Grattan Institute proposes Sydney and Melbourne congestion charge cordons

Across some of the Australian media is the release of a report from the Grattan Institute (a public policy thinktank) report titled "Stuck in traffic? Road congestion in Sydney and Melbourne" (PDF) by Marion Terrill.  It needs a rethink.

It reports what those of us working in the road pricing field would say is, generally speaking, fairly obvious.  Charging for road use at peak times in cities can reduce congestion and is worthwhile.  However, for all of the general merit of the argument, and some useful data in the report, I question very much one of the key conclusions of the report and the value of the report to the public debate about congestion.  In fact, I'd suggest it is counterproductive and sends the case for road pricing backwards in Australia.  It doesn't help that the report doesn't even understand the London scheme properly.

Let me be clear, I am not talking about parking pricing or public transport pricing, all of which have some merits.  Independent regulation of toll road pricing is interesting, but naive.  With private concessions already, there is effectively a contract with private concessionaires about pricing.  Overall the report is lacking in some fairly fundamental analysis, as it provides selected data that indicates on the one hand that most car trips in both cities are not to the CBD.  29% of trips to the CBD are by car in Melbourne, only 15% in Sydney.  81% of trips in greater Melbourne are by car, 67% in Sydney are by car.  Yet its solutions would indicate that this should be the focus.  

My problem with the Grattan Institute report is threefold:

1. The proposed solution of cordon charging for the CBDs of Melbourne and Sydney;
2. The lack of any reference to progress on reforms that could eventually lead to road pricing in cities;
3. The failure to emphasise that the main difficulty with the introduction of congestion pricing is public acceptability.

Why not cordons?

The report briefly mentions London, Stockholm and Singapore cases of congestion charging, but fails to acknowledge that London is an area charge and conditions in central London are now as slow as they were before the congestion charge was introduced in 2003.  Indeed the report completely misconstrues the London congestion charge as follows: 

But the gains in travel speeds are slowly diminishing, due to steadily growing traffic volumes and an inherent limitation of cordon schemes – vehicles that stay inside the zone are not charged, making it free for them to cruise the inner London streets.

The travel speeds are back to where they were before the charge was introduced, in part because road space has been reallocated to pedestrians, cyclists and bus lanes, but also because of uncharged vehicle growth (private hire vehicles - prebooked taxis).  Vehicles that stay in the zone ARE charged because London has an area charge, so they are not free to cruise the inner London streets.  Indeed a key part of the London problem is not that, but that almost half of all vehicles entering central London are either exempt or have a 100% discount from the congestion charge.  The Grattan Institute report ignores this.

None of these examples (and Gothenburg is a much less convincing example) have urban form similar to Sydney or Melbourne.  All have higher densities of population, all have urban commuting patterns more concentrated on their CBDs than the two biggest Australian cities.  In short, the car use patterns in Sydney and Melbourne are much more about people moving between suburbs and within them, than on long trips to the CBDs.  Cordons for Melbourne and Sydney could make a difference to those areas, but the impacts beyond the CBDs are likely to be relatively minor.  

If most car commuting in the major cities is not about going to the CBD, then charging trips to the latter are unlikely to make a big difference to most congestion.  Furthermore, the report dismisses the boundary effects of introducing a cordon charge.  What impact does it have on home or businesses on the "wrong" side having to pay a one off charge for a short trip?  Does it mean a cordon should be ruled out?  No.  However, the idea that this is the right solution is intellectually lazy.  

Much more likely to be effective would be network road pricing, which is what the Grattan Institute says but then doesn't recommend (it thinks that a cordon charge is network road pricing, but it certainly is not).  That means paying to use roads on a network wide basis, varying by time of day and location.  Obviously this would be a much bigger step than a cordon, but I am unsure why other road pricing options are ignored.  Furthermore, although it is acknowledged that such charges could offset registration fees (which seems odd in that it would mean commuters would get an offset of registration fees, but others wouldn't) and that net revenues should be spent on public transport.  Surely if it is offsetting registration fees it should be offsetting spending on roads?  Is there a case for more public transport spending per se or is it assumed?  Surely the idea that revenues should be spent based on merit would make more sense.

This comes to my second point.

