Cordon Blues?

Envy the lucky travelers of London. As you may know, in 2003 the city imposed a congestion toll of £5 (later raised to £8) on all vehicles entering the central district. In 2007, Transport for London, a government agency, did a cost-benefit analysis of the impacts (find the full report here).

It found the following about costs per year to travelers in the central district:

  • Individuals and business travelers pay about £236 million in tolls.
  • Some trips to the area are canceled, costing would-have-been drivers the equivalent of about £31 million.
  • It costs motorists and firms £19 million to comply with the system.
  • Total burden on travelers: £286 million.

And now the benefits to travelers:

  • Drivers (individuals and businesses) reap benefits from saved time and improved travel reliability of about £260 million.
  • Drivers save £28 million in vehicle operating costs.
  • Bus riders save about £43 million worth of time.

This adds up to £331 million in savings. Please note that even the driving public (who, after all, pay the tolls) come out slightly better than if the tolls did not exist.

Even if the considerable benefits to bus riders are ignored, and even if all the revenue were tossed onto a giant bonfire (or, even worse, sent off to the EU to subsidize French farmers), auto travelers win out or, at the very least, are no worse off.

But the money does not disappear; government nets a profit of £47 million (after excluding items like operating costs, infrastructure expenditures, and lost tax and parking revenue). Obviously, this money can be used for many worthy causes, transportation-related and otherwise. And there are other social benefits: reduced accidents and pollution are worth about £17 million.

This study isn’t perfect; it excludes changes in the business climate for stores and other firms within the cordon. And after all, it was performed by Transport for London, which is hardly a disinterested party. But the numbers are probably in the ballpark, and they indicate that cordon pricing for the central area nets society about £99 million per year in total benefit.

The reaction of the British public to this win/win/win situation has been vigorous and spirited:

  • Eighty percent of Manchester voters recently voted no on a cordon pricing proposal, a level of unpopularity among Mancunians that even the Liverpool football club would find hard to match.
  • In 2005, 75 percent of Edinburgh voters rejected a cordon charge.
  • London Mayor Boris Johnson recently conducted a survey on expanding the London Congestion Charge Zone and found that 67 percent of respondents were opposed. Johnson scrapped the plans and is toying with reducing the size of the existing charge zone instead.

Why such ingratitude, British drivers? There are a couple of possibilities. First, people may not be appreciating their time savings. While the out-of-pocket expenditure on the tolls is very visible and quite annoying, there is very little way for drivers to see what traffic and delay would have been like without the tolls. Plus, many people underestimate the monetary value of their time.

Second, there are admitted distributional concerns. Pricing detractors are right to suppose that this policy will disproportionately benefit the well-off. This is due to the smaller burden the tolls place on the wealthy’s personal finances and the higher monetary value of their time.

The equity argument is probably the most powerful weapon in the antis’ arsenal. And it is the one which proponents of the policy have the toughest time answering. Like it or not, it resonates politically. Perhaps this is what rankles British voters.

For these reasons, it may be premature to think about tolling entire downtowns or freeways. A better plan is to concede that we won’t get the most economically efficient, toll-everything outcome (sorry, transportation economists). Instead we should settle for tolling only portions of facilities while leaving the remainder of them au naturale.

Were, say, two lanes of a four-lane freeway tolled and flowing and the other lanes free but congested, the time savings your money buys you would be very visible to drivers. Equity concerns would be blunted since the poor have a free option. In fact, low-income folks would be better off than before, thanks to the chance to use the toll lanes when really necessary, express bus service in the toll lanes, and increased throughput there.

This would leave a situation in which the rich might disproportionately benefit, but all are made at least somewhat better off. This would probably seem equitable to all but the most egalitarian thinkers.
Perhaps this is why polls conducted after the opening of California’s SR91 toll lanes found that the concept was supported by over 70 percent of corridor drivers — including a majority of those who used the free lanes exclusively. Unfortunately for London, none of those satisfied customers are registered to vote in the UK.


M.B.

There are some pretty broad (questionable) assumptions behind those numbers, especially the £236m and £260m. The analysis places little value on the loss of personal freedom from the government intrusion.

Michael

I-15 in Utah has a car-pool lane which single riders can ride in if they pay a fee.

I think it would have the effect mentioned in this article if it weren't for the fact that all 3 lanes AND the car pool / fee lane come to a standstill during rush hour. The car pool / fee lane is the last to get slow down and then stop though.

DF

I think economists over estimate the monetary value of people's time.

I mean I am on a fixed salary, outside of work, ten minutes here or there makes no difference to me. It is probably eating into time I spend watching television or something.

Charlie

On route 95 south of Washington D.C. there is a commuter freeway in between the north- and south-bound lanes. You are allowed to use it with 2 or more people in the car heading north in the morning and south in the evening.

If you have 2 or more people in the car and you get into the commuter section, you really move. Most commuter lanes are only one lane next to the existing highway. This is two lanes, so you can pass people driving too slowly - truly wonderful.

You can really move in these lanes because there is nobody in them. Nobody car pools. Nobody ever has. And it will get more unlikely as jobs become ever more time-flexible.

I would love to see the commuter lane turned into a toll-lane. I bet a lot more people would use it and the state would collect money for a road that has already been built.

libert

As a former resident of London, I'd like to point out another benefit that was not considered here: increased economies of scale on the London bus system.

