Congestion charging zone, London
Congestion charging zone, London

Fairfax senior journalist Jason Dowling wrote a very good commentary in The Age yesterday arguing for congestion pricing on Melbourne’s motorway network (How toll roads are introducing a congestion tax for Melbourne by stealth).

He concludes by highlighting the major stumbling block with winning wider support for road pricing: (1)

A glaring inadequacy of current road tolls is equity: our tolls are priced like the GST, a flat tax that does not discriminate whether you are a chief executive on $3 million a year, or scraping by on welfare payments or the minimum wage. It’s an inequity that must be addressed, as governments and city planners push for an expanded use of tolls.

Congestion pricing would provide many benefits, like avoiding or deferring the need for new motorways and making public transport more competitive with cars (see Is congestion pricing just too unfair?).

But it will be hard to implement in Australian cities while ever progressives withhold their support. Here’re some points to consider in evaluating the equity issues around congestion charging:

  • Congestion charging provides greater horizontal equity; those who cause the congestion pay for it.
  • All travellers already face the same fares for trains, buses and trams irrespective of their income.
  • All consumers already pay the same tariff for other essential services like water and power, irrespective of their income.
  • There are innumerable government regulations that impose costs on citizens but don’t differentiate by income e.g. speeding fines, passport fees.
  • Qualifying public transport users get concession fares. Likewise, financial compensation can be provided for lower income motorists to offset the additional cost of charging (2).
  • Travellers who don’t think their intended trip is worth paying the charge for will in many cases be able to shift their journey to off-peak periods when either the charge doesn’t apply or it’s much lower.
  • There are travellers at all income levels who make high-value trips from time to time (e.g. running late for child care pickup) and would appreciate the option of faster travel in uncongested conditions.
  • Travellers have the option of taking public transport instead. This is likely to be an especially attractive option when congestion pricing is implemented as a central city cordon e.g. London, Singapore and Stockholm. Radial public transport systems, even those in Australian cities, provide good services to the city centre. (3)
  • With a comprehensive implementation, the charge could be designed to replace existing standing costs like registration and fuel excise.
  • Revenue over and above that used for compensation and/or to replace existing income streams could be applied to improving alternative forms of travel e.g. public transport, cycling. Users of road-based public transport like buses would benefit from faster and more reliable travel.

Like pricing, congestion itself is also a way of rationing use of road space. But it’s inefficient and, arguably more worryingly, provides a rationale for the construction of new motorways.

Most congestion only occurs at peak periods. It’s a failure of management that the spare capacity available in the existing road network at other times isn’t used more efficiently. We wouldn’t tolerate it with other scarce resources like power or bandwidth; we shouldn’t tolerate it with road space or parking either.

It’s bizarre that we have a flat charging structure for trains and electricity with concessions for eligible users, yet many oppose charging motorists for the use of road space on the same basis. On that logic they must’ve opposed the Gillard Government’s carbon tax!

Policy can’t be made on the basis of evaluating the equity effects of specific taxes in isolation. That’s what happened with restoration of indexation on the fuel excise; it led to the ridiculous situation where the Greens and Labor were effectively arguing for a reduction in the real price of petrol.

The sensible approach is to evaluate equity outcomes at the level of the entire tax and transfer system. Politicians don’t care about that of course so it’s imperative progressives take a more reasoned approach to congestion charging.

There’s a disconnect between opposing both new motorways and measures to reduce the demand for new motorways (4).

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  1. Mr Dowling appears to use “tolling” interchangably with “charging”. It’s worth noting that private operators set their toll structure to maximise revenue; that’s not necessarily the same charging structure that maximises the efficient use of a motorway.
  2. However it can’t be delivered by way of a concession on the charge (like public transport concession fares) as that would defeat the demand-suppressing intent; needs to be an income supplement or similar.
  3. How many low income travellers drive to the city centre in peak periods and thus would be worse off because of a cordon charging scheme? I suspect it’s not many n cities like Sydney and Melbourne.
  4. And no, provision of better public transport will not by itself be enough to address traffic congestion e.g. see Is more public transport the answer to traffic congestion?