What about road reform?

The Grattan Institute appears to be completely unaware of the national Heavy Vehicle Road Reform programme and the proposal in that to create an independent price regulator for existing and future road charges (existing being registration fees and fuel tax).  Heavy Vehicle Road Reform envisages a future whereby all heavy vehicles pay by mass, distance and location.  Furthermore, the Commonwealth government announced some months ago that there would be a study launched into road charging for light vehicles.  The latter, in part due to the challenges in the future as fuel efficiency, hybrid and electric vehicles erode fuel tax revenues.  The Grattan Institute seems oblivious to the likely introduction of an independent price regulator for national heavy vehicle charges, or the possible introduction of full network charges for heavy vehicles at least.   

You see congestion pricing should be seen in a wider context, in that how roads are managed and charged for should be reformed more fundamentally.  That means moving from fixed (registration) charges and fuel taxes to distance, mass, location and time of day charges, set by utility based road providers with an independent price regulator.  Some support for wider reform would have been helpful, but lack of acknowledgement of road reform seems odd.

Public acceptability?

Well this is the key problem, and the media coverage in Australia following the release of the report has almost entirely been negative.  Who believes that charging for road use will reduce congestion?  No one, and it is in part because the Sydney Harbour crossing peak charging has had negligible impacts, but moreso because it hasn't been piloted seriously in Australia.  There is a distinct lack of trust in any government introducing a new charge (it has been coined "traffic tax" in the media, which is disastrous) around what it does with the revenue and if it will reduce other taxes.  

This is why there is a need to talk about road reform more generally, and how congestion pricing can be offset by lower prices offpeak (by replacing registration fees and fuel taxes).  There is a need to bring the public along with how pricing can work, what it would replace and what revenue would be used for.  That requires a lot of effort.  To glibly talk about public acceptability in London (where hardly anyone actually drives to the CBD) or Stockholm (where similarly, most trips are not charged and revenue has been hypothecated for roads) is simply missing the point.  It is overwhelmingly obvious that the reason this policy hasn't gotten anywhere in Australia is because it is politically toxic and that is because it is toxic with the public.

It is that which the Grattan Institute needs to address, which is convincing the public that this would be good for them (and what "this" would look like).  I see little evidence of this, and the public backlash about the report is counterproductive.

What now?

More needs to be done, and it would be helpful to acknowledge that, of all cities, Auckland is more advanced in thinking than any Australian cities, not least because most recent reports indicate a central and local government are in some alignment about the need to act and that pricing is part of the mix.

Australia needs a conversation about pricing roads, which includes congestion pricing, which includes replacing registration and fuel tax, and most importantly discusses what is done with the money, how the roads are managed and paid for.   The Grattan Institute report contains some useful data and analysis, but a report that misconstrues the London scheme, that jumps to transplanting a cordon onto Sydney and Melbourne and ignores the national agenda of road reform falls well short.  My hope is that it doesn't undermine the whole argument by generating public opposition about the concept, by proposing options that are fundamentally flawed.

Connecticut learning the hard way

Connecticut could almost be a case study in what not to do when investigating whether and how to transition from fuel taxes to road user charging. I wrote about it in August last year, and it shows just what goes wrong when a half-hearted effort is undertaken in developing and communicating even the investigation of road charging as a policy option.  As such, it has simply got worse.

What's happened? Well Connecticut has announced (reported in the CT Mirror) that it is not participating in a pilot with three other states as part of the I-95 Corridor Coalition. Connecticut should be a lesson to other states in the US, and other jurisdictions more globally about what not to do.

The proposal  

Under Section 6020 of the FAST Act, US states are able to access Federal funds to undertake road pricing pilots (more here). The I-95 Corridor Coalition is an association of state DOTs for all of the states through which Interstate 95 passes through (as the primary north-south Interstate Highway along the eastern seaboard of the United States). Four states in the I-95 Corridor Coalition applied for funding to undertake a pilot – Connecticut, Delaware, New Hampshire and Pennsylvania.

The pilot was primarily intended to look at charging by distance across multiple states and received US$1.49 million in Federal funding (which needed to be matched by the states). 

