Wednesday 22 December 2021

Will the Mayor of London introduce road pricing on a wide scale?

Transport for London (TfL) has a serious financial crisis due to ongoing declines in patronage of London Underground, Overground and bus services because of the Covid 19 pandemic. Patronage has never recovered to pre-pandemic levels, and now the Omicron variant has scared off many more passengers, with London Underground peak time patronage now at half of pre-pandemic levels. Given London Underground usually generates a net surplus of fare revenue over operating costs, this has had a severe impact on TfL’s finances.

The tools available to the Mayor of London are Council Tax (a tax on residents of London), fares and congestion charges, or to cut spending.  So far the UK Government has provided £4 (US$5.3) billion in assistance since the start of the pandemic, with another £1 billion in capital spending from the Spending Review (in part paying for the, still under construction, Elizabeth Line - formerly known as Crossrail). 

However, this is not enough. TfL is seeking £500 (US$0.66) m for the remainder of the 2021/2022 financial year, £1.1 (US$1.46)b for 2022/2023 and up to £500m for each of the following two years, plus guarantees of long-term capital funding. 

So there is pressure to save and raise more money, and the Mayor must come up with ideas, to get a longer term rescue settlement plan from the UK Government.  Part of this is politics, with the Mayor claiming he will have to scrap 100 bus routes, reduce frequencies on 200 others and possibly close one Underground line (which seems highly unlikely).  He is currently proposing to increase Council Tax by £20( US$26.50) a year, phase out free bus travel for people aged 60-65 and to keep congestion charges at the recently increased level of £15(US$19.90) a day.  I’ll focus on the road user charging based ideas.  It's worth remembering though that the London congestion charge is only imposed on a comparatively small part of London (see below)

London congestion charge zone as a part of greater London

London boundary charge

The Mayor has made various proposals, including a cordon charge for vehicles entering Greater London of £3.50 a day. That idea is particularly troublesome because the boundary of Greater London is not, as many think, the M25 motorway, but actually an administrative line that most Londoners would not know exists.  It would slice through Buckhurst Hill, part of Dartford, cut off Chigwell and Grange Hill from London, separate Borehamwood and Elstree from Barnett and Edgware, and Watford would be outside London. Moor Park would be divided from Northwood, Sunbury and Walton-on-Thames are on the wrong side of such a cordon and Long Ditton the wrong side from Surbiton.  Chessington would be inside, but Epsom outside. As can be seen in the map below, the boundaries are not well known and in only a few cases does the M25 actually represent the edge of London (e.g. adjacent to Heathrow). In short, it would mean a lot of communities, with relatively poor access options to neighbouring communities, would face a congestion charge, although it would effectively be just a toll – because it isn’t about congestion.  If it were, it might apply at peak times, but this is a money making proposal, albeit it would not be introduced until October 2023 (so it is not going to make much difference in the short term).

Ministers are not supportive of the idea and there is some uncertainty over whether the Mayor has the full legal powers to implement such a scheme.

Map depicting Greater London boundaries from Wikimedia  (Contains Ordnance Survey data © Crown copyright and database right, CC BY-SA 3.0)

London's "share" of Vehicle Tax

The idea with more merit is for Transport for London to receive some of the money raised by Vehicle Tax (what are effectively vehicle registration fees), which is currently almost entirely hypothecated for National Highways.  The Mayor’s estimate is that this is worth around £500m a year, although it is far from clear how much is spent on motorways in London in a year, it is likely to be much less than that.   

Of course this wouldn't mean the Mayor doing ANYTHING new, it's just a claim on an existing tax collected by the UK Government, which would then need to find the same money from elsewhere to pay for National Highways.

The argument of the Mayor is that London vehicle owners pay Vehicle Tax, but there are few motorways in London itself. This is true, but then I have long argued that there is a stronger case for Vehicle Tax to be hypothecated to pay for local roads not the strategic road network, because as a fixed charge, it makes more sense to pay for the roads that are used for access, not roads primarily used as arterials (which would be paid for by usage-based charges).  However, without changing the policy around use of Vehicle Tax more generally on those grounds (after all, why should London get such funding but not other municipalities), it seems unlikely that much of a case can be made for Transport for London to get such money for its roads. 

