Price Roads! Cut Taxes!

Why we need road pricing

The Adam Smith Institute has long supported road pricing as the best way of paying for the scarce resource that is road space – a particularly scarce resource in many towns and cities at around 8.30 in the morning and 5.30 at night.

Huge unfairness. Research by Peter Mumford in the Adam Smith Institute report The Road From Inequity shows that the current system – where we pay for roads through tax on fuel – is completely unfair. People in rural areas have to drive long distances, so they pay a lot. But the roads they use are uncongested, there are few accidents, and they can drive at efficient speeds through relatively unpopulated areas. In towns, by contrast, people drive short distances and so pay little. But they contribute to major congestion, are involved in lots of accidents, cause noise nuisance to local residents, and generate extra pollution because their engines are running at low speeds.

Mumford estimates that the social costs imposed by urban drivers are seven times what they pay back in taxes. By contrast, rural drivers are overcharged three times for the cost of their road use.

For heavy vehicles going through towns in busy periods, the discrepancy is even greater. A heavy goods vehicle driving through a town centre at peak time imposes congestion, pollution, accident and noise costs that are a hundred times greater than those caused by the rural car user.

British industry estimates that billions of pounds worth of production are lost by road congesting, through wasted time, missed deadlines, failed deliveries. And that’s not even counting the sheer frustration of sitting in the jams!

Public transport use. If congestion charging allows traffic to run more smoothly, then it has benefits all round – particularly to the millions who use the humble bus. At the moment, there is no point in going by bus, because it is less comfortable, its timings are erratic, and it sits in the same traffic jam as everyone else. If traffic flows more smoothly, then buses run more to timetable, which makes them more attractive to use, which gets people out of their cars and on to public transport – a virtuous circle.

The London scheme

The unfairness and inefficiency of this system caused the Adam Smith Institute to look at how road pricing could be introduced, in its celebrated ‘Trafficflow’ project. We held a wide range of meetings and seminars with leaders from various cities throughout the UK – including London’s Ken Livingstone – and experts from motoring, public-transport and other bodies. And we published a report, Charging Ahead, which you will find on our Transport Issues and Publications pages.

Superficially, the plan we drew up for London looks a lot like what Ken is now doing. His map of the charging area is almost exactly what we proposed – we recognized that politically, it was important to get the South-of-the-River boroughs of Lambeth and Southwark in the scheme, even though the worst collection was in Westminster and the City. And there are other similarities.

Bad timing. But lots of bad ideas have crept in. For example, the London charge runs from early morning to early evening. We suggested it should be restricted to peak times only, which is when the worst congestion is. It’s 11am and as I look out of my window in Westminster’s Great Smith Street, I’ve seen precisely five cars go by in the last 60 seconds. When I look out at 8am, though, it’s nose to tail. So why keep the charge running all day? With a peak charge, drivers can spread their journeys to less congested times. With an all-day charge, you might as well continue to come in at 8am because it costs just as much to delay. And people on low incomes don’t get any option at all.

Moreover, the charge cuts out just as the West End is getting busy in the evening as people make their way into Theatreland.

Low technology. We also wanted to see an electronic road pricing system. The trouble with a ring system like London’s is that there are hard boundaries. So people just outside the ring find more and more drivers trying to park there, causing a local nuisance. With a more sophisticated electronic system, it’s possible to charge people different amounts in different rings or areas, so there are fewer boundary problems. And it’s also possible to charge different rates at different times – say to have a peak-hour charge, a shoulder charge (a little later in the morning) and a low or zero charge at quiet times in the middle of the day – which is both fairer and more efficient economically.

An electronic system, where roadside equipment checks a special device in your car, also allows better management of traffic. Information about how many vehicles are passing which points can be sent back to a central control room, where traffic lights can be adjusted to keep things running smoothly.

Manipulation. Of course, in London by contrast, people argue that traffic lights, road works and other obstacles have been managed deliberately to make the road pricing experiment work. Major development of Trafalgar Square has caused major traffic jams stretching right down to us in Westminster. And motorists complain that London’s traffic lights are set at red for much longer times than they were, as the Mayor tries – successfully, as it turns out – to discourage people coming in by car.

And then the Mayor has put a three-month ban on other major traffic works just as the congestion charging scheme comes in – which again, can be seen as a fraudulent way of making it look like a success, even if it really is not.

Black hole. And where does the money go? Well, in our researches we were definite that road pricing should be matched by a massive cut in fuel duty – perhaps to one-sixth of its present level. If road pricing is judged a success in London, then other cities will quickly copy it, but you can be sure that the Chancellor won’t be reducing the fuel tax. So road pricing becomes an extra charge, not a better way to charge, for road use. No wonder motorists are so deeply skeptical.

Our opinion polling found that motorists don’t trust politicians to use the money from road use wisely. Motoring groups already complain that, of the £32 billion raised in road taxes, £26 billion goes straight to the Treasury and is not spent on improving the roads. It will be the same with congestion charging. The politicians will get the money, and will probably use it for all sorts of pet schemes. Our solution was to vest the roads in an independent trust, which would use the charge income specifically to improve city roads to make traffic run more smoothly and improve the local environment for residents, walkers, and cyclists.

There are numerous other problems with the London scheme, such as the wide range of groups that are exempted. Congestion charging will work best only if everyone pays for imposing congestion on others. But people are likely to accept that only if there is a large corresponding cut in the fuel duty they pay.

The London congestion charging scheme is a bad scheme. But if it fails, it will put back the debate on road pricing for another twenty years, until we’re all in an even worse jam.