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.


Anon

Not only does the money not disappear:

"By law, all money raised by the Congestion
Charging scheme must be spent on improving
transport in London, from which all Londoners
can benefit".

London has a very extensive public transport network, which is being significantly upgraded. And that's part of the reason why other congestion charges have been rejected: Manchester people wanted the public transport there first, not developed with the proceeds.

The western extension of the London zone seems like it may not be scrapped (some legal wrangle) but the reason this and further expansions are unpopular is that they take in many more residential areas, with higher numbers of people who use cars within their home area.

London congestion charging is only partly about traffic flow and quite a lot about encouraging public transport use - it is a solution for places with well developed public transport and built on a string of prior changes - for example most of London has only resident parking outside of expensive meters, combined with other measures to encourage out of town commuters to use the train into the center from their home area.

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Cinnamon

Yeah, price the paupers out of driving, that'll clear the roads alright!

Seriously, how can any tax save you money? All it does is cost you time since you have to work extra to get the needed money, and then some more time because you have to pay it.

As an example: If you removed VAT from goods in the UK, immediately we all would be 15% better off and people could afford to buy more goods.

So tell me again why it's good to make things expensive (and hence unaffordable for many) and thus use tax to ration the world's goods just so the rich get to drive on empty roads and enjoy many other perks as a result of the great unwashed being kept out?

We need a good standard of living for everyone, not only the rich!

X

Charlie & JRH:
On I95 in South Florida, they have also installed lanes like those Mr Morris suggested. In the span from Miami to the Turnpike, the two leftmost lanes (the "express lanes") are tolled (Sunpass only) while the remaining 3-4 lanes are toll-free. The size of the toll varies depending on the level of congestion (or time of day - I'm not sure). I've seen it as low as a quarter and as high as $3.75. Small plastic posts prevent changing over from the express lanes to the others and, incidentally, prevent you from using any of the many exits during the 5-10 mile stretch.
These replaced the commuter lanes (commuters can use the express lanes free of charge) and, in my opinion, are vastly superior. Despite some problems in the implementation (there is often congestion at the end of the express lanes, where they merge with the other lanes), it is almost always worth it for me to take the express lanes. However, the varying tolls guarantee that I always have to think about it and that the lanes don't become too crowded. At present, only the northbound side has the express lanes but I believe they're being installed on the southbound side very soon.

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X

To clarify my post above, commuter lanes are high occupancy vehicle (HOV) lanes. Alas, the replacement of our HOV lanes with express lanes has led to a most lamentable and unforeseen side effect: no more will we see people driving with an inflatable (and invariably busty) passenger...

JH Holloway

Oh dear...

Two things you missed from your calculation.

First, a policy of road space removal by the first London mayor (2000-2008) by widening sidewalks and increasing the number of permanent bus lanes meant that traffic speeds inside the Congestion zone are now slower than they were before the charge was introduced.

That means the value of the £8 fee is marginal.

Secondly, the toll's contribution to pubic transport is £89m per year (a sum almost the same as the fine income from the charge). Now, while London's buses are plentiful, the annual central government bus subsidy is around £600m per year.

The introduction of the charge was mostly a political move by a left-wing Mayor, backed by left wing politicians who had been keen to install road tolls for over 30 years.

It's also worth noting that the number of vehicles entering central London had been failing for many years, even before the charge was introduced.

PS - The US embassy is still refusing to pay the Congestion Charge.

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Mike

Road tolls bother me. Funds for transportation come from taxes already, which to me suggests that if a toll is necessary, then a) someone isn't appropriating enough money to do the job required or b) someone is doing the job incorrectly assuming the problem still exists.

While this is certainly more applicable to tolls for maintenance, I would be outraged at a toll to head downtown in my city regardless of traffic. Financial incentives may prove effective, but for some reason I want to say they just aren't right.