Why Freight Exchange Platform Members Should Embrace Dynamic Road Pricing

Why Freight Exchange Platform Members Should Embrace Dynamic Road Pricing

Do you rely on the road for a living? If so, you probably contribute thousands of pounds each year to their upkeep. But as a tax payer, are you getting value for money? Let me illustrate my point by providing you with an example, albeit a fictional one, but a user case which is based on real world feedback from Courier Exchange members.

Scraping the stubborn layer of ice from your windscreen on a crisp February morning, John remembers the small dent on his screen which was caused when a small stone leapt up from the poorly maintained ‘A ‘road and hit the windshield. He knows that if the chip is not repaired quickly, it will become a crack, which could shatter the whole glass screen, meaning more time off the road and a greater squeeze on profits.

As he drives to his first pick-up, John begins to focus on the bigger picture. Anecdotally at least, it appears that the roads that make up his delivery route are deteriorating. There seem to be more potholes, more loose chippings and greater volumes of traffic than a decade ago.

The poor state of the local roads is having an adverse effect on John’s business, as the constant gridlock is reducing the number of journeys he can make each day. As an owner operator, with extremely tight margins, John decides to take decisive action. He joins a freight exchange platform. Over time, it helps to raise productivity and increases profit levels by consolidating loads and reducing dead mileage.

But it also makes him think about the vehicle excise duty, the road user levies and the taxes on fuel which traditionally fund the roads that he uses every day. Where is the cash going? Is the existing model, which has been in place since the 1920s, fit for purpose? And if the UK government replaced it with dynamic road pricing would freight exchange members – many whom are part of the SME community – be any better off?

A better way…

These are all questions which the Association for Consultancy and Engineering (ACE) has been wrestling with for the last four years and many of the answers can be found in a ground breaking report entitled ‘Funding for roads for the future’ which suggests that the government should introduce dynamic road pricing from 2030 onwards.

Dr Julian Francis, who is ACE’s Director of Policy, and one of the authors of the study, explains why the current taxation model will not deliver the sustainable and productive road network that commercial logistics operators and their customers deserve.

dynamic road pricing edited

Julian Francis, ACE’s Director of Policy

Of Britain’s crumbling road network, which carries more freight per kilometre than any country in Europe, Francis says, “It is something of a perfect storm for those designing, building and operating Britain’s roads. Government has not spent enough in our national road network in the last forty years. In 2011, for example, investment was only 75 per cent of what it was in 1975.

Dr Francis, who was head of Public Affairs for the London Taxi Company before joining ACE three and half years ago, says that a further hole in the government’s revenue stream could come from the mass take-up of electric vehicles.

He says, “With zero emission vehicles set to be commonplace by 2040, the government will lose a vast chunk of taxes raised by vehicle excise duty.”

Finally, he points to the fact that infrastructure has not kept pace with Britain’s rising population.

“The UK population has increased by seven million people, while the UK economy has grown by 225 percent. But the strategic road network on these islands has not expanded at the same level. Therefore, when couriers and hauliers report that there is more traffic on the roads and the network is in decline, they are right.”

With government figures forecasting that traffic levels set to increase by 55 per cent by 2040 and congestion on the UK’s strategic road network costing the country £10 billion each year, clearly something has to change [i]. But surely dynamic road pricing, which charges more or less depending on the time of travel, the number of vehicles on the road, and, most critically, the amount of miles travelled, will have an adverse effect on freight exchange platform members?

Exploding the myth that dynamic road pricing will cost the haulier more…

“It may seem illogical, and counter-intuitive, but actually the opposite is true,” says Dr Francis. “Dynamic road pricing actually levels the playing field. For example, if you were to compare a large commercial fleet operator to a white van man who owns and operates his own vehicle, for instance, over the course of a year, not only does he travel far fewer miles than the 3PL’s combined fleet, but he fills up his van at his local fuel court. In contrast, the larger entity, because of its size, enjoys reduced diesel costs. This means that it is able to run its vans more cheaply, and therefore, has a competitive advantage over the smaller player. If fuel duty was abolished and replaced by dynamic road pricing, it would mean there would be parity between the operator with 50 trucks and the sole trader with just one.”

But wouldn’t the current paradigm still generate a lower burden of taxes than a ‘pay as you drive’ model for freelance drivers belonging to freight exchanges, who travel hundreds of thousands of miles each year to make their deliveries?

“The government cannot have its cake and eat it. Therefore, if it does decide to impose dynamic road pricing, it can’t then demand taxes from fuel duty, VED or the HGV levy. Therefore, in theory at least, as we do not have an accurate timeline as to when zero emission vehicles will start to dominate, fuel duties would no longer exist, and VED could be much lower.”

Data: a tipping point for dynamic road pricing…

For Dr Francis, however, it is the big data and the technology that enables and surrounds it that holds the key to dynamic road pricing.

“As we move to an age of big data, quantum computing will enable us to process information faster, while Blockchain and AI will allow us do more with that data. Therefore, in theory, if transport data specialists, including innovative freight exchange platforms, were to adopt a collaborative approach, they could gather and harmonise floating data streams from vehicles, from roadside infrastructure and from goods. And with vehicle manufactures collecting much of this data already, the task of collaborative logistics providers, that are able to utilise this data effectively, may become easier in the future.”

But how would this data prove a game changer government’s dynamic road pricing model? Continues Dr Francis, “Having access to the information would not only create more visibility in the supply chain, but would take this paradigm to a whole new level. Why? Because effectively, it would enable regulators to take into account a range of factors including a driver’s financial situation to determine how much he or she should pay to use the road. Moreover, it would allow for real-time road pricing which could be directed seamlessly and easily into government coffers through smart contracts via the blockchain.”

Francis believes that data-centric collaborative logistics platforms could one day provide many of these next-generation services for their members.

“I want to be clear. I don’t wish to overplay the role of freight exchanges – and it may be blue-sky thinking – but in the future a data-savvy Exchange with a large virtual fleet could provide members with ‘a load consolidation passport’. For this to happen, it would mean creating enhanced data that would provide total visibility surrounding every container that is loaded and unloaded. This would allow regulators, in theory at least, to reward fleets whose trucks are always fully loaded with lower road pricing tariffs.”

And could the data emanating from freight exchanges, which really provide a microcosm of the overall UK freight picture, help local authorities to realise another one of ACE’s recommendation – to develop a sustainable revenue stream for local road infrastructure investment?

“Again, I don’t wish to overstate the part that freight exchanges will play in this respect, but certainly by analysing a myriad of aggregated data sets over a number of years, they might, in addition to other research, enable councils to spot anomalies and trends which they could take into account when deciding whether or not to increase or decrease road pricing on local roads.”

[i] The Association for Consultancy and Engineering (ACE)

Funding roads for the future

Creating a more productive and sustainable road network in England

Date of publication: January, 2018-02-01 https://www.acenet.co.uk/Documents/Files/ACE%20Funding%20Roads%20for%20the%20Future.pdf

All statistics taken from the ‘Funding roads for the future’ report.

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