Response by the Eurocouncil of the Fédération Internationale de l’Automobile towards Road Pricing
Publication date: 13 June 2005
Taxes and charges are among the most intensively discussed issues in transport policy. In the last years the European Union has – sometimes in parallel, sometimes in contradiction to national policies – developed an independent approach on infrastructure charging. Running trough various, partly fundamental changes the EU’s infrastructure charging policy has cumulated recently in a draft directive (Eurovignette) which is under controversial discussion in Parliament and Council. The European Commission strives to set methodological foundations for road charges in general and specific regulations for charging heavy goods vehicles. AIT & FIA need to respond to these initiative and develop an own policy on infrastructure charging.
In order to address the issues, some basic terms should be defined since these are sometimes used ambiguously.
Infrastructure financing: To provide funding for infrastructure investment.
Infrastructure charging: To levy a fee for the physical use of infrastructure. In contrast to taxes not an instrument to finance general public budget but in character a payment in return for a public supply. Can be levied for a certain period (toll sticker, vignette) or a certain distance travelled.
Road pricing: Levying infrastructure charges with an electronic system and with respect to distance travelled.
Costs of infrastructure: Economic cost for providing a certain infrastructure, including deprecations for invested values and running costs of maintenance.
External costs: Costs which are not covered by the person responsible because no market is present (e.g. there is no market for “clean air”).
Demand Management: Trying to influence driver's behaviour in the choice of transport mode, travel time, travel routes or travel distance by charging or taxing.
Marginal social costs: Marginal costs of infrastructure use for the economy as a whole, including not only direct costs of infrastructure but also external costs (e.g. for environmental damage or congestion).
Europe shows a wide diversity of historically grown, national systems of infrastructure funding. The only common fact is that in any country the vast majority of the roads, the secondary network is financed out of public budget. Secondary roads provide access to the whole expand of countries, including rural roads.
For funding the primary road network (e.g. motorways, Autobahnen) all kinds of systems can be found in Europe, including:
primarily or exclusively tax funding (e.g. Germany, UK)
- Charges (toll sticker) for private cars and road pricing for heavy goods vehicles (e.g. Austria, Switzerland)
- Distance related charges for all vehicles, motorway companies (e.g. Italy, France)
As a very recent development, city congestion charging is discussed very intensively in the last months, following the implementation of London´s Congestion Charge schema. Still no conclusion on city charging in general can be drawn as the London example has succeeded in reducing traffic and congestion but at very high operational costs and within a rather unique framework.
No European-wide infrastructure funding policy
National systems of infrastructure funding have grown historically and are well-founded. There is no obvious advantage in a harmonised, European-wide infrastructure funding policy covering private and commercial transport. Any policy-making would need a solid evaluation of national systems and their current scale of covering infrastructure costs first.
European motorists accept the user-pays-principle. In fact they pay much more than the infrastructure costs the cause. It is fair and justified to raise revenues from users in order to cover the costs of a publicly supplied transport infrastructure. Today, motorist in the EU pay taxes and charges in high volume: over 100 million car users are paying 270 billion Euro a year for taxation only, this is around 15% of EU governments` total revenues. German motorists pay approximately 50 billion Euro at taxes and charges per year, i.e. they pay about three times more than the cost they cause. In Austria the motorists pay 10.3 billion euro.
When discussing new approaches in infrastructure funding, existing taxes which have developed historically as means of financing roads must not be forgotten. Other transport infrastructures do not cover its costs (rail, waterway). The user-pays-principle - when contrasted with taxation reality - gives no justification for higher motoring costs at all.
Internalisation of so-called external costs
Motorists must not be burdened with costs exceeding the ones for building and maintaining roads. External costs are not an acceptable base for taxes or charges. Up to now, no unified and broadly accepted methodology to define and value external effects has been presented. Additionally, when discussing external effects not only costs but also benefits have to be considered. Road traffic’s undisputed social acceptance in broad for literally more than a century indicates that its tremendous benefits for society surely exceed its social costs. Road traffic has become an indispensable tool for mobility. To drop the approach of marginal social costs is an important step forward for the European Commission to a more reasonable infrastructure funding policy.
