Nov/Dec 2004

The procurement process for the forthcoming Lorry Road User Charge (LRUC) marches inexorably on, but industry observers are becoming increasingly frustrated by a lack of clear guidance on how the scheme is intended to work and who's going to pay for it all. Robin Meczes tries to find out more

While the UK braces itself for the introduction of a national road user charge for all vehicles in ten to fifteen years' time, the forerunner to this scheme - the national lorry road user charge (LRUC) - moves ever closer.

The procurement process for the LRUC, intended to be introduced in 2008 for the UK's 420,000 heavy goods vehicles, has been under way for several months now, and an initial ten bidders have submitted proposals which LRUC has begun evaluating. Linda Swinburne, programme manager for the LRUC, recently confirmed that those selected to go on to the next, proof-of-solution phase of evaluation will be announced before Christmas, and final contracts are to be issued in the last quarter of 2005.

But despite the fact that LRUC is already waist-deep in the process of selecting the technology that will be used to make lorry road user charging a success, it still cannot tell us just how the scheme is to work.

Speaking at a recent conference on the subject organised by The Centre For Transport Policy, Swinburne acknowledged that LRUC had a "reference solution" against which the various bids would be judged, but stressed that the procurement prospectus contained only a list of output-based requirements. Despite popular misconception, she emphasised, no technological solution had yet been chosen, and in fact no decisions had been taken about the exact technological nature of the scheme.

The charge itself, Swinburne stressed, is designed to modernise taxation in the haulage industry, and will be linked to a fuel duty rebate for UK hauliers to ensure a level playing field between them and foreign hauliers operating domestically in the UK. But Swinburne declined to go into further detail of how the scheme is expected to work or how exactly it will be financed, except to say that some kind of onboard unit (OBU) is on the cards for frequent users of the scheme. "Our studies have shown this will make the charge easier to administer and more resistant to fraud, and will remove the regulatory and compliance burdens imposed by any manual scheme," she said.

Roundly critical

The Government's plans for a lorry road user charge were roundly criticised at the same conference, however, by David McClelland, research associate at the Logistics Research Centre of Heriot-Watt University.

The LRUC proposition, said McClelland, will necessarily be "several orders of magnitude" more complicated than the troubled German Maut, as it will eventually apply to all vehicles over 3.5 tonnes gross vehicle weight (whereas the German scheme applies only to vehicles over 12 tonnes), and will apply to all roads (the German scheme applies only to motorways).

The proposed system, he said, would be both expensive and complex to administer, even if it could be made to work. But that, said McClelland, was far from certain. "If we were going to buy a piece of technology, we would buy it from the Germans - and the Germans can't do this."

It will also cost far more to operate than it will raise, suggested McClelland. Figures produced by Heriot-Watt show that based on a collection cost of 24 per cent of anticipated total revenue, the annual cost of collection will be £797 million, while the income from the scheme - which will come only from foreign hauliers operating in the UK, as domestic hauliers will be given a rebate - will amount to no more than £140 million a year.

The infrastructure costs, meanwhile, are likely to far outstrip the purported figure of £4 billion over 10 years, added McClelland. And in the meantime, the cash flow implications for hauliers could be serious, if they have to pay the toll in advance of receiving any rebate. "I would suggest it's going to be a disastrous moment for the UK haulage industry," said McClelland.

Given that a sophisticated road user charge for all would soon be under development anyway, he suggested, it would be much better to delay current LRUC proposals and use a much simpler and less expensive interim solution. And it just so happens that McClelland has one, devised with his colleague at Heriot-Watt, Professor Alan McKinnon.

Under the Heriot-Watt alternative scheme, existing tachograph information would be used to establish the distances driven by foreign hauliers in the UK, with distances being checked at ports and charges levied accordingly, on the basis of factors like vehicle weight, number of axles, vehicle type and emissions levels.

Although all of Britain's 24 ports would need a range of new equipment to carry out such checks and charges, the total costs of hardware and software for such a system would come to under £2 million, according to McClelland. This is based on total hardware costs per port of £43,000 (for wireless routers, leased lines, wireless handheld PCs for drivers and port authorities, Internet kiosks, and so on); £150,000 for a central database and the necessary hardware; £100,000 for laptop computers for enforcement authorities; £250,000 a year for broadband connections; and an annual hardware and software maintenance cost of around £165,000. "The total cost comes to around £1.7 million," he said. "And that's the problem - it doesn't cost enough."

Asked if the use of readily available tachograph data had actually been considered as the basis for a distance-based charge on lorries, Swinburne of LRUC said she'd be surprised if some of the bidders for the scheme didn't come up with a solution that included doing just this.

Swinburne also revealed that LRUC has carried out a full internal review of the Heriot-Watt proposal - but she declined to share the findings of this review, and also refused to be drawn on whether the costings put forward for the alternative scheme added up.

"We are in the middle of the procurement process and it would be inappropriate to discuss costs. I have to say Alan McKinnon and his colleagues are entitled to their view and have some interesting ideas - most of which won't work. But I don't intend to get in to an argument about what will work and what won't," she said.

The questions they won't answer

m.logistics wasn't entirely satisfied with what Linda Swinburne of Customs and Excise had to say at the conference and approached LRUC at the invitation of one of its press officers shortly afterwards to see if we could get some answers to a number of the key questions - not least why the Heriot-Watt proposals "won't work," and how exactly LRUC envisages running this increasingly contentious scheme.

Unfortunately, by the time we did so, LRUC had entered the evaluation stage on the ten initial bids, and we were told Swinburne would be "locked up in rooms from dawn until dusk" every day until January, and could not grant us an interview until that time. A spokesman for LRUC, however, did prove willing to comment on some of the points we raised.

Sadly, this didn't include explaining Swinburne's suggestion that the Heriot-Watt proposals won't work. Given the ongoing procurement process it would be "inappropriate" to comment, he said.

Nor was he able to clarify who will pay for installation and maintenance of any onboard units - or indeed the communications costs involved in sending data in to the central database. "No decision has yet been taken," was the unreassuring response - which surely indicates those charges might conceivably still come the vehicle operator's way.

Whether vehicle operators will be given automatic and free access to the data about them generated by the scheme for their own fleet management purposes, or whether they might have to pay LRUC to get at it, also remains to be decided, he said.

Despite all this, the LRUC spokesman confirmed previous assurances that the scheme will be tax-neutral for the UK haulage sector as a whole, since anything the sector pays in road user charges will not exceed what it already pays in fuel duty. How vehicle excise duty (VED) will fit into the overall picture is not yet absolutely clear, he said, "but we're still talking about the overall tax burden."

Alarmingly, however, there is no commitment from LRUC on just how long this tax-neutrality will remain in place after the introduction of the charge. "That's the starting point - there's nothing more than that," confirmed our contact.

The spokesman was at least able to clear up the interesting issue of who will actually own the data generated by the scheme, however. "HM Customs and Excise (HMCE) will be responsible for the scheme and will own the data generated by the scheme," he said.

HMCE will also be free to provide that data to other enforcement agencies, he confirmed, as outlined in the original procurement prospectus, which called for the eventual solution to have "the capability to provide original data, where an assurance process is intended to confirm the validity of a charge calculation, where the enforcement process has identified a potential breach of LRUC obligations, or where required by other law enforcement agencies."

In theory, at least, this means the technology could be used to tip off the police or VOSA about speeding or drivers' hours offences. Our spokesman couldn't deny this but said that such information would only be supplied if it was asked for and that this wasn't the point of the charge. "LRUC is not there to look after those particular aspects of the world," he said.

Frankly, we're still not satisfied!