Darling speeds plans to introduce nationwide network of road tolls

Alistair Darling, the Secretary of State for Transport, wants to introduce a mass pilot scheme in one of the UK's large conburbations - possibly the West Midlands - within the next five years. This could pave the way for the introduction of a scheme covering the whole country on a much faster timetable than ministers had originally planned.

A feasibility study published last summer by the Department for Transport described the development of a national system as a "massive and complex task" and said it could not be in place until 2014 at the earliest.

Since then ministers have been heartened by a number of developments: first, the generally uncritical reaction to the idea; second, the successful, albeit delayed, introduction in Germany of a nationwide road-tolling scheme covering lorries; and third, the launch of a pilot scheme in the UK by the insurance company Norwich Union which uses the kind of technology needed for a nationwide system and is now being tested in 6,500 cars.

Last year's feasibility study estimated that a national road-pricing system, whereby motorists are charged according to the distance they drive, the roads they use and the time of day, would cost £3bn a year to operate but generate £9bn of annual revenues. These would replace car tax and fuel duty so that motorists would pay to drive, a bit like households with water meters paying according to their consumption.

But the main drive behind the idea is to cut congestion. The study calculated it would take only a 4 per cent reduction in traffic levels to cut urban congestion by a half, producing savings of up to £12bn a year. On present trends, traffic levels will increase by 25 per cent by 2010 and a further 10 per cent by 2025.

Stephen Joseph, the director of Transport 2000 and a member of the steering group which produced the feasibility study for the DfT, says there is no doubt about the political and commercial momentum building up behind the concept if the interest shown in it at this week's Labour conference in Brighton is any guide. "Alistair Darling is very serious about this and so are a number of very large companies who have realised there is big money to be made because of the size of the revenues," Mr Joseph said. "The Government has more or less convinced itself there is no alternative out there. All the intermodal studies show that you can build what infrastructure you like and expand public transport, but you won't solve the problem of congestion until you tackle the issue of demand management."

A senior figure involved in advising the Government added: "The official date that has been put into the public domain is 2014 but ministers and officials are beginning to realise there are good reasons why something could happen earlier."

The Norwich Union pilot, known as Pay As You Go, was launched a year ago with 5,000 motor insurance policyholders, and the company has since signed up 1,500 young drivers - the area of the market the scheme is aimed at because they are at greatest risk of accidents.

Each car is fitted with an IBM-designed black box wired into the battery and ignition system. Using GPS satellites, the black box records when and how far the car is driven and what road it is on. The data is fed back to a central computer at Norwich Union's headquarters using the Orange mobile phone network, enabling it to bill the policyholder each month according to usage.

Douglas Vallgren, the marketing manager for the Pay As You Go project, says: "The Government is looking across the whole of the industry to see what works and has spoken to us and we are sharing our knowledge. I wouldn't underestimate the work that would have to go into a nationwide system. To install 20 or so million cars will not happen overnight. But if the data collection is the same, there is no reason you couldn't use our system to pay your car insurance and your road tax depending on when you drive."

Advocates of road pricing believe it could be introduced in as little as five years. That would give manufacturers two years to perfect the technology and three years to roll it out, fitting new cars with the necessary black box when they go for their first MoT.

But even the enthusiasts admit there are big obstacles to overcome beyond the task of physically installing the equipment. The biggest is to win public support. Although the feasibility study calculated that charges might be as high as £1.34 for driving on the most congested roads at the busiest times of day, the vast majority of roads would cost a fraction of this, with the toll starting at 2.4p a mile. "The fact that is now costs nearly £1 a litre to fill up a car and a lot of that is fuel duty means that people in general may be more willing to look at other ways of paying to drive," one adviser said.

Privacy could also be a problem since the black boxes will be able to pinpoint where any car is at any time of day or night if it is being driven. However, a survey conducted in March last year as part of the feasibility study showed privacy was not an issue for 62 per cent of those polled. Norwich Union's Mr Vallgren says the data collected from its black boxes is encoded and would be meaningless to anyone who attempted to hack into it as it was being transmitted back.

Another issue DfT officials are grappling with is how to devise a "menu of tolls" so that drivers know how much their journey is going to cost before they set off. It is one thing filling up with a tank of petrol. It is quite another calculating what the tolls will be if the trip is not a usual one and involves using a variety of different types of road. Officials say that because the bulk of journeys involve commuting, drivers will quickly become familiar with how much their daily toll will be.

The next step will be to press ahead with the mass pilot scheme. The DfT wants to pick a large area which has a good demographics and an array of different roads - hence the speculation that it could be the West Midlands. Transport 2000's Mr Joseph says the pilot scheme will be more complicated to introduce than, say, the London congestion charge. The capital has the advantage of being run by one unitary transport authority headed by the Mayor Ken Livingstone. In other regions of the country the responsibility for transport is shared by a variety made of rural and metropolitan authorities and passenger transport executives. But if the scheme is to go nationwide, these are the kind of problems that need to be ironed out.

Perhaps the biggest obstacle to overcome will be to persuade the motorist that road tolls are not simply another "stealth tax" designed to make them pay for something hitherto regarded as "free". For this reason, Mr Darling may yet be tempted to steer clear of compulsion and instead go down the road of encouraging "early adopters" to have the black boxes fitted in return for a reduction in their fuel duty or road tax.

The problem with this is that the revenues generated will have to be large enough to cover the costs of operation. One idea now circulating in Whitehall for generating more income is to privatise the agency that will administer the system. First, however, Mr Darling has to convince the country that road pricing is the way forward.