Pricing driving led people to take buses more. Since buses tend to have low marginal costs, the increased utilization drove down per-rider costs of operating the system. In response to these lower costs, Transport for London was able to cut bus fares.

So not only did I save time as a bus rider, I also paid less!

JRH

In South Florida, I-95 (a free highway) runs parallel to the Florida Turnpike (a toll highway). As you'd expect, the Turnpike is much less crowded and so traffic moves along quicker (although at rush hour even the Turnpike gets congested).

Brendan

"people may not be appreciating their time savings"

If people do not appreciate their time savings do the time savings benefits really exist...

gevin shaw

Those who can afford the toll buy their convenience from those who can't with reduced access in the form of longer commutes and cancelled trips. There is no benefit in not having to pay $4,000 a year (for a daily trip) you can't afford anyway. Time is money only if you've got the money, and the poor will have to find their work and their services elsewhere, or spend more time getting there than before, for the benefit of the impatient.

It is a blind spot of economists, evident in lumping commute time savings with business travel time savings, that not all opportunity costs are recoverable. If someone's commute takes longer, that doesn't mean he gets less work done, it means he has to leave home earlier and get home later. Each commuter had made this cost/benefit analysis pre-toll. The toll allows those who can afford it to transfer time lost with their families to those who can't afford the toll. It is, if you will, a regressive time tax.

I wonder what arrangements for toll pooling have been created, allowing different people to make use of a single car that has been charged that day's toll.

Read more...

David Hayes

I lived in London for along time, the congestion charge was one of the best things to happen to public transport in the city

a n other

"two lanes of a four-lane freeway tolled" - you would be lucky to get two lanes altogether in London. Most tolled roads London are single lanes. So pricing lanes is very inappropriate in London.

On distributional issues, most of the lower socio-economic classes used buses or tubes before the toll and not cars.

rusty

In terms of 'disproportionately benefitting the well-off', I think some additional nuance is needed.

I would conjecture that the benefits are not linear -- that is to say, someone who is very wealthy certainly benefits more than someone who is somewhat wealthy for the reasons you describe (tolls being relatively less and time being relatively more valuable). But someone who couldn't afford a car anyway benefits without changing any behaviors.

Ian

This is a 2007 study. it should be born in mind that Transport for London, that produced the study, also operate the congestion charging scheme and at the time answered to the Mayor who instigated the scheme. Thus the objectivity of the study is, at least, questionable.

TwoNineteenTrain

"Equity concerns would be blunted since the poor have a free option. "

I hardly think a second-rate free option for "the poor" is an adequate goal for equity. It's just a different shade of gray inequity ... not that much different (really) from saying "Let's make all the roads hyper-efficient Lexus-lanes for the rich because the poor would still have the free option to walk."

Rachel

I lived in London when the toll came in, buses became much quicker - I saved an hour every time I travelled through the city (once a week in my case).

People forget the benefit, because those new times become the norm. They see the #8pounds, they don't feel the time saved through less delays.

Shaun

"London Mayor Boris Johnson recently conducted a survey on expanding the London Congestion Charge Zone and found that 67 percent of respondents were opposed. Johnson scrapped the plans and is toying with reducing the size of the existing charge zone instead."

It's worth noting that the plans Johnson scrapped were made by his predecessor as mayor. There's little love lost between the two so it would have taken a lot to make it politically likely that Johnson wouild have kept the expansion plan.

Nick

Regarding the equity of the situation, London is such a car unfriendly city, that really, only the vey rich (or very stupid) drive anyway. Even the middle classes use public transport (although more often the tube than bus). Therefore, the congestion charge isn't nearly as inequitable as you might expect.

Outside of London, commuting by car is much more common, and so I can see why a congestion charge would be much less popular there.

One group who massively benefit from the charge are cyclists (clearer roads = fewer accidents and less polution), who tend to have low to middle incomes and are the most environmentally friendly.

Andrew

#1 London has CCTV cameras everywhere. The marginal loss of personal freedom from using some of those cameras to enforce congestion charging is essentially nil.

Jose

The solution can also be giving the money back to the lower income users with a subsidy or another program such as free parking

toao

Re: the proposed expansion of London's congestion charging zone, the picture would probably look quite different for an expanded zone. While the current CC zone covers mainly commercial areas, the proposed expansion would have included a large residential area. This would have meant that people living in this area could drive across all of central London for a tenth of the costs of people living outside the zone. Hence, the benefits in terms of reduced traffic would have been less. Worse, these residential areas are some of the most well-off in London, meaning that inequality concerns would have been even more acute, as rich Kensington dwellers could drive for free around central London, while Brixtonians have to pay £8 a day.

Hamed

As a Londonder who now lives in Manchester I suppose I have a decent view on the differences between the cordon-charging plans for each city. By far the biggest difference (and the reason that I voted no in Manchester) is that public transport in Manchester is quite poor, both in absolute terms and relative to London.

Whereas the combination of bus, underground and mainline trains in London is extensive and fairly reliable (as much as Londonders like to complain about transport, this is a fact) Manchester has a puny tram system and a very patchy network of buses. So those who could not afford the congestion charge would not have a decent alternative.