A Treasury-commissioned report gave a stark warning today that the UK had no choice but to adopt widespread road-pricing as the only practical means to alleviate the growing problem of congestion.

The report by Sir Rod Eddington, the former British Airways chief executive, said that road-pricing schemes could cut congestion by half and produce economic benefits worth a total of £28 billion a year by 2025.

The alternative was a massive new programme of road-building or a gradual clogging-up of Britain's transport arteries that would damage its economic competitiveness.

Sir Rod said in his report: "Given the scale of the congestion challenge, I believe that there is no attractive alternative to road pricing. Without a widespread scheme by 2015, the UK will require very significantly more transport infrastructure.

"However, road pricing on this scale is new and at this stage has unknown implementation costs. There are very significant risks and uncertainties involved in delivering a pricing policy, particularly around the technology needed for its delivery. Potential technologies exist but have never been used at a national level."

The Australian businessman, who was personally commissioned to write the report by Gordon Brown, focuses on clear cost-benefit analysis and on the return on investment offered by particular transport schemes.

His analysis is that large-scale infrastructure projects and costly high-speed rail links are not the answer. The Government should instead focus on priority areas and smaller projects that "unblock pinch-points" in urban areas and can offer returns of between £5 to £10 for every pound invested.

The Eddington report examines the whole of Britain's transport system, which supports a "staggering" 61 billion journeys a year, and in broad terms is described as one of the world's most competitive.

On aviation, Sir Rod said the industry needed to be sustainable and one of the most effective ways of achieving that was "by ensuring that air travellers pay the full environmental costs of their journey".

He added, however, that provided economic analysis showed there was a net benefit from increased airport capacity, even once travellers paid the full environmental costs of their journeys, there remained "a strong economic case for a additional runway capacity".

Environmental groups welcomed the report - although with the predictable caveats.

Transport 2000 said that revenue from the increase in road-pricing suggested by Sir Rod should not be spent on building more roads but on improving public transport - especially the country's train network. "We will oppose funding going towards big new roads programmes," a spokesman said.

Sir Nicholas Stern, the economist who warned in an official report in October that global warming could shrink the world’s economy by 20 per cent, also backed the report, to which he contributed as an adviser.

He said: "I fully support the results of this study into the future of transport in the UK and its contribution to economic growth. The Eddington report highlights the importance of reflecting the external costs of transport in the price paid by users, whether this be for congestion or environmental impacts.

"This principle is strongly endorsed by the Stern Review. I congratulate Rod and team for their excellent work on this report."

But Alistair Carmichael, the Liberal Democrat transport spokesman, dismissed the report as "thin and outdated" and said that it did not take sufficient account of global warming.

"Sir Rod Eddington was asked for a 30-year strategy; he has given us a businessman’s analysis which might have been acceptable to more people a few months ago but since the Stern Report it looks a bit thin and outdated in its thinking," he said.

"Support for a road pricing scheme is welcome, but it is not enough to meet the green switch that is required."

Sir Rod said that, even with road pricing, there was "still a case" for additional road infrastructure but that this case beyond 2015 would be reduced substantially, by around 80 per cent.

He added: "What is clear from this analysis is that the economic case for transport is compelling but that there is no single answer to the UK’s long-term transport needs."

Sir Rod noted that, outside London, bus passenger numbers had been falling and fares rising. He said: "I therefore believe there is a strong case for strengthening competition in the bus market to ensure that it delivers in the interests of users."

Buses in London, where services are privatised but still regulated, have seen a big rise in passenger numbers. Buses outside London, in the rest of England, are deregulated and Sir Rod said today that he recommended changes to the regulation of the bus market to allow local bodies to co-operate more with bus operators.

Sir Rod said that it was already clear that some parts of the transport system were under "severe strain" and if left unchecked, 13 per cent of traffic would be subject to stop-start travel conditions by 2025. A 5 per cent reduction in journey time for all business travel on the roads could generate around £2.5 billion of cost savings.

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