However, although the Governor was interested in studying options to replace the gas tax, the political and media narrative around charging by distance was an absolute disaster.

The most recent statement from the I-95 Coalition about its proposal is below:

Phase II of the Coalition’s research was conducted as a case study involving the three neighboring states of Maryland, Delaware, and Pennsylvania. A concept of operations for a long range vision was developed that describes the functions that would need to be accomplished by a multi-state MBUF system that encompasses all miles traveled by all vehicles by state and jurisdiction as well as tolls and congestion-based charges. The research also explored issues that would have to be considered in the transition from the current fuel tax based revenue collection to implementation of this potential future concept of operations, including staging of the transition, the functionality of early stage systems; participation in early stage systems, including vehicle types and the potential for opt-in alternatives; collection and payment enforcement methods, both within individual states and across state lines; strategies for operating under a dual fuel tax/MBUF system during transition, and procedures for properly allocating revenues based on where miles were actually driven. The research also produced a further analysis of cost, examining it from the perspective of the estimated costs associated with the collection of MBUFs compared to the current costs for collecting not only fuel taxes, but also tolls and registration fees.
Note no mention of Connecticut, and there is a fairly simple reason for that – there was little engagement with politicians, the media and the public of the value in participating in this pilot in Connecticut. Indeed, the media coverage is scathing, not just because of the failure to communicate, but because in the absence of clear objectives and a clear message, people make things up.

Although the focus of opposition was on spending US$300,000 of state taxpayers’ money on the pilot, when no politician was willing to state that distance based charges might be implemented, that focus rapidly expanded to a dismissal of the pilot on the grounds that it isn’t even worth studying.   That level of ultracrepidarianism occurs because ignorance fills a vacuum of information, and in this case it is fed by a parochialism that is blind to the experience of others.

The arguments against studying road user charging are exacerbated by the absence of politicians (or even journalists) that are willing or able to challenge the negativity.

Patch reported that State Representative David Rutigliano claimed it was about "Big Brother" knowing how far you travel and where you travel. Yet, if that were the goal, then there wouldn't be options to charge by distance without recording location. More importantly, there is no engagement about how to address privacy concerns, such as keeping the state away from user data by using competing private service providers.

There was a petition to stop the pilot which showed that opposition was based on the usual arguments about privacy and fear that it would be a new tax. 

Where were the arguments about the sustainability of fuel tax? Where were the arguments about the equity implications of the roads being paid for by people who can't afford electric or hybrid vehicles?

More fundamentally, the absence of the basic economic concept of user pays is disappointing.  Connecticut didn't have a champion for reform, able to make these arguments, even the basic point that the whole reason to investigate road user charging is to replace fuel tax.  This report from Fox indicates how both Democratic and Republican politicians saw it as a new tax.

I'd not be surprised if people oppose it if they think it is a new tax, or think that it is part of a conspiracy to spy on everyone.

Connecticut had no political champion with a clear message and simple clear responses to criticism, based on a mixture of policy goals and the experience of others. Oregon and California have had this, but Connecticut media has operated in a vacuum filled with ignorance and fear.

The messages should have been clear about:

- Declining yields from fuel tax will make it unsustainable and increasingly unfair;

- Charging by mile could replace fuel tax;

- Charging by mile is feasible, is done elsewhere, but the state needs to understand a lot more about it and how people would react to it, before considering it further;

- Any money from such charges would be dedicated to road maintenance and upgrades.

That hasn't happened, this clearly shows what not to do when a jurisdiction is considering even investigating how to reform the charging and funding of roads.

Connecticut has since debated the introduction of tolls on major interstates, but that raises opposition as well, given they would be additional charges for all users and has other challenges. It can only be an interim measure, as it can only address major corridors, not the lack of revenue on all roads.

A common debate in the US about road charging is between those who support it because of the unsustainability of fuel taxation, compared to those who think existing spending on roads is wasteful and inefficient, so the focus should be on reforming how existing funding is spent.

Both are right. US states could learn a lot from each other and from foreign jurisdictions about lifecycle asset management, long term funding commitments for roads, competitive tendering of contracting and depoliticisation of road funding. However, that will only extract so much value from the current system without addressing more fundamental limitations on the sustainability and fairness of fuel tax. Just as inflation adjusting fuel tax will buy time, it is likely to only be enough time to investigate, pilot and start a transition away from fuel tax.

