The Financial Times’ Alphaville blog has noted that Uber London Ltd’s accounts filed at Companies House refer to discussions with HM Revenue and Customs about a potential liability for VAT at 20% on either gross bookings or the service fee that Uber charges drivers. This liability may depend on the outcome of a case that Uber is appealing to the Supreme Court to determine whether drivers are self-employed or are ‘workers’ with employment rights. The threshold for VAT liability is £81k a year, so individual drivers are unlikely to be liable. But if Uber is deemed to be an employer, the company would be liable, with potential backdating.

The VAT threshold means that there is not a level playing field for taxi type services. Self-employed drivers, such as the owner-driver of a London black cab, would be at an advantage over a ride-haling company that employed many drivers.

This piece was a guest blog in the newsletter of the Transport Knowledge Hub, a free resource aimed at providing local-decision makers with tools and information to make transport investment decisions which facilitate inclusive and sustainable economic growth.

In my new book, Driving Change: Travel in the Twenty-First Century, I assess the likely impact on travel behaviour of new transport technologies, in particular electric vehicles, digital platforms, digital navigation and autonomous vehicles.

Electric vehicles eliminate tailpipe emissions and so help improve urban air quality and mitigate global warming. Yet a change of propulsion does not change the basic characteristics of cars or buses.

Digital platforms help match supply and demand and have made possible online shopping, which has contributed to reduced numbers of shopping trips. Digital platform apps on mobile phones, exemplified by Uber, facilitate finding a ride-hailing taxi or a rental bike and are understandably very popular. They may tempt people away from buses, but they can also complement regular public transport by meeting the need for ‘last mile’ travel. When the Night Tube opened in London, the pattern of late-night Uber trips changed, from centre-to-home to suburban-station-to-home.

Digital platforms permit vehicle sharing by people travelling in the same direction. Some commentators see this as the answer to road traffic congestion, in that higher occupancy would allow travel demand to be met by fewer vehicles. However, congestion arises in locations where both population density are car ownership are high, so that there are more trips that might be made by car than the capacity of the road network permits. Some potential drivers are deterred by the prospect of unacceptable delays and make other choices – a different time, mode or destination of travel, or not to travel at all. Congestion is therefore generally self-limiting, in that if traffic builds up, delays increase and more road users are deterred. Conversely, measures to reduce traffic tend to have little impact on congestion because the initial reduction in delays then releases previously suppressed trips. So increased vehicle occupancy is unlikely to make much impact on congestion.

Digital navigation devices, such as Google Maps or Waze, offer optimum routing that takes account of congestion. They also predict journey times in advance, which is the best means we have to mitigate the impact of congestion, given that what bothers people most is the uncertainty of how long a trip will take in congested traffic.

Autonomous vehicles – driverless cars – are attracting enormous interest and investment, both by established auto industry businesses and new entrant tech companies. As yet, there is only very limited evidence of impact from pilot trials and simulation studies.

The main historic transport innovations have allowed faster travel and so a step change in access to desired destinations and services – the railway in the nineteenth century, the car in the twentieth, the modern bicycle in its heyday before the mass market car, and motorised two-wheelers today in low-income countries. Similarly, a series of electronic and digital innovations have permitted a step change in virtual access to people and services – the telegraph, telephone, radio, television, internet, broadband, smart phone, social media. All these innovations have stimulated huge investment, rewarded by the returns from increased access.

In contrast, the new transport technologies seem unlikely to lead to any significant increase in speed of travel. They will therefore not be transformational. Rather, they offer incremental improvement to the quality of journeys and possibly some cost reduction.

Public transport is benefiting from digital technologies for travel information and payment. On the railway, digitised signalling and train control permits shorter headways and hence increase capacity of existing track. For buses, the main constraint is the difficulty of creating segregated routes in dense urban spaces. Nevertheless, there are opportunities for public authorities to encourage technological innovation that aligns with their strategic objectives for movement and place making.

 

 

 

 

 

 

A noteworthy report from bank BNP Paribas, summarised in the Financial Times, compares the energy return on a $100bn outlay on oil and renewables where the energy is being used specifically to power electric vehicles. The  analysis indicates that new wind and solar-energy projects in tandem with battery EVs will produce 6x-7x more useful energy at the wheels than will oil at $60/bbl for gasoline-powered cars and vans, and 3x-4x more than will oil at $60/bbl for those running on diesel. The conclusion is that oil cannot compete with renewables when viewed over the investment cycle unless oil prices are below $20/bbl, which would make oil investment unattractive. This is before taking credit for eliminating tailpipe emissions of carbon and noxious pollutants.

