Congestion Charging Where next?

1. Congestion ChargingWhere next? Stephen Glaister Professor of Transport and Infrastructure Imperial College London LSE 31 January 2005

3. The car is dominant – outside Central London

4. Traffic speeds in London 1968 - 2003

5. The three options • Tolerate the congestion • Build lots more road capacity • Road user charging – to reflect • congestion AND “environmental” damage

6. Infrastructure policy: Interlinked issues • : • Price • Funding Crowding/ delay/ service quality • Investment in capacity Better use of existing system Levels of subsidy & tax Case for new capacity Capital financing

7. You cannot set policy for any one of these in isolation from the others • If you hold urban metro fares below long term growth in real earnings…. • do not be surprised if you get • over-crowding, • declining reliability, • under investment • Road user charging: the attempt to introduce a proper set of incentives • (a) achieves a better use of existing assets • (b) provides a source of local revenues to fund infrastructure • (c) provides a meaningful long term capacity investment rule

8. London Congestion Charging: February 2003

9. CC area is a tiny part of London

15. Forecast scheme revenues and costs for 2003/04 (£ million)

16. Better pricing has improved quality of service • The London experience has been broadly as economists would anticipate • It has been fundamental in demonstrating to the public that • People do respond to price incentives • Higher charges can produce a better outcome • Road user charging can be made to work in a large urban area • Road user charging can be politically acceptable

17. It is a good solution in principle, but is national charging practical? • It does NOT necessarily mean charging more • Nb of every £0.80 for fuel, over £0.50 is tax • – or a charge for use of the system

18. Result of loading additional 22% demand onto 2000’s networkN. b. these are average effects Traffic increase % Speed reduction %

19. Road costs (pence per vehicle km) 1998 prices These are averages. Values vary by road type and urban density.

20. Environmental tax + congestion charging additional to current dutyExtra revenue £10 - £15 bn pa (in 2000 conditions: more in 2010) Speed increase % Traffic Reduction %

21. Some different policies: • The previous scenario assumed charges would be added to existing road taxes • It would be possible to rebate some, or all fuel duty and/or the tax disc • in order to balance the overall yield… • …. or to remove tax (over and above standard VAT) and replace it with “proper” road prices, as follows

22. Zero fuel taxes, environmental + congestion charges Low environmental costs (-£4bn) High environmental costs (+£5 bn) Traffic Change % Traffic change %

23. Rural road users are currently paying FAR too much, and peak time city users are paying too little. • On a “middling” view about environmental costs the total tax take “today” is about “right”… but it would have to increase as traffic grows. • Environmental costs can be dealt with by pricing (unless they are thought to be infinitely high!) • Road pricing could generate congestion benefits and environmental benefits without changing overall traffic by much. • It increases the economic value of the road assets by using them more efficiently

24. What might a practical scheme look like? • ALL THIS ASSUMES THE COSTS OF COLLECTION CAN BE IGNORED, WHICH THEY CANNOT. • Since congestion is very localised in time and space • the technology must have a moderate degree of discrimination • The London technology is very expensive • At least half of the revenue is consumed by the investment and administration costs • National road user charging only practical if investment and running costs can be made reasonable

25. Other issues: all depend on a clear statement of what the policy is • Administration, enforcement, propensity to offend, penalties • Privacy and human rights • Effects on business and commerce • What concessions? • Preferably very few exemptions • Residents should not be given too many concessions • Equity and “social inclusion” • Depends crucially on how revenues are used • (Imperial college for Independent Transport Commission is doing new research on this) • It is absolutely essential that there is clarity about what will happen to the net revenues

26. The effect on rail finances • It would cause transfer to rail in those markets where • rail is already strong • rail subsidies are low • there is little spare capacity • It would strengthen competition from roads where • rail is already weak • rail subsidies are very high • there is unused capacity • If roads were properly priced then the case for rail subsidies would be weakened: no congestion relief argument

27. To promise “better alternatives” or not? • It is often claimed that alternatives must be offered before road charging is introduced (e.g. better public transport) • This was the case for the central London CC Scheme • But central London is unique in its public transport density • Elsewhere it is generally INFEASIBLE • It is NOT NECESSARY to offer a genuine alternative • The case for charging is better use of existing system and better investment in existing system • It stands irrespective of whether alternatives can be provided

28. To promise “revenue neutral” or not? • Revenue neutrality would help reduce opposition from the road-user lobby • But it leaves no net revenue for complementary measures eg • Public transport improvements • Road capacity or better maintenance • NB the London scheme is not revenue neutral • Revenue neutrality might shift cash from urban to rural areas

29. Governance of roads • Which body would • set the charges? • collect the revenues? • make investment decisions? • carry the risks on those decisions? • Governance of the funds. Credibility is essential on: • Prudence and efficiency • Accountability • Transparency

30. What is the meaning of “a national scheme” • What are the respective roles of Whitehall and local government? • Local authorities already have the powers but have great difficulty using them. • There must be a degree of national compulsion • Yet local government knows its area and should set local transport policy. • Raises issues of devolution and local government finance – would adjustment be necessary?

31. The Future of Transport – Transport White Paper , July 2004

32. The London Congestion Charging: a chapter of accidents • 1986 Mrs Thatcher abolished GLC (Leader K. Livingstone) • 1997 New Labour: elected executive mayor for London Battle with Treasury won to allow hypothecation of CC revenues to transport in London area • 1998 Technical group to design a practical scheme (RoCOL, 2000)

33. 2000 K. Livingstone NOT made official Labour candidate for Mayor • Livingstone stands as an Independent. • Strong public support because of 1986 • Livingstone puts CC explicitly into Manifesto and elected • 2001-02 Formal public consultation • CC survives two attempts to stop it by Judicial Review because Mayor had an explicit mandate. • CC successfully introduced. • Livingstone proposes Western Extension • Livingstone re-elected • Kiley proposes alternative way forward

34. The main obstacles to proper road and rail user charging… • The real obstacles are not: • Acceptability of the principle • Finding a suitable technology • The obstacles are • Finding a trusted, politically accountable system of governance and administration of the funds. • National government clearly stating and then sticking to what the policy is. • The rest will follow if, but only if, these issues are resolved