Friday 24th Mar 2017 - RUC Magazine

A lost compromise

Case Studies

Prior to being scrapped, France’s Ecotax distance based truck toll was to be scaled back, reports Scott Wilson

As previously reported, the French Government had been committed to implementing a distance/size based heavy goods vehicle charge on all national highways (this excludes the extensive private and public corporation owned toll motorway network), using GPS technology, called Ecotax. As the name suggests, it was sold on the basis of improving the environment. However, the scheme was driven by a desire for net revenues from foreign trucks and to rebalance the use of the highway network, by reducing the attractiveness of the un-tolled national highways, which often run parallel (although over longer distances) to the tolled motorway network.

The politics behind the concept came under fire in late 2013, as the Hollande government faced protests on the eve of the system’s introduction. The laws and contracts for the system were committed under the previous Sarkozy government.

The main complaints grew from the trucking sector, who opposed additional charges, and from businesses in some more distant parts of France, notably Brittany, where parties argued it was discriminatory as they were “further away” from other parts of the country.

The calls from the trucking sector for opposing “more tax” are understandable, given no other taxes were being reduced to offset the Ecotax. Although, the French Government is keen to reduce the budget deficit, given it has not run a budgetary surplus for 40 years and public debt levels are becoming a significant burden. Yet to complain about paying by distance when you locate your business far away from suppliers or customers is almost comedic. Yes you will pay more, but you use more roads that need maintaining and renewing. Quite why choosing to live far away from where you want to go, or get things from, should be cross-subsidised by others, seems curious.

So the scheme was shelved, for a time.

Smaller scale truck toll

On 23rd June it was announced that Ecotax was to proceed, but on a smaller scale and simply be called a “truck toll”. According to Reuters, prime minister Manuel Valls said the new scheme would focus on the roads with the heaviest traffic and generate €550 million (US$748m) per annum, less than half of the €1.24 billion previously forecast.

It was due to start on 1st January 2015, following a three month testing period, changes to the law, and no doubt contracts with the suppliers.

What was lost?

The network to be tolled was reduced to only 4,000 km long, compared to the 15,000 km that was going to be tolled before. This comprised of 10,000 km of national highways and 5,000 km of secondary routes that would have been severely affected. This was a significant reduction in scale.

Very few highways to the west and the south were to be tolled, with the emphasis being entirely on state highways which have parallel tolled highways and heavy volumes of traffic. This represented a significant compromise. All but one road in Brittany would have been exempt. In other words, protest in France and politicians cave in.

“The Local” reported further changes, stating that charge levels could be €0.13 per km, whereas before the range was from €0.025 – €0.20 Euro per km.

Circus, agricultural and milk collection vehicles were also exempt from the scheme. The circus example is obviously some minor cultural exemption for little reason, but the agricultural lobby, which is a long standing campaigner for some of the most generous subsidies in the world, has won again.

Agricultural equipment being relocated short distances is one thing. It is another for a whole new category of freight vehicles to be exempt, for no other reason than the politics behind expecting one of France’s most mollycoddled sectors to be treated like everyone else.

Still, it would have been significant to introduce in the first place, and it makes sense in itself, although the argument that other taxes could have been reduced to offset it is a valid one. Diesel tax in France is €0.44 per litre, although EU law sets a floor that would only allow a reduction of around 17 per cent. The French Government is also desperate for more tax revenue, rather than rebalancing the tax system. Reducing tax on diesel would also potentially benefit cars with no new toll for them.

The net revenues were to be dedicated to new urban public transport projects, which of course doesn’t have a direct relationship with trucks on intercity highways, but is better than just adding money to general funds. Of course, not spending the money on roads is a good way of generating opposition.

What isn’t clear is how the amended scheme would have affected the contract with supplier Atlantia, which would still have sought payment for services, from a smaller revenue pool. It would have added to the net costs of the system relative to revenue.

I previously reported the costs as; €250 million per annum of operating costs with the remainder to recover the €600 million capital costs over the planned period of the concession. Those operating costs would not have dropped by 60 per cent in line with revenue. I suspect more like 30 per cent. And the capital costs would have changed little, given much of them have already been incurred. So it might have come to pass that 40 – 45 per cent of the revenue generated would have been spent on the costs of the system, rather than 20 to 25 per cent. That hardly looked like a great deal for anyone paying.

What did the changes mean?

The changes did not mean the technology does not work. It does not mean that it is not a good idea. It does mean that the biggest problem is the politics of adding a new charge on top of an industry that faces both taxes for owning trucks and high fuel duties.

Moreover, it means that unless you have addressed the politics and have the determination to go through with it, you’ll face losses of revenue in backtracking. This can result in compromises that unfairly target some less vocal groups against the more vocal, and indeed violent.

The result will be more traffic on tolled highways, a little less on the newly tolled state highways, a little revenue for the state, and probably a modest reduction in environmental impact.

What the Ecotax needed was a more convincing story around where the money would be spent, what rate the charges would be set at, and having some offset against other taxes. The compromise agreed in June was a smaller scale political fudge.

Scott Wilson is associate director, LeighFisher and writes a regular blog on road pricing: http://roadpricing.blogspot.com

Article taken from the November 2014 issue of RUC Magazine