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Cars & traffic

Jun 21, 2011

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Projected avoidable costs of traffic congestion (BITRE)

I’m very disappointed with the line one of the State’s largest employer associations, VECCI, is taking on road congestion charging. This issue was raised in a report prepared by consultants Acil Tasman for the Competition Commission’s (VCEC) inquiry into a State-based reform agenda.

Congestion imposes such a high cost on business – whether freight or personal business travel – that I’d expect the great majority of VECCI’s members would be better off with pricing. The Bureau of Infrastructure, Transport and Regional Economics puts the current cost of congestion in Melbourne at around $3 billion per year, rising to $6.1 billion by 2020 with unchanged policies.

VECCI says it is opposes the idea of congestion charging for three reasons. First, motorists already pay both the CBD Congestion Levy and the fuel excise. Second, there’s no spare capacity in the public transport system to take displaced motorists. Third, the economy can’t handle another tax on top of the forthcoming mining tax and the carbon price.

In regard to VECCI’s first objection, the obvious point is that these existing imposts on motorists aren’t working – many Melbourne roads are still congested at peak times. Despite the lofty title, the CBD Congestion Levy is actually a tax on parking. It’s only had a very minor impact on traffic because most drivers don’t pay it personally – their employers do. It isn’t in any event peak-loaded and of course it does nothing to manage the level of through traffic. And as per the name, the levy only applies to the CBD. The $0.38 fuel excise tax (no longer indexed) does reduce the overall level of travel by motorists, but has no appreciable effect on congestion because it doesn’t vary with the level of traffic or time of day.

So far as the “no spare capacity on public transport” objection is concerned, a congestion price only has to remove a relatively small number of vehicles in order to get traffic moving at an acceptable speed. The vast majority of motorists won’t come seeking a seat on the train – they will continue to drive but, rather than pay with time as they do at present under congested conditions, they’ll pay in cash. Their numbers may increase over time, but so will public transport capacity. Also, revenue from congestion charging should be applied to improving public transport and increasing capacity.

VECCI’s argument that the economy can’t handle another tax is about as nakedly political as you can get. Australia is one of the world’s most vibrant economies and has been growing for 20 years. Motorists, both business and private, can afford to pay their way. In any event, a congestion charge isn’t a tax — as the name says, it’s actually a charge. Motorists pay directly for the quantity of road space they use and get a direct and immediate benefit – faster travel. That means motorists who travel more pay more. It also benefits drivers from all income strata by enabling them to reduce delays when they make high value trips.

I know VECCI’s a broad church – it has a diverse membership – but it’s a bit stunning when a policy that would lower the cost of doing business in Melbourne is opposed by business. In fact it beggars belief. Business should be insisting on congestion pricing and leaving the Government to sort out the politics.

However lame VECCI’s arguments are, they highlight the key challenge with congestion pricing – the problem isn’t establishing that it’s a good idea, it’s selling it politically. For example, the Victorian Government’s immediate response to the Competition Commission’s report was to issue a statement saying it isn’t considering congestion pricing. It’s vital the option be kept ‘live’ for when conditions are more favourable. In the meantime we’ll continue to suffer the costs of traffic congestion and pay well over the odds for other solutions that aren’t anywhere near as cost-effective and provide much lower benefits.

We have the technology to implement comprehensive metropolitan-wide congestion pricing but the politics would be very hard in the short term. Robert Doyle’s problems with tolls on EastLink when he was Opposition Leader indicate how fraught the issue of pricing can be. In the first instance, it would be easier to pursue a “second best” scheme in the CBD modelled after a cordon like London’s, with revenue ploughed back into public transport and city centre amenity improvements. The CBD already has excellent public transport and few people are going to worry about the equity implications of executives paying substantially more to drive to work.

Alan Davies — Editor of The Urbanist

Alan Davies

Editor of The Urbanist

The Urbanist is edited by Dr Alan Davies, a principal of Melbourne-based economic and planning consultancy, Pollard Davies Consulting.

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16 thoughts on “Does business oppose congestion charging?

  1. jack horner

    A few thoughts on common memes in this debate:

    ‘Public transport has no spare capacity’:
    1. You need to unpack this a bit. Public transport has plenty of spare capacity offpeak. And probably at all times in many places that are not the radial rail routes that gather most attention (spare capacity includes ‘ability to increase services if existing services are full’).
    2. In any case, so what? Is there no vision for the future? The obvious riposte is that there should be congestion charges *with* a serious long term PT capacity expansion project. With the second leading, to be realistic.

    ‘People will just pay and keep on driving’
    1. A congestion charge is a charge varying by time or place to discourage people from driving at the most congested times and places. Observations of existing tolls which don’t have these features are not a good indicator of how people would respond to a congestion charge.
    2. It depends what you mean by ‘people’? Who, when, where, how many? All people, most people, some people? In the short term, in the long term? On what routes (since the response will obviously be different between PT rich areas and PT poor areas)? These distinctions are important. Some people will pay to continue driving, and good luck to them. Some (and more in the longer term) will change their behaviour. All change is at the margin.

    Similarly with many other pub-argument statements about transport, such as ‘people prefer the convenience of cars’ All such statements starting with the word ‘people’, without specifying exactly what you mean by ‘people’, should be rejected in any rational debate . You see them often enough in the reports of highly paid officials and consultants, not only bloggers.

    1. Alan Davies

      In London, revenue from the congestion charge is applied to public transport improvements. Congestion charging is politically unthinkable without hypothecation – the savings to the Government in deferring expenditure on major transport works would swamp any potentially foregone revenue. See the independent evaluation of the parking levy done by
      Hamer, Currie and Young, which confirms my contention that the levy had little impact on traffic because it was mostly paid by employers. My point about the impact on PT is that only a small proportion of drivers – say the last 5% – actually turn free flowing traffic into congested traffic. So only a small proportion would possibly be looking to PT (I think most of them would simply delay or reschedule their trip).

      On the “stunning” issue, you’re the professional editor so I accept your judgement! I’ll try harder in future, just as I’m sure you’ll be attentive to using question marks at the end of questions.

  2. Anton

    I’d like to focus my comment on one particular argument of the VCCI against a congestion tax – that there is no spare capacity on public transport. As Daniel Bowen says in his blog today at http://www.danielbowen.com/2011/06/21/preaching-to-the-converted/ in peak there is no capacity (I’d argue on dual track Melbourne ought to be able to manage up to 12 trains per hour, but that’s beside the point). But certainly in off-peak/weekends there is much more capacity.

    In my view we ought to look to reduce the current 30 minute frequencies for the stations beyond Ringwood and Dandenong in the inter peak to 20 minutes. Similarly, lines such as Glen Waverley ought to run every 10 minutes from say 6 AM to 9 PM. Tram frequencies may be expensive to increase, but many bus routes would not be – Smart Buses also should run every 10 minutes 6-9 weekdays in view. Those 2 simple and relatively cheap steps would be a massive increase in terms of capacity for public transport. They would have the potential to increase the share of trips taken by public transport in the Melbourne metropolitan area.

    And finally I like Oz’s comment, I’m sure variable tolls according to time of day would firstly be cheap to implement, and secondly over time would see congestion reduce. Perhaps also on our most clogged freeways (eg the Monash from Toorak Road to Warrigal Road) peak only tolls could be introduced, with funds raised going towards sensible ideas like improving public transport or say improving car pooling schemes.

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