Around the World in 80 Ideas   

3: Charging forward
Traffic congestion pricing in cities

The problem: congested streets

The remorseless pace of traffic growth has led to congested towns and cities throughout the world. Gridlock is now a common sight, not only in advanced OECD countries, but also in rapidly developing countries such as Venezuela, Thailand and the Philippines.

The idea: price for congestion

So why not price road space through direct charging, thereby discouraging inefficient road use? The new revenue raised by this can be channelled into alternative transport provision or help towards reducing the overall level of taxation.

Examples: tolls for thee

It is an old idea. The first toll road in England was built in 1663. By 1770, some 90 per cent of the country's arterial roads were tolled. But apart from a few bridges and tunnels, some built recently on build-operate-transfer (BOT) arrangements, none are today.

Many other countries, nevertheless, have tolls on their long-distance roads, including the notable examples of United States (where electronic systems work alongside cash-in-the-hopper systems) and France and other European states. In Australia, an electronic toll system was introduced on a new airport link into the city of Melbourne.

Singapore created a paper-based road-charging scheme in 1975, obliging road users to pay a daily toll when they entered the business area of the city centre. Recently the paper system was replaced by a more automated electronic pricing mechanism, and charging has been extended to other congested areas. Singapore's policy has proved highly successful: traffic speeds have increased by a fifth and congestion has fallen. Over the years, pricing has been adjusted so as to keep traffic moving smoothly without driving cars off the streets entirely.

In Norway, road pricing does not seek to reduce traffic so sensitively. Road users are charged whenever they enter the city - a 'cordon' system. The purpose is to raise revenue to finance environmental and traffic-management improvements, including tunnels, bridges, cycleways and walkways, pedestrianization, and mass transportation. Similar schemes exist in two other Norwegian cities, Bergen and Trondheim.

In the United Kingdom during the 1990s, field trials were carried out with a view to charging tolls on motorways - creating a revenue stream that would allow the subsequent sale of the roads to private management companies. The Labour government elected in 1997 scrapped this policy, but instead shifted its focus towards road pricing in cities, where the worst congestion problems were thought to lie.

A number of UK cities, including Edinburgh, Leeds, Leicester, Cambridge and Bristol looked carefully at congestion pricing and in some cases conducted trials of electronic tolls linked to identifiers attached to car windows.

In London, there was surprise when the newly-elected Mayor, Ken Livingstone announced his intention to introduce congestion charging in the central area by 2003. A prominent left-winger, he was regarded as an unlikely advocate of pricing, but his view was that all Londoners would benefit by lower pollution levels (there would be fewer cars on the road, moving at more optimal, lower-polluting speeds), while more smoothly-flowing traffic would make bus journeys more predictable and thus encourage more people to use the buses. And the predicted revenue, of about £250 million each year, would go back into road upgrades and public-transport improvements.

Assessment: go with the flow

Road pricing has the potential to ease traffic congestion in cities and elswehere. Imposing a price deters marginal users, who respond by not travelling (making the children walk to school instead of driving them, for example, or shopping more locally rather than in town), or car-sharing, or planning their tasks so that they need to make fewer journeys, or by using public transport, or by travelling at some less congested time.

A charge that is limited to the morning and afternoon peaks may be sufficient to have a clear effect on congestion, as people decide to make their journey a little earlier or a little later in order to avoid the charge.

One problem, however, is how and where to draw the boundary. A cordon system, whereby all journeys into the city boundary are charged, may raise revenue, but will not necessarily reduce congestion on particularly problematic junctions and streets. If only the most congested areas are priced, residents just outside the border may complain that they face large charges for short journeys (such as to the local shopping centre or school) that take them over the line. And the fear is that people will park in residential streets in order to avoid driving into the centre and facing the charge.

Many of these, and other problems, can be solved by an electronic system, which allows pricing to be made highly discriminatory. In principle, there does not need to be any boundary ring - individual streets and junctions can be charged. The data collected through electronic systems can also be used to help plan future road infrastructure.

However, such sophistication might be confusing to road users; and the cost of equipping all road users with electronic road-pricing technology is high. And for drivers who enter priced areas only rarely or not at all, it would be a large waste of money. In response, some IT firms have looked for 'value added' benefits to the motorists, such as traffic information, that might be built into the system, making it more attractive for road users to bear (or share) the cost, but the problem remains.

Occasional users - particularly visitors from other countries or parts of the country where there is no pricing system - are seen as another problem. There is no point in them buying the electronic in-vehicle equipment, so there must be some other way of charging them. Melbourne solves this by enabling drivers to telephone and pay in advance. Cameras detect the number-plates of all cars using the route and send fines to the owners who have not done this.

To win public support, congestion charging must not been seen merely as a new tax on the motorists. Road users must see some improvements in return for the extra payment they are making. And since road improvements often take many years to complete, there is a case for starting them before the charging system comes into effect - although that leaves a funding gap to be filled. There must also be adequate public transport, so that people who are prompted out of their cars have some other way of making their essential journeys.

Adam Smith was critical of the operation of private toll roads in the eighteenth century. He urged that "tolls…should be put under the maintenance of commissioners or trustees". And certainly the public is skeptical about whether governments can be trusted with road-pricing revenues. Experts in the UK are therefore looking at new trust arrangements whereby the ownership and management of a priced road network can be taken out of the hands of local politicians.

For further information:
  • H M Government (December 1998) Breaking the Logjam:, The Government's consultation paper on fighting traffic congestion and pollution through road user and workplace parking charges: Department of Environment, Transport and the Regions (London).
  • Schabas, Michael (1995)Charging for Roads: A better way to ease congestion: Centre for Policy Studies (London).
  • Hewitt, Patricia (1989) A Cleaner, Faster London: Road Pricing, Transport Policy and the Environment: Institute for Public Policy Research (London).
  • H M Government (October 1994)The Royal Commission on Environmental Pollution, Cm 2674, Stationery Office.
  • Roth, Gabriel, and Butler, Eamonn (1982) Private Road Ahead: Adam Smith Institute.
  • Mumford, Peter (2000) The Road from Inequity (download PDF 68kb): Adam Smith Institute,