewhere.
One study in the Yorkshire Dales National Park found a proposed cordon-based charge for Upper Wharfedale, coupled with a park and ride bus, to be acceptable to 68% of respondents [14]. What is, of course, critical is the response to an actual scheme by the remaining 32%. Another study in the Lake District National Park concluded that equity costs outweighed congestion relief [15]. The latest proposed transport strategy for the Lakes revolves around a blanket 40 mph speed limit and park-and-ride hubs [16].
Where the road network allows, drivers clearly make diversions around charged areas, and higher priced zones within them, if they do not need to enter those zones. This has been shown very clearly in a simulation of a scheme for the city of Leeds [17]. Over time, diversion would increase as people choose destinations in cheaper locations. Congestion charging does not tackle traffic growth which is the real problem. Adams states [18]:
'Traffic growth has already virtually ceased in urban centres because they have reached capacity… The need for restraint by pricing is in those areas where traffic growth is fastest – in precisely those areas not targeted by electronic road pricing.'
Area or zonal charging schemes, whether urban or rural, work best where they cover places to which people will still come; the pricing system will not affect the number of people (as opposed to vehicles) entering or moving around the area. This is clearly important to tourist areas. Places like central London are a special case in this regard. Whether the Lake District, for instance, is similar is another matter.
Most urban areas, historic towns included, are far from unique and have attractions (whether shops, jobs or tourist activities) outside the potential priced area with which they compete. Urban core tolls and congestion-based charges will tend to tip the balance more in favour of out-of-town attractions.
Rural attractions may well, therefore, benefit over central urban competitors who have a significant proportion of car-borne visitors. People driving to leisure and tourism facilities have less need to go to a specific destination, so that diversion from areas that are subject to a charge is likely to be greater for leisure trips. Naturally, it takes more to change people's destinations for commuter trips.
However, the effects of zonal and congestion charging are time-specific. A charge in force Monday to Friday day-time leaves evenings and weekends free of charge. Attractions whose main visitor numbers come in non-charged times will be less affected by the charge than those whose visitors are more spread through the week and/or day. Even so, it should be noted that out-of-town attractions that benefit from the zonal charge may, as a result, be in a better position to compete at the uncharged times as well.
The UK Government considers the reduction of congestion as the over-riding target of road pricing, fuelled by the Eddington Transport Study in 2006 [19][20]. In this, the UK is unusual. A Commission for Integrated Transport reports states [21]:
'…it is clear that the primary focus of Road Pricing in the UK is addressing problems of congestion, while the majority of schemes worldwide explicitly seek to achieve a wider range of objectives.'
The single-issue focus of UK road pricing policy was clearly elucidated by the opposition Conservative Party in 2007, which stated perceptively that charges varying by road and time of day are tools for managing congestion, not emissions, and that congestion charging would actually increase emissions by causing traffic diversion and spread traffic intensity over a wider area
[22]:
'There are also very reasonable concerns that road user charging could shift activity patterns from high charge to low charge areas, turning what is currently an acute problem (of too much traffic in specific places at certain times) into a chronic problem afflicting a wider area, more of the time. This would increase travelling distances, so acting against policies for sustainable land-use planning.'
However, distance-based road pricing could be used to manage traffic levels overall, and so reduce emissions which are created by all driving, not just that in congestion. To be effective, such charging could not be revenue neutral as there would then be no overall effect on motoring taxes. However, until electric cars become a significant proportion of the national fleet, fuel duty will still be closer to an emissions tax, particularly for carbon emissions [23].
To complicate matters, because of their historic focus on congestion, economists frequently use the term ‘distance-based charging’ to mean a way of charging for the actual distance travelled in a congested environment, rather than the less subtle methods of tolls, cordon or zonal charges [24]. The principle would be the same as a national distance-based scheme but the emphasis would still be on tackling urban congestion.
However, no definite national system of road user charging, congestion-focused or otherwise has emerged in the UK. This is why attention is currently on the Netherlands, where the proposal is more rounded.
The proposed Dutch national road pricing system [25] will mean a charge per kilometre driven across the Netherlands, varying according to the vehicle’s carbon dioxide emissions. This ‘base tariff’ will be supplemented by a peak-hour surcharge, the rate of which will not vary according to the vehicle, but rather according to the kind of road (motorways, urban and regional trunk roads). The amount of the surcharge will be decided centrally in consultation with local and regional authorities.