UPDATE: The Ridgefield Press reports on how Senator Toni Boucher is hailing the withdrawal from the pilot.  This article has a poor representation of the technology options:

Possible mechanisms for tracking the number of miles included a chip in the car or an app on the GPS, which has raised concerns about the possible invasion of personal privacy.

 

Miles aren't tracked, they are recorded.  Neither a "chip in the car" nor an "app on the GPS" (whatever that means) make any sense.  

 

Boucher's comments are not unreasonable though:

“The Department of Transportation did pursue this mainly on their own without letting the legislature know about it,” Sen. Boucher said. “Since we were not in session, it was a big shock to us. As one of the co-chairs of the transportation committee, I was very much interested in what this was all about. When looking into the mileage tax study, it did not appeal to us at all.”

She opposes it as being "another tax" and thinks the state shouldn't find new sources of revenue. That's a fair position to take, as discussion about charging by distance is generally about replacing existing taxes.   This just reinforces the importance of getting the policy and communications right.

London Assembly calls for congestion charge reform

The Greater London Assembly Transport Committee has released a report calling for both short term and long term measures to reform London's congestion charge, coming to the solid conclusion that the charge in its current form is not "fit for purpose".  The Committee has little actual power, as the matter is up to the Mayor (the Assembly is meant to hold the Mayor to account, but the Mayor has considerable Executive power).  The current congestion charge raises £168m net revenue a year.

London's congestion charge zone

Its report is available here (PDF) and makes a series of recommendations which I have listed below.  

1.  In the short-term, the Congestion Charge should be reformed, so the payments levied better reflect the impact of vehicles on congestion. The daily flat rate should be replaced with a charging structure that ensures vehicles in the zone at peak times, and spending longer in the zone, face the highest charges. 

For the longer-term, the Mayor needs to start to develop proposals now for replacing the Congestion Charge with a new citywide road pricing scheme, which charges vehicles according to the extent, location and timing of their road usage. Road pricing could also replace Vehicle Excise Duty, which should be devolved by the Government to the Mayor. There may be a case for the scheme to be wider than the existing Congestion Charge zone; discussions with all boroughs should take place to determine whether and how road pricing should cover their local road network. 

The Mayor’s forthcoming Transport Strategy should set out plans for both Congestion Charge reform and for the potential introduction of road pricing. The Mayor should also update the committee by the end of April 2017 about discussions with the government on the devolution of Vehicle Excise Duty.(which is not a London matter, but the Mayor wants devolved to London).  (this is what I will be focusing on in this blogpost)

2. TfL should ensure that new monitoring technology introduced to identify vehicles in the proposed Ultra Low Emissions Zone should be compatible with the future requirements of a road pricing scheme. TfL should confirm it will do this when responding to the recent consultation on ULEZ proposals. (i.e. ANPR, but by the time road pricing is introduced it may need renewed anyway)

3. TfL should take steps to encourage bids from boroughs interested in piloting a local Workplace Parking Levy. Provided the plans fit with any wider road pricing scheme, TfL should offer support to a WPL pilot programme if proposed by a borough. This should include offering additional funding to the borough(s) to initiate the scheme.  (I'm not a fan of taxing parking places for commuters, particularly in suburban centres, because the modal alternatives for commuters are often poor, so it can be a tax on small businesses seeking to attract labour, and there is little evidence they effectively address congestion).

4. The Mayor and TfL should take steps to encourage more delivery consolidation. This will involve working with those running large construction schemes and retailers, potentially through Business Improvement Districts. The new London Plan should promote consolidation for new developments. TfL should also work with London Councils to reduce restrictions on night-time deliveries.  (the latter is all about noise in residential or mixed use areas, although restrictions could be lifted if linked to more electric trucks.  Delivery consolidation will occur if roads are priced efficiently)

5. TfL should pilot a ban on personal deliveries for staff. Based on the findings, the Mayor should consider extending this to all GLA Group premises, and promote this change in practice to other large employers in London. (I'm not a fan of this heavy handed approach which was justified because people can "pick them up at tube stations".  This assumes people live near tube stations, over half of London doesn't.  Efficient road pricing would mean the price of such deliveries could vary to reflect such costs, obviating such an illiberal policy).

