Congested Pockets

Posted by Iain Murray

Almost five years ago, I argued that London’s Congestion Charge was merely a wealth transfer from London commuters to the administrators of the charge. You know what? I was right:

Capita, the company that set up the system and operated it for the Mayor, was said to have been given a £250 million contract over five years, but the Mayor refused to reveal the details. Then it emerged an extra £31 million was paid to Capita in the first year, raising concerns that costs would reduce revenues promised by the Mayor. Last year Capita was paid £130 million, more than 60 per cent of the money taken in by the charge over the year.

What about congestion? TFL’s own spin figures suggests that congestion is down by a paltry 16 percent overall. However, as The Bow Group has shown, most of this relates to a drop-off in people entering London after 11am. There has been precious little effect on congestion in the rush hour. And journey times - where the real economic benefit of reduced congestion should appear - have not been affected.

Once again, an environmental tax, disguised as a market mechanism, has failed to achieve its own objectives, while making some people rich at the expense of commuters. Diffuse costs, concentrated benefits, indeed.

Cross-posted from The Really Inconvenient Blog.

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05/01/2008 @ 8:31 am | Environment, Mobility | Comments

3 Responses to “Congested Pockets”

  1. Posted by: Ryan Radia - 05/01/2008

    I’m no fan of traffic congestion, so pricing the roads seems like a good way to discourage people from driving unless they value it. Yet, as you point out, London’s congestion fees haven’t had much impact.

    Is there any feasible and efficient method of reducing traffic congestion, and if so, is it desirable?

  2. Posted by: Iain Murray - 05/01/2008

    The Congestion Charge is an inefficient market-like mechanism that relies on far too little information - a political consideration of a desirable level of congestion above all. Real market-based responses exist, like High Occupancy Toll (HOT) strategies that have worked well where tried. They use dynamic estimates to adjust the “congestion price” (in this case, access to a lane otherwise reserved for carpools) according to the congestion in the other lanes. Like dynamic pricing of electricity, they are genuine market-based strategies that are critically dependent upon genuine information - ie how crowded it is and what the individual driver views he is willing to pay at that moment to get a faster ride.

    Of course, in old cities like London this may be more difficult to implement because of infrastructure limitations, but variations should be achievable, particularly with fewer barriers to infrastructure construction.

  3. Posted by: A Question for Iain | OpenMarket.org - 05/02/2008

    [...] believe you that congestion pricing has not worked in reducing traffic during London’s rush hour. Here’s my question: how [...]

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