The report’s conclusion is striking – the death toll for petrol. With 36% of demand for crude oil today accounted for by cars/vans and other vehicle categories susceptible to electrification, the oil industry has never before in its history faced the kind of threat that renewable electricity in tandem with EVs poses to its business model: a competing energy source that (i) has a short-run marginal cost of zero, (ii) is much cleaner environmentally, (iii) is much easier to transport, and (iv) could readily replace up to 40% of global oil demand if it had the necessary scale. The conclusion is that the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors.

In the short run, however, the huge existing investment in oil supply makes this source competitive with renewables/EVs that require substantial infrastructure investment to bring forward new supply.

An interesting report, from a new organisation called Transport for New Homes, examines a number of greenfield housing developments in Britain, criticising most of them for generating excessive car dependence. This is in part due to location away from existing centres, and in part to disregard of public transport possibilities in the planning process. Generally, the arguments are well made. However, what is missing is survey evidence of the experiences and attitudes of occupants of these new houses. The BBC reports a couple of anecdotal examples of dissatisfaction of residents. Yet these may not be typical since those whose choose to live in such housing may prefer the car to the public transport, walking and cycling alternatives. After all, car dependent lifestyles are adopted by choice by many residents of cities where alternatives exist.

The developers of new greenfield housing construct new properties to sell, which they of course do, reflecting the need for new housing and the preferences of many for location away from traditional urban centres. The lack of public transport provision tends to arise from the relatively small scale of developments, in a context in which bus use is generally on the decline. The report discusses some developments of new urban quarters in the Netherlands, where the scale and location adjacent to existing towns means that good public transport provision is feasible. One example, Almere, is a planned city built on land reclaimed from the sea, which makes large scale development possible. In Britain, assembling land on that scale has not been attempted since the post-War new towns.

It would be worth considering innovative approaches to transport provision for greenfield housing developments, for instance as in Pinellas County, Florida, where residents can use a subsidised Uber service to reach the core bus routes – known as ‘micro-transit’.

A recent transport innovation with potentially a big impact is the dockless bike – for hire in urban areas but not linked to a permanent location or installed by or with permission of the local transport authority. Dockless bikes are linked instead to an app on the mobile phone, which allows payment for use, and are installed by entrepreneurs who see a business oportunity.

Dockless bikes have made a striking impact in China, with large numbers flooding the market and huge surpluses piling up – literally, as recent photojournalism in The Atlantic magazine vividly illustrates. Presumably, economic considerations will restore a balance between supply and demand in due course.

A witty follow up article in Slate shows pictures of extensive arrays of dockless vehicles in the US – in this case parked cars.

Another stage on the long-running saga of expanding the capacity of London’s Heathrow Airport is marked by publication of a report from the House of Commons Transport Committee. This considers the Government’s Airports National Policy Statement, which endorses the proposal for a third runway at Heathrow. The Committee goes along with this, subject to quite a number of caveats about environmental impacts and costs.

What struck me were the weakness of the case for a third runway (the Northwest Runway, NWR), as revealed by the Committee’s findings:

Figure 3 on p17 shows that the main impact of the runway would be to increase the numbers of leisure travellers and international transfer passenger. The extra numbers of business travelers are very small, yet the case for the runway is mainly based on the needs of the UK economy.

‘The benefits and costs the NWR scheme are finely balanced. Even small changes in assumptions or methodology could mean that the monetised costs of expansion via a NWR would outweigh the benefits.’ (p19)

While Heathrow is ‘full’ in respect of aircraft movements and landing/takeoff slots, it is not yet full in terms of passenger throughput since each plane is on average only 76% full and is not always an  aircraft with the highest capacity (p40). Luton and Stansted have the equivalent of around one third of a runway to spare through to 2050. This means that passenger throughput for the London airports is forecast to rise by 27% out to 2050 without expansion at Heathrow (p42)

The forecasts  show that an expanded Heathrow would accommodate more than three times more outbound passengers than inbound passengers (p48), a net economic deficit to the UK.

The NWR scheme would only offer only one new destination to emerging and fast-growing economies when compared with no expansion by 2050 (p49).

