Road charging: what will it mean for your business?

There has been an increasing amount of speculation - supported by proposals put forward by the Secretary of State for Transport, Alistair Darling, today - that the road tax regime will in the future be replaced by a system of 'pay as you drive' road charging.

Whilst these proposals are still at an early stage, and in any event are not planned to come fully into effect for the next 10-15 years, they will begin to shape the way private individuals and businesses think about road usage.

Businesses could forgive themselves for feeling specifically targeted by the new proposals relating to car drivers.

In the past five years, congestion charging has been introduced in central London and has been mooted in a number of other cities including Bristol, Cambridge and Liverpool. Employers have found themselves facing difficult decisions about whether to meet rising costs faced by their employees by subsidising travel, and have faced increased administration in dealing with the charges and fines incurred by drivers at work.

The Workplace Law Network has reported widely on a number of other proposed transport initiatives which would impact directly on business. Proposals to introduce a 'parking levy' would see the employer effectively paying a tax on the number of parking spaces provided to employees. Proposals designed to encourage businesses to set up environmentally friendly transport schemes include encouraging employees to use public transport, incentivising car share schemes, and providing secure lock-ups for bicycles.

Businesses do not always find it easy to successfully implement such schemes. Boots, one of Nottingham's largest companies, has been highlighted by the Government in several reports as leading the way in green transport initiatives, including a bus service for staff and promotions for cycling to work and car sharing. But despite investing in a diversified transport plan to reduce car usage the firm still faced additional costs for the thousands of parking spaces needed after it merged operations at an out-of-town business park.

The authorities have begun to crack down much more severely on the health and safety implications of car driving, taking a firmer view of accidents that take place as part of a worker's employment. A ban on the use of hand-held mobile phones was introduced in 2003, potentially making an employer jointly liable in the event of a work-related accident involving the illegal use of phones. Many businesses have failed to understand their responsibilities: to check driver documentation; to provide driver training; to inspect vehicles regularly (whether provided by the business or privately owned); and to assist in journey planning.  And under a review of the way workplace injuries are reported, companies may be required in future to provide details of how many of their drivers have been involved in motoring accidents.

The latest proposals on road charging could see the introduction of metered usage costs ranging from 2p per mile up to £1.34 per mile, calculated using GPS tracking software fitted in the vehicle. The proposals are likely to have an impact on employers in two areas: their employees' journey to work (commuting); and at-work driving.

Commuting

The road charging regime is intended to cut car journeys during peak times by introducing a financial disincentive to travel during the rush hour. Employers are likely to face similar issues to the problems posed by the parking levy: if your employees have to pay more, are you going to have to increase their salary in order to keep them (in effect, by subsidising the charges)? If driving to work during rush hour is not financially viable, what are you going to do about it? And what is the Government going to do about it? The Department for Transport in its White Paper from 2004 says it is considering options on introducing car-pooling lanes (similar to bus lanes) which give priority to high-occupancy vehicles, and that it is increasing investment in transport diversity by 4.5% a year over the next three years.

However the problem of transport is addressed, businesses will certainly need to become more flexible, and will undoubtedly face additional costs in time and money investing in solutions.

Local authorities are likely to be encouraging employers to produce workplace travel plans, aimed at reducing car use for travel to and from work and travel for business. Model studies suggest that such travel plans can reduce commuter car driving from 10%-30% at a cost to the local authority of £2-£4 per head. Even the smallest and most environmentally friendly changes don't come cheap, however: in the DfT's own Green Travel Plan guide issued in 2002, the costs for supporting a cycling scheme are calculated as follows:

- 10 lockers: £300-£1,000
- two sets of shower and changing facilities: £3,000-£8,000
- area of lockable parking: £3,000-£8,000

The introduction of more flexible start and finish times for workers can result in diluting congestion during peak hours to spread the volume of traffic over a longer period. However, experience from the London congestion charge scheme suggests that start times would have to be varied greatly to make a difference: changing from a 9am to an 8am start is likely to make little impact. While detailed proposals are unavailable, it is fair to speculate that peak charging times will be in place from 7am.

New work practices might also play a part, for example using IT solutions to help staff work from home, cutting the need for travel to and from work either selectively or entirely.

At-work driving

For companies that require employees to drive as part of their job, the introduction of charges is likely to make them rethink the way the business operates. Road haulage and delivery drivers will still be needed. However, much of the work involving sales or client-facing meetings might prove expensive when the costs are logged directly against the activity, making a move to video-conferencing and alternative forms of communication more likely.

The Government might argue, with some justification that businesses are currently paying the cost of gridlock through unreliable distribution patterns, incomplete journeys, and delays caused by accidents and congestion. To many businesses, however, this is a hidden cost which is tremendously difficult to calculate, whereas the introduction of direct charges will have to be met out of the company's cash flow. This, and the fact that some businesses are far greater car users than private individuals, could see the shift from fixed taxation based on ownership (under the current regime) to a 'pay as you drive' scheme costing them a good deal of money.

The Government is resolute that change must come. Employers would be well advised to start doing their sums now, so that the impact of that change on the shape and financial performance of the business can be planned in advance.

A feature on this subject will be included in the September issue of Workplace Law Magazine, due out on 15 August. more info»