Imperial College London 1 Centre for Transport Studies Congestion Charging Where next? Stephen Glaister Professor of Transport and Infrastructure Imperial College London LSE 31 January 2005

Imperial College London 3 Centre for Transport Studies The car is dominant – outside Central London

Imperial College London 4 Centre for Transport Studies Traffic speeds in London

Imperial College London 5 Centre for Transport Studies The three options Tolerate the congestion Build lots more road capacity Road user charging – to reflect congestion AND“environmental” damage

Imperial College London 6 Centre for Transport Studies Infrastructure policy: Interlinked issues : Price Funding Crowding/ delay/ service quality Investment in capacity Case for new capacity Better use of existing system Levels of subsidy & tax Capital financing

Imperial College London 7 Centre for Transport Studies 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

Imperial College London 8 Centre for Transport Studies London Congestion Charging: February 2003

Imperial College London 9 Centre for Transport Studies CC area is a tiny part of London

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Imperial College London 15 Centre for Transport Studies Forecast scheme revenues and costs for 2003/04 (£ million)

Imperial College London 16 Centre for Transport Studies 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

Imperial College London 17 Centre for Transport Studies 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

Imperial College London 18 Centre for Transport Studies Result of loading additional 22% demand onto 2000’s network N. b. these are average effects Speed reduction % Traffic increase %

Imperial College London 19 Centre for Transport Studies Road costs (pence per vehicle km) 1998 prices These are averages. Values vary by road type and urban density.

Imperial College London 20 Centre for Transport Studies Environmental tax + congestion charging additional to current duty Extra revenue £10 - £15 bn pa (in 2000 conditions: more in 2010) Traffic Reduction % Speed increase %

Imperial College London 21 Centre for Transport Studies 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

Imperial College London 22 Centre for Transport Studies Zero fuel taxes, environmental + congestion charges Low environmental costs (-£4bn) High environmental costs (+£5 bn) Traffic change % Traffic Change %

Imperial College London 23 Centre for Transport Studies 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

Imperial College London 24 Centre for Transport Studies 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

Imperial College London 25 Centre for Transport Studies 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

Imperial College London 26 Centre for Transport Studies 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

Imperial College London 27 Centre for Transport Studies 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

Imperial College London 28 Centre for Transport Studies 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

Imperial College London 29 Centre for Transport Studies 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

Imperial College London 30 Centre for Transport Studies 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?

Imperial College London 31 Centre for Transport Studies The Future of Transport – Transport White Paper, July 2004

Imperial College London 32 Centre for Transport Studies 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)

Imperial College London 33 Centre for Transport Studies 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 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 2004 Livingstone re-elected 2005 Kiley proposes alternative way forward

Imperial College London 34 Centre for Transport Studies 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