Airport charges at Heathrow are the highest in the world (p82). Could a further runway be financed without increasing charges, which would erode the economic benefits and deter use?

Assessment

I am struck by the weaknesses in the case for building another runway at Heathrow. A key question for the future will be the ability of the airport to finance construction from private sector investors at a cost – both construction and financing – which the airlines and their passengers will be willing to pay via landing charges. The proposal may achieve planning consent but could prove to be commercially unviable.

Professor Anne Graham and I submitted evidence to the Transport Committee, which argued that the market for air may be more mature than generally supposed, and hence demand growth may be less than projected, with consequences for the business case.

 

The Transport Committee of the London Assembly has published a report on future transport technologies in London, covering Connected and Autonomous Vehicles, App-based services (Uber and dockless bikes) and drones. This is a useful review of the prospects for these technologies, which draws attention to aspects of governance and regulation where the existing framework is inadequate for innovative technologies.

I was recently involved, as a member of an expert Panel, in a study, Older Canadians on the Move, carried out by the Council of Canadian Academies. This had been commissioned by the Federal Government and focused on measures that might be taken to improve the mobility of older citizens primarily for longer distance travel, local travel being the responsibility of lower tiers of government. Nevertheless, we did recognise that longer trips started locally and so were concerned with door-through-door journeys.

The Panel identified three pathways to help facilitate door-through-door journeys for older adults and improve the inclusivity of the Canadian transportation system: advancing human and social resources; advancing technology and infrastructure; and advancing policy. Each pathway has an important research and development and innovation component, whether it be through the development of new technologies or the testing and implementation of research-driven solutions in real-world settings.

I have also contributed a chapter to a book edited by Charles Musselwhite on Transport, Travel and Later Life, on the topic Future Transport Technologies for an Ageing Society: Practice and Policy. Let me know if you would like to see this.

The National Infrastructure Commission has been consulting on the intended National Infrastructure Assessment. One question concerns what changes to the design and use of the road would be needed to maximise the opportunities from connected and autonomous vehicles on both urban and inter-urban roads; and how could these changes be brought about.

Autonomous vehicles (AVs) are being developed by established car manufacturers and new technology companies. It seems unlikely that there will be much impact on road use until they become fully driverless, when there will be two main consequences.

First, for shared use vehicles such as taxis, the cost of the driver will be eliminated. This will open opportunities for services in the current gap between high capacity, low fare public transport and low capacity, high fare taxis. A variety of door-to-door mobility services using cars or minibuses will draw people from conventional public transport but also lessen the attractions of individual car ownership in urban areas.

Second, individually owned AVs will be capable of travelling unoccupied, for instance returning to base after dropping a passenger, or ‘parking on the move’ by circling the block while the owner is doing business. Such unoccupied trips would add to traffic and may need to be regulated in areas prone to congestion, to give priority to occupied vehicles.

As regards the impact of AVs on the capacity of the road network, the above consequences would be expected to increase demand and thus congestion. The question then is the scope for increasing capacity through connected autonomous vehicles (CAVs) operating with shorter headways, with or without drivers available for some tasks.

Trials are planned of platoons of freight vehicles, the main benefit being fuel saving from reduced air resistance. There will be drivers for each vehicle who will be trained and required to operate with a very short headway. However, the generality of drivers of AVs will be able to choose the gap to the vehicle in front. It is not clear why, without an incentive, they would choose a gap smaller than that with which they are comfortable, which may not be much different from current headways.

Accordingly, to increase road capacity by reducing headway there would need to be some incentive that would impact on individual drivers. This might be a road user charging regime that charged on the basis of the length of carriageway effectively occupied. However, drivers willing to ‘tailgate’ would pay less than those of a more cautious disposition, which would raise a question of public acceptability.

Another kind of incentive to reduce headway would be dedicated lanes that are less congested and faster flowing than other lanes, analogous to High Occupancy Vehicle lanes on US freeways. Short headways would need to be enforced. A faster lane for CAVs would need to be the outer lane, requiring vehicles to manoeuvre prior to leaving at a junction.

There would need to be acceptable incentives for drivers to reduce headways if manufacturers are to go beyond equipping vehicles with the existing adaptive cruise control. Manufacturers will be responsible for the safe functioning of AVs. Adding vehicle-to-vehicle or vehicle-to-infrastructure connectivity to reduce headway would exacerbate this responsibility by introducing functionality that depends on that of other manufacturers and suppliers and that increases the risk of security breaches.