Revenue-neutrality of charging
Given the facts cited above, any shifts in taxes or charges must be revenue-neutral. Social hardness must be avoided. Income-weak groups are not to be loaded more strongly by the road charge then income-strong groups. Any social exclusion of individual social groups may not take place. With a system change from taxing to charging the motorists must not be burdened with additional costs.
In the light of long time experience, motorist have lost the believe in governments dealing fairly with motoring taxes and charges. Too often, fuel taxes have increased without providing improved services for motorists. Keeping this in mind, merely promising revenue-neutrality within shifting from taxes to charges is not enough, governments need to prove their will to do so in advance, for example with cutting existing taxes or designing a new institutional frame work (like independent road operators).
Charging can be used as a tool of demand management. Levying road fees can influence the citizen's behaviour in theory, though in reality the effectiveness of such measures is strongly limited. Experience shows that shifts in modal-split (e.g. from road to rail) by influencing user costs hardly happen at all since the quality of modes for specific transport demands differ greatly. Any effect on the choice of travel time or routes is dependent on alternatives from a users’ perspective – which are not available most of the time. In case of non existing alternatives for the motorists (public traffic, alternative routes) it comes to high depletion effects into the secondary nets. Road safety will decrease and the environmental damage rise.
Road revenues have to be earmarked
The revenues of charging have to be earmarked for the transport network. The resources must be re-invested in roads. It must not take place a transverse subsidization between the traffic infrastructures. The goal is a financing system, in which the annual investments in road construction do not depend on political eventualities of the general budget. User tolls must be earmarked and can be fed in an independent freeway finance company directly as an option. The Austrian ASFINAG can be consulted thereby as a positive example.
Public responsibility for infrastructure
Government and state institutions must be kept responsible for a good-quality road network in total. Roads, primary and secondary ones, are an important public service and prerequisites for mobility as a mean to participate in any social and economic life. At any time, citizens must be provided with an acceptable road-network to satisfy their basic needs free of charges, even when there are higher-quality roads which are charged.
Data protection issues need to be addressed
Electronic systems for implementing road charges bear the potential of collecting huge amounts of data about motorists and their habits of travel. In any case, protection of personal data needs to be guaranteed.
Road charges for heavy goods vehicles
Europe needs a truck-toll, because heavy goods vehicles do not cover their road using costs. In Germany heavy goods vehicles cover only 75.8% and the foreign ones vehicles only approximately 52.6 % of their road using costs. In Austria trucks and busses cover 39 % of their costs.
Harmonization of the terms of competition for the European transport industry, especially the harmonisation of the widely differing fuel tax rates within the Member States, which distort competition, is necessary. The collection of a truck toll is technically simpler than the collection of a passenger car toll. The technical problems are solved partly or will already be implemented in short time. Truck tolls don’t rise social issues in significant volume compared with charges for private traffic (e.g. entrance to the job, commuters). All revenues have to be earmarked completely for investment in transport infrastructure and must not be used for any other purposes. The amount of the charge has to correspond with the road using costs.
Road charges for passenger cars
Levying charges from passenger cars is not necessary, because passenger cars do more than cover their road using costs. In Germany the ratio of revenues and costs of domestic passenger cars is about 218.2%.The foreign passenger cars cover 135.6% of their road using costs. Passenger cars in Austria finance 173 % of the user costs. The introduction of road charges for passenger cars may not imply additional costs for the motorists. Any passenger car toll will cause high system costs compared with existing taxes, since the population of passenger cars is so high.
Besides the social effects of levying tolls for passenger cars must be considered. Commuters may not be loaded above average by a passenger car toll. The personal mobility must remain affordable and a social exclusion of individual social groups cannot be accepted.