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Customers, not governments, should determine the amounts and locations of road expansion.

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New research published recently by the Institute of Economic Affairs finds that the introduction of a voluntary pricing mechanism for road usage would have a sizeable impact on traffic and congestion.

In this new report, Moving the Road Sector into the Market Economy, leading transport economist Gabriel Roth highlights important lessons for UK policymakers in tackling chronic road congestion through the introduction of road pricing. The research calls for customers, not governments, to determine the amounts and locations of infrastructure expansion.

Roads are chronically underfunded

• 90% of passenger traffic and over 60% of freight movement is by road, compared to 8% and 10% by rail, respectively. Despite this, government spending on roads is just a third higher than on the railways.

• Britain’s roads have become the most crowded in Europe, with congestion costing around £20 billion a year in the UK.

Road development has been hamstrung by the government

• Road users are not getting the benefits of competition. Governments are all too easily swayed by political considerations, which do not take into account what is best for drivers.

• Despite a shortage of roads, suppliers are disincentivised from providing additional capacity because investment is constrained by government policy.

The research recommends:

• A focus on consumer demand

Private providers should be allowed to enter the market and compete on equal terms with government providers. Prices determined by supply and demand are crucial to allocate scarce road space and signal shortages, alleviating traffic congestion for road-users.

• Voluntary mileage-based tolls

Drivers who opt to use toll roads could receive an exemption from vehicle taxes. A voluntary system such as this could test road-users’ reactions and allow private firms to test out equipment and billing technology. The current operation of mobile phone networks could be replicated in achieving a system for road pricing.

• Tolled express lanes

Private road providers could build these where government roads are congested. If just 20% of drivers opted to use these, it would have a substantial impact on congestion. Many customers would be prepared to obtain quicker travel by paying more to drive on commercially provided roads.

• A step towards privatisation

Gradual and voluntary road pricing should be seen as a step towards much more widespread pricing on a system-wide basis, whereby tolls would be offset by an equivalent cut in Fuel Duty and Vehicle Excise Duty.

Commenting on the research, Dr Richard Wellings, Head of Transport at the Institute of Economic Affairs, said:

“For too long motorists have been used as a cash cow by successive governments which have received vast sums in fuel duty but have invested relatively small amounts in the road network. Moving the road sector into the market economy would mean higher investment, lower taxes, less congestion and a much better overall deal for road users.”

Mark Littlewood, Director General at the Institute of Economic Affairs, said:

"Rather than taxing motorists so heavily, we should encourage moves to a pay-as-you-go system of pricing. Imagine if, instead of paying directly for each purchase, we all paid for annual season tickets to our local supermarket and could then just help ourselves to whatever we wanted. The result would be gross inefficiency and even chaos. To keep our traffic flowing and to encourage the appropriate expansion of our transport network, we need road pricing to begin to replace upfront, one off taxes."

Notes to editors:

To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Communications Officer on 020 7799 8900 or 07766 221 268.

Moving the Road Sector into the Market Economy, by Gabriel Roth, is available to download here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.