More generally, connected vehicles operating at short headways would require reconsideration of the safety regime, which at present is concerned with the performance of individual vehicles, having regard to the nature of typical crashes. A system of connected vehicles would require consideration of fault modes at system level, for instance the consequences of faults in individual vehicles in a platoon and of faults in connectivity. It would not be surprising if there were trade-offs between headway and safety that limited the possible increase in capacity.

The Strategic Road Network (SRN) of motorways and major interurban roads is a mature system, with investment aimed mainly at increasing capacity by utilising hard shoulders as running lanes, plus junction modifications. Few wholly new routes of any length are planned. Mixed traffic will be the norm for many years to come. Distances between junctions are relatively short, compared with other countries. Space is scarce for forming up platoons of freight vehicles. So the SRN is not obviously well suited to pioneering short headway CAV operation, despite the Government’s enthusiasm.

Likewise, Britain’s urban roads substantially reflect historic street patterns, unlike more recent US gridiron layouts (of which Milton Keynes is a rare UK example). Narrow inner suburban streets with on-street parking are likely to prove awkward for driverless taxis, which would inhibit their general use.

Road traffic congestion arises mainly in or near areas of high population density and high car ownership, such that many potential car trips are deterred by the prospect of unacceptable time delays. Were capacity to be increased by connected vehicles operating with shorter headways, more car commuting would result, with more vehicles entering cities – not a desirable outcome given that car use is declining in successful cities. Increasing road capacity through vehicles operating at shorter headways is not fundamentally different from increasing capacity by adding carriageway. Through neither approach can we build or manage our way out of congestion.

Altogether, it does not seem a high priority for Britain to attempt to be an early adopter of connected vehicle technology. We should evaluate developments elsewhere, aiming to be a fast follower if there were to emerge benefits that could be gained under our conditions. On the other hand, there are good reasons to press forward with electric propulsion and digital technologies, including road user charging, where UK geography and institutions provide a favourable context.

The National Infrastructure Commission has now announced a competition with up to £200,000 available for ideas to change road design, management and use, to maximise the benefits of connected and autonomous vehicles. I will be interested to see if any proposals that result lead me to revise my somewhat pessimistic judgement.

Uber’s buccaneering entry into regulated taxi markets in many cities prompts questions about the purpose of regulation and who benefits. While there is little academic literature on the topic, a 2016 paper* by Harding, Kandlikar and Gulati, focused on North American taxi markets, is illuminating. It is argued that the case for regulation is based on the view that the taxi market suffers from three problems: ‘credence good’, open access and thin market:

  • A credence good is a good or service whose quality cannot be determined by the consumer until after it has been consumed. Questions about reliability of a taxi service may deter users who may be concerned about excess charges or a poor quality vehicle. Regulation that sets standards for quality and price overcomes such market failure.
  • Open access to the market may attract large numbers of new entrants on account of low costs of entry. Given limited demand in the locality, earnings of drivers would fall, increasing the incentive to illegitimate charging and poor vehicle maintenance.
  • A thin market has a small number of buyers and sellers, which reduces the chances of matching supply and demand. The taxi market is thin in that it is geographically dispersed. Regulation of fares prevents exploitation of users when demand exceeds supply.

The entry of Uber and similar ride hailing platforms impacts the taxi market in a number of ways:

  • Barriers to entry for drivers are lowered, and users are attracted, shifting a thin market to a thick one.
  • Fares flex according to demand but are specified before the trip is undertaken. Surge pricing attracts drivers to meet peaks of demand.
  • Quality rating of both drivers and passengers, plus predictable fares, helps ensure consistent standards of service.

Thus the platforms address the shortcomings of traditional taxi markets that have justified regulation, effectively removing two of the rationales for taxi regulation, and largely mitigating the third (open access), Nevertheless, the implications of competition between platforms are as yet unclear. Competition could lead to instability on both supply and demand sides, which could result in collusion by platforms, to the disadvantage of drivers and passengers; while lack of competition may result in monopolistic pricing.

The paper concludes that regulators should allow the ride hailing market to grow and focus on the possibilities of future monopoly and of collusion between platforms.

*Taxi apps, regulation, and the market for taxi journeys. Transportation Research Part A: Policy and Practice, 88, 15-25, 2016.