The scheme is designed to be revenue neutral, replacing existing vehicle and fuel taxes, so that some people will pay more and some less, whilst the total taxation from motoring will remain the same. There are exemptions from charge: emergency service vehicles, disabled people’s cars, agricultural vehicles, buses, taxis and, simply because of the difficulty of securing the necessary equipment, motorcycles (which will continue to pay the current vehicle tax).
Foreign motorists will be integrated into the system, although how this is to be done has yet to be decided. A system has already been worked out for lorries, where frequent visitors can have the Dutch equipment installed and occasional visitors register at borders.
The Dutch Government expects [25] the base tariff to bring about a 10-15% drop in distance driven, with commuter travel down 17% and leisure travel down 29%. However, a slight increase in travel for business is expected to result from eased congestion. The peak-hour surcharge is anticipated to result in a 40-60% fall in time lost in congestion.
Assuming the legislation is passed, large-scale tests will commence, running until 2012. The new system will then be phased in, starting with heavy goods vehicles, then tranches of 100,000 motorists selected at random, with full implementation by 2018.
One operational advantage of a national scheme using satellite location and in-car equipment is its flexibility. In theory, anywhere (or any time) where it is desirable to reduce the number of cars, and where it would be useful to raise extra money for transport investment, could have an increased charge. This means that the benefits of road pricing can be felt beyond city centres.
However, the downside to increasing the charge in congested areas, as with the introduction of a free-standing charging zone, is that it places financial pressure on people to change their behaviour in more ways than those desired by the scheme promoter. In big city centres, especially London, people are perhaps likely to choose other forms of transport, car-share or come at different times, but elsewhere the dominant changes are likely to be:
- avoidance, by using longer, orbital routes, where feasible, and
- in the slightly longer term, changed destinations.
A national road pricing scheme, whether along the lines of the Dutch model or purely congestion-based, would have significant effects on tourism. There are potentially two elements to this impact: congestion-related charges and any purely distance-related tariff.
The congestion-related elements of the Dutch scheme would probably have only marginal impacts on most tourism businesses, generally affecting staff travel to work in places where alternative options are available anyway. However, were a national scheme based upon congestion charging to be employed, as seems most likely in the UK, there would be a general spreading of traffic out from congested places and roads [17][18]. This would mean more traffic in currently quieter areas and fewer car-borne visitors to businesses in more congested areas.
Rural areas generally, under a purely congestion-based charge, would see mixed effects. These have been assessed by the Commission for Rural Communities (CRC) in two categories: revenue-neutral and revenue-raising charging, the latter where the charge is in addition to current fuel and vehicle duty [26].
It is important to mention that the CRC’s assumptions about traffic levels in urban hinterlands are suspect, in that it is assumed that traffic levels here would fall, whereas the opposite is to be expected as urban traffic spreads. It also treats all rural dwellers alike, whereas many of those living close to urban areas are really suburbanites, supporting the urban, rather than the rural economy, shopping at regional superstores and only living distant from their workplaces because of the relatively low cost of motoring.
However, the CRC does usefully identify that, despite discontent, increased motoring costs resulting from a revenue-raising charging system would improve the rural economy and allow local shops and services to return to villages. A revenue-neutral scheme would significantly reduce the cost of motoring, the more so further from cities, but with negative impacts which are likely to include an increase in traffic resulting in the disappearance of existing shops and services and a rise in access deprivation for non-car-owners.
In tourist areas, such as National Parks, the CRC's analysis shows that the situation would be more complex. In a revenue-neutral charging scheme the reduced motoring costs experienced by locals would attract more visitors, particularly in-comers, resulting in a growth in the tourist economy. However, local shops and services would not necessarily benefit from in-comers (as illustrated above), house prices would be forced up further, whilst traffic would grow and access for non-car-owners (whether locals or visitors) would get worse.
In the case of a revenue-raising scheme, tourist areas would benefit from reduced traffic, including from tourists, and experience a reduction in house prices, but lose some income from tourism.
A more far-reaching effect is likely to be seen from distance-based charges. These would tend to shorten distance travelled, benefiting some regions more than others. Attractions local to population centres would benefit, so that Norfolk’s tourism economy might do better than that of Cornwall, for instance.
