Theory and Practice of Excise Taxation: Smoking, Drinking, Gambling, Polluting, and Driving

By Sijbren Cnossen | Go to book overview

Chapter 7 Road User and Congestion Charges

DAVID MICHAEL NEWBERY*University of Cambridge


7.1 INTRODUCTION

This chapter argues that roads should be treated as a regulated public utility, and road charges set accordingly to yield a stable and defensible revenue stream. An efficient structure of charges would confront road users with the marginal social cost of their decisions, but there are limits to the precision with which this can be done. Congestion externalities make up the larger part of the efficient road user charge, with road damage costs and externalities a relatively small part. Accident externalities are hard to measure, and could be small in comparison with other costs. Other environmental costs affect non-road-users as much as road users, and are therefore best dealt with by corrective taxes (and standards). If governments could set out and defend the total revenue to be collected for road use, and the environmental taxes, then it would be politically easier to move to a more efficient structure of road user charges, such as congestion or road pricing. The levels of road user charges dictated by the regulated public utility model are not inconsistent with an efficient set of road prices, provided that the level of road investment is set efficiently. The public utility model has the additional advantage that it is more likely to deliver efficient investment than current budgetary arrangements.

Road users require access to expensive road infrastructure and impose a variety of external costs on each other (congestion, accident risks) and on non-road-users (accident risks, pollution, noise, environmental degradation). They typically pay special excise duties on fuel and annual licence charges for the right to use highways. They may also pay special taxes on vehicle purchase, though these are less common now in developed countries. Increasingly, countries impose tolls for certain roads and bridges, often as the means to pay the private concession holder, while charges to enter congested urban areas have been introduced in Singapore, Norway, and other countries. Most of these are

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