So that idea isn’t going anywhere either.

There is also a proposal to tax online deliveries (in London), which seems difficult to administer and enforce (as there would be a need to identify all those undertaking delivery activities, which can include anyone with a car contracted to deliver anything from a retailer). 

More road pricing?

The Government has been encouraging the Mayor to be more ambitious and implement a wider road pricing scheme to manage congestion and as a corollary, generate the revenue needed.  It appears the Mayor is not interested, having already implemented an Ultra Low Emission Zone (ULEZ) across a wide area (within the North and South Circular Roads) with some controversy, although it doesn’t raise much revenue.  However, what could the Mayor do?

The Mayor has considerable powers to implement road pricing, with the purpose of managing congestion, not raise revenue, so could consider a number of options.  Here are some of them:

1. Multiple zone charges: Whether area charges as at present (capturing all vehicle movement within an area) or more simple cordons, London could become a patchwork of congestion charging zones at peak periods. Crossing between zones could be subject to a charge, a little like underground fare zones.  The main difficulty with this idea is that it would seem inherently unfair for those living or with businesses located adjacent to a boundary to have to pay to travel in one direction, or to have a cost in the way of customers from that direction.  Unlike tube boundaries, it isn’t easy to soften that.  In any case, it could be an option, and it is not any less blunt than a greater London boundary charge.

2. Strategic corridor charges:  Congestion charges could be applied on some congested corridors, this could include some Thames Crossings (Blackwall Tunnels will have a toll introduced when the Silvertown Tunnel opens), parts of the North Circular Road, A40, A4, A13, A10 etc.  These would need to be carefully designed to minimise diversion of traffic, but could be implemented at specific times to lower congestion on those routes (and would generate revenue).  They could even be designed to exempt shorter trips by requiring vehicles to cross two or more points to be fully charged.  Key would be to only apply charges at times of peak demand, not all day like the current congestion charge.

3. Distance based charge with a high flat fixed fee:  The theoretical best solution would be to enable road pricing by distance, time and location, so those that drive the most miles, at certain times at certain locations, pay more.  Such a system could be trialled, using telematics systems already built into some cars and trucks, and new systems that could be installed in suitable vehicles.  Users could choose to pay by mile, or pay a high flat fee instead, at least during times of peak travel (such a system could be zero rated during off peak hours or weekends).  It could be limited to travel within the North and South Circular Roads, with those roads not charged, and could have charge rates that vary by route/road type (higher on B and unclassified roads, lower on A roads to discourage rat-running).  The big issue with this option is it needs time and needs vehicles to be suitably equipped with the technology to make it work (the idea in Brussels of using mobile phones for this is not without merit, but has bigger challenges around enforcement). 

Key to making any wider congestion pricing scheme be acceptable is that it needs to deliver a significant improvement in the level of service for those paying. That means it should ease congestion, considerably.  Net revenues should also ensure that road maintenance is at a suitably high standard because it would be inefficient and unfair to be paying by mile and have potholed roads.  It also means there should be some capital works to address bottlenecks, such as fixing Hammersmith Bridge, but also intersections that are poorly designed, and even plugging the grossly inadequate sections of the North Circular.

It seems unlikely such a radical step would happen, but if it did it would go a long way towards encouraging the sort of modal shift the Mayor says he wants, as well as reducing emissions and significantly improving the productivity of London – as cargo, commercial vehicle users and buses could all operate much more efficiently than at present.  Given around half of all London households don’t have a car, it seems likely that if presented as a package to avoid Council tax increases, improve congestion, improve road maintenance, make bus services more reliable and lower emissions, it might get support. 

Meanwhile... tinkering

Meanwhile, the Mayor has announced that he is cutting back the congestion charge operating hours from 0700-2200 to 0700-1800 (as it was before), which will cut revenue by about £60m a year, although it will still operate between 1200 and 1800 on Saturdays and Sundays. Discounts for fleets paying automatically or anyone paying automatically are to be abolished as well, effectively increasing charges for light commercial vehicles. This is, of course, just tinkering.

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