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$8bn road charging plan could backfire

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A PLAN to radically change the way motorists pay for using the road, which could cost drivers more than $8bn a year, has failed in other countries and could fail in Australia, experts have warned.

There are also fears road charging, essentially ditching fuel excise and rego in favour of tolls you can’t avoid, may hurt the hip pockets of those who can afford it least.

This week, Julieanne Alroe, the Chair of Infrastructure Australia (IA), the government body that advises on major infrastructure projects, said road charging was now “essential” because taxes levied on car drivers could soon dry up.

“The current regime is through fuel excise and registration but if you are an electric vehicle you’re effectively not charged for the use of the road,” she said on Monday at the AFR National Infrastructure Summit, held in Sydney.

Every time a motorist fills up, a proportion of the cost goes to the government in the form of fuel excise. The proportion of revenue generated by fuel excise has been falling as cars become more fuel efficient. The take up of electric vehicles, that don’t fill up but charge up, could kill off the revenue stream entirely.


“As an electric vehicle driver I have not been near a petrol station for 12 months and have saved a lot of money,” said Ms Alroe.

In its Making Reform Happen report, IA said that drivers should be directly charged for their road usage: “A reformed charging framework for roads would see all existing taxes and fees removed and replaced with direct charging that reflects each users own consumption of the network including the location, time and distance of travel.”

By 2047, road charging could cost motorists as much as $8.5bn and add $36.5bn to GDP. But all the money raised should be ring fenced for road projects, said IA.


Philip Davies, IA’s Chief Executive, said push-back from motorists was inevitable.

“It’s a hard conversation with the community (to have) but there will be a crisis down the track. Our income in terms of paying for road infrastructure is declining so we need a new model and now is a good time to start before the crisis comes.”

However, tolls aside, road charging has been only rolled out in a very few cities and the results have been mixed.

London is the most well-known example. There a daily congestion charge of A$20 is levied on every car that enters a 21km² zone in the CBD during the day on weekdays.

Introduced 15 years ago, it initially reduced traffic in Central London, reducing air pollution and making more room for cyclists and buses, as well as bringing in hundreds of millions of pounds in revenue for the city’s government. But some of the gains are now being eroded.


David Franks, the CEO of Australian-French transport company Keolis-Downer, was in London when the congestion charge was introduced.

“The plan was to take cars off the road, and it did that initially, but over the longer-term people have got used to it and have come back so vehicles are now at a level not much different to before the charge. What it did do is generate a lot of additional revenue,” he said.

Writing on The Conversation, Nicole Badstuber, a researcher in urban transport governance at University College London, said vehicle levels in London were around 25 per cent less than a decade ago.

“But while car numbers are down, the number of private for hire vehicles — your cabs and Ubers — is up,” she said.

“Trips by taxi and private for hire vehicle as the main mode of the journey have increased by 29.2 per cent since 2000. Today, more than 18,000 different private hire vehicles enter the congestion charging zone each day, with peaks on Friday and Saturday nights.”

These vehicles are exempt from the congestion charge so are contributing nothing to London’s transport budget, and revenue from the levy has flatlined.

The influx of Ubers has had other effects. Clogging up streets, they were slowing buses down which, in turn, had led to fewer passengers opting for public transport.

Asked at the conference if there was anywhere road charging had been proven to work, Liesbet Spanjaard, a partner at Deloitte, said “Not really (and) there haven’t been too many cities where it’s been in for a long time.”

Ms Spanjaard said Australia needed to have a clear idea what it wanted to achieve before introducing the charge.

“What are the key outcomes you’re trying to address through road charging? One is around revenue stream but others are emissions and safety (or) to change demand or change the profile of vehicle.”


Any future road charging plan in Australia could look to Stockholm, that has changed from a flat rate fee to progressive charges, she said.

It was an example also raised by Ms Badstuber: “Inspired by cities such as Stockholm, the (London citywide government) has recommended … replacing the daily flat rate with a charging structure which would reflect when and where drivers enter the zone and how much time they spend there.

“In Stockholm, the zone covers 35km², capturing two-thirds of the city’s residents in a scheme with varying charge levels depending on the time of the day.”

There was also a fairness issue with road charging. Right now, motorists can avoid tolls. In the future, a driver could be charged the second their tyre hit the tarmac. And those charges might be the same regardless of income level.

“The problem with the tolling system is that the last beneficiary, who has often had the most impact of congestion, has to pay — and that’s a fairness issue that we’re not willing to talk about,” Business Council of Australia head Jennifer Westacott said on Monday.

Whatever form it takes, road charging is on the agenda. Deputy Prime Minister, Michael McCormack, said: “We need to look at new way of doing things. We are looking at pricing at the moment”.

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