The CRC [26] did not consider distance-based charging, but its distinction between revenue-neutral and revenue-raising charging is still pertinent. Distance-based charging is likely to benefit the local economy and increase the availability of local shops and services, including public transport, without forcing up house prices, even if it is revenue-neutral. This is due to the fact that people who live in rural areas tend to travel longer distances. In a revenue-raising system this would be enhanced. Benefits to the local economy would be expected to have a knock-on benefit to tourism in that the rural economy becomes more vibrant and interesting, and easier for car-free visitors to explore.
Car-borne visitors, however, would not perceive the difference between revenue-neutral and revenue-raising charging as acutely, as leisure travel would be a more marginal activity than today, and so more susceptible to distance charging either way. This will certainly benefit some areas, as mentioned above, and leave others with fewer visitors, at least by car.
The actual situation is more complicated as there would also be a greater incentive to use public transport, or walk and cycle, where facilities exist, so that tourism businesses and areas that have, or can, develop good networks for car-free travel will be better off. Similarly, those businesses that can forge relationships with others in local clusters, connected by walking, cycling, public transport, boat or even horse-riding facilities, would have a promotional advantage in that people who park at one business could explore the others at no additional distance-charge.
Distance-based charging is likely to affect tourism businesses operationally as well. Supplies and maintenance contractors will naturally incorporate the charge into the costs they pass on to their customers, just as they do today with fuel duty. Assuming other factors remaining unchanged, this is likely to favour more local produce and suppliers, already a plus point for many tourists and promoted by the Green Tourism Business Scheme.
Road pricing began as simply a way of paying for roads but has turned into, firstly, a way of paying for congestion and, secondly, a way of reducing overall travel by car. The second holds out most hope for a sustainable future, but the first is the preoccupation of most UK pundits.
Indeed, aside from tolls to pay for new or renewed infrastructure (M6 Toll, bridges, etc), the entire focus of the UK road pricing debate has been on congestion on urban and inter-urban road networks. Less congested and rural areas have been left out of the discussion as they are not considered to suffer from the big problem of congestion. The fact that these areas have their own problems and that there are bigger issues than urban congestion (ones which may be exacerbated by congestion charging), tends to be ignored.
The Dutch national scheme seems to move in a new direction, although whether it is likely to be replicated in the UK remains to be seen. As far as tourism is concerned, the devil is very much in the detail.
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- Note, the relief of congestion by increasing available road capacity does not necessarily reduce pollution or resource problems, due to the traffic generation effect of providing new capacity (3,4).
- Metz, D. ‘The myth of travel times saving.’ Transport Reviews. 28 (30). 2008.
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- See http://www.forestry.gov.uk/website/ourwoods.nsf/LUWebDocsByKey/ EnglandNorthumberlandKielderKielderKielderCastleForestParkCentreKielderForestDrive.
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- Adams, J.G.U. ‘Towards a Sustainable Transport Policy.’ In Roberts, J., Cleary, J., Hamilton, K., and Hanna, J. (eds). Travel Sickness: The Need for a Sustainable Transport Policy for Britain. 1992. Lawrence and Wishart.
- Butcher, L. National road pricing. Standard Note SN/BT/3732. 2009. House of Commons Library. Available from: http://www.parliament.uk/commons/lib/research/briefings/snbt-03732.pdf.
- House of Commons Transport Committee. Road Pricing: The Next Steps. Seventh Report of Session 2004-05. 2005. TSO. Available from: http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtran/218/218i.pdf.
- Atkins. Commission for Integrated Transport, World Review of Road Pricing, Phase 2: Final Report. 2006. CfIT. Available from: http://cfit.independent.gov.uk/pubs/2006.
- Quality of Life Policy Group. Blueprint for a Green Economy. 2007. Conservative Party. Available from: http://www.conservatives.com.
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- See http://www.verkeerenwaterstaat.nl/english/topics/mobility_and-accessibility/road_pricing.index.aspx.
- Commission for Rural Communities. Thinking about rural transport: The potential impacts of road pricing on rural areas. CRC WEB 28. No date. Available from: http://www.ruralcommunities.gov.uk/files/CRC%20Potential%20Impacts.pdf.
Chris Wood has worked in sustainable transport for some twenty years. As Transplan, Chris specialises in green access to the countryside, including ‘Green Access Audits’ for countryside attractions, although his capabilities stretch across the gamut of sustainable transport: rural, suburban and urban. He also has research and writing interests in history, heritage and landscape. Chris can be contacted on 01603 667 314.