6. TfL should reconsider its approach to ‘click and collect’ at Tube and rail stations. Stations should be identified for a pilot programme in which multiple retailers and/or freight operators can deliver packages to a station for collection.(This should certainly be tried where it makes business sense and is practicable and safe).

7. he Mayor should set out how his new regulations for the private hire industry and the legislative changes he is advocating will affect congestion levels in London. He should also commit to assessing the impact of making private hire vehicles subject to a new road pricing regime, and different options for implementing this proposal. (rational to require private hire vehicles to pay any new road pricing scheme, but a similar case can be made for hackney carriages "black cabs" to do so as well).

8. TfL should conduct and publish an analysis of the impact of the Road and Transport Enforcement Team and, if it is proven to be cost-effective, set out plans to expand the size and coverage of the team. (this group focusing on breakdowns, stoppages, illegal stops and other activities that create congestion.  Logical). 

9. The Mayor and TfL should carry out an assessment of the effectiveness of the London Permit and Lane Rental schemes for roadworks. This should be aimed at ensuring the cost of delayed roadworks on London’s road users is reflected in the amount companies must pay. (Appropriate for a scheme that should be part of what any good road controlling authority does for utility access to its corridor).

10. TfL should continue to implement its Road Modernisation Plan schemes including the proposed network of safer cycling routes such as Cycle Superhighways and Quietways. It should report back to the committee by the end of April 2017 on how the construction of additional Superhighways and other major projects will be planned more effectively to minimise traffic congestion. (the "Road Modernisation Plan" needs some more economic rigour, taking into account impacts on congestion and modal shift.  It's not clear how these projects positively impact on traffic congestion, if at all. Theoretically there is plenty of scope for projects to improve the capacity of intersections, although road pricing revenue may be needed to fund those that need land acquisition).

11.  TfL should conduct and publish an analysis of the impact of the pilot scheme displaying traffic notices on buses and, if it is proven to be cost-effective, set out plans to roll out the programme more widely.  

Of Committee members, the UKIP Member disagrees with recommendations 2 and 3, and partly with 1 and 10.

Congestion isn't about growing private car use

The report says:

"The mode share of private vehicle transport has fallen in recent years, from 41 per cent in 2003 to 32 per cent in 2014"

"Londoners’ usage of cars has been falling for at least ten years. Between 2005 and 2014, all the key measures of car use – trips taken by Londoners as a car driver, the distance travelled and time spent driving – all fell by around 25 per cent"

In other words, public transport use has been growing significantly.  However there has been an 11% increase in light delivery vehicle kms in three years, which can put down to internet shopping.   There has also been a 70% increase in private hire vehicles in under four years.  Both can be seen as partly an effect of reduced car use.  If you don't have a car, it is difficult to go shopping for goods over a certain size to take them home, so deliveries grow.  Similarly, public transport doesn't take you everywhere you want to go, especially in evenings, or when carrying a lot of shopping or luggage, so booking a private hire vehicles makes sense.

Corresponding to this has been reductions in the capacity available to motor vehicles, with the advent of more cycling lanes and in a few cases, footpath capacity.

Cycling has been increasing in popularity, but it is likely this is mode shift from buses and the underground, not cars given the low mode share for cars in any case.  In short, London has successfully made commuting by private car uncompetitive in central London (although not outer London), and has not added significant road capacity for over 15 years, but non-car traffic has grown considerably.  The question is how to address this.  

Short term reform

The profile of traffic in the congestion charging zone by time of day doesn't match the AM peak inbound, PM peak outbound pattern seen in many cities.  In fact, there is more traffic around 0900-1000 than at 0700, because very few commuters into central London travel by car.   The congestion charge is an area charge.  So any vehicle (that isn't exempt) moving within the area is charged a flat fee for unlimited driving in the zone that day.  It would be possible to have a different rate for different times, but that could split the charge into period passes.  There could be a charge for driving in the AM and a separate one for the PM period, or a pass for a two hour period, although that adds complications to the system.  An alternative would be to actually trial distance charging, which simply measures distance on the charged roads and to hike the daily charge considerably (making that the capped rate for driving in the zone).

Truth be told, very little that can be done with the congestion charge would make much of a difference, except perhaps charging all private hire vehicles (and black cabs - as controversial as that will be, to them) by distance.  This might be possible as a part of their licences, and would be a good start (as it could encourage mode shift to public transport and reduce the number of empty touting trips by black cabs).   Another point would be to charge heavy vehicles on a PCU (passenger car unit) basis, so that they pay according to road space, although I doubt this would make much difference, it would be fairer. 

Long term reform

It's fairly obvious that charging all vehicles (except perhaps contracted bus services) by distance, vehicle size, location and time of day, could transform road traffic conditions in much of London. That's assuming such a system would price with a high degree of disaggregation by time of day and route.  No doubt, the idea of using it to replace Vehicle Excise Duty (the UK's annual registration fee) would make it more acceptable, although if it means transferring revenue from central government to the Mayor of London, it is more questionable unless the use of revenue is dedicated, first, to maintaining and upgrading the road network.   The obvious question would be about fleets and other road users who might register vehicles at London addresses and never pay VED and pay little "London road pricing" because they rarely enter London.  

A survey undertaken as part of the report (PDF) indicates a number of interesting statistics:

70% of those surveyed had not paid the congestion charge in the past year.

48% support the current congestion charge, 27% oppose it, 25% are neutral.

54% think the congestion charge is too high, 11% think it is too low, 27% think it is about right (interesting it is women, younger people and non-white Londoners who particularly think it is too high)

50% would prefer a distance (or time based) charge instead of the current flat charge, 20% oppose

47% support local congestion charge zones, 21% oppose

29% support expanding the existing congestion charge zone, 41% oppose

60% believe a distance charge would be fairer, 13% disagree

41% believe a distance or time based charged would be bad for business, 17% disagree

37% believe a distance or time based charged would make journey times quicker, 19% disagree, 44% neutral

27% believe they would be likely drive less if they faced a distance or time based charge, 15% disagree, 25% are neutral, 32% don't drive

55% believe net revenue from road pricing should be used for improved public transport, 21% believe it should be used to improve roads, 12% believe it should be used for cycling infrastructure (note a third of respondents don't drive but are included in this).

64% of those surveyed in employment don't drive to work.

30% support workplace parking levies, 39% oppose, 30% neutral

The three big questions to ask about a wide scale scheme as proposed are:

1.  What about visitors to London?  Any time/location/distance based system will need to involve either on board telematic or an installed on board unit to identify, measure and transmit charging information from vehicles.  For vehicles without such systems, an alternative will be needed, which inevitably will be much less disaggregated, blunter and more expensive.  For example, London could be blanketed with a patchwork of area charges that occasional users pay a charge to cross into. Otherwise, a single, expensive day pass could be offered for entering London, perhaps one for outer London and another for inner London.  In either case, the impacts of this need to be modelled and carefully considered.

2. What should be done with net revenues?  Road users should expect that if they pay a lot more, they get a good standard of service.  A lot of roads need serious capital renewal due to poor maintenance. Bridges with weight restrictions could be strengthened, but more importantly, bottlenecks that are worth improving should be.  The Mayor seems to have dropped planned for new east-west road tunnels, but there is much that can be done to improve some existing corridors with historic bottlenecks.  Road pricing can curtail induced demand and make such improvements sustainable, and those who pay should expect an ongoing programme of capital improvement.  

3. What about other charges?  The congestion charge would go of course, and it's unlikely Vehicle Excise Duty would be replaced, especially since it is government policy to hypothecate the revenue for the strategic road network (although I think it should be hypothecated for local roads only).  How about it being a pilot for partially replacing fuel duty?  Fuel duty revenue is in decline, not just because the government wont increase it to adjust for inflation, but fuel efficiency and the rise of electric/hybrid vehicles means it is becoming slowly obsolete.  Public acceptability would be much higher, and the impacts may be more dramatic if existing taxes are replaced by carefully targeting congestion.

Hopefully the Mayor will consider a study into how to take road pricing further in London.