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What price roads?

What price roads?

Transport Policy 1993 ! (1) 68 73 What price roads? Practical issues in the introduction of road-user charges in historic cities in the UK Michael N...

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Transport Policy 1993 ! (1) 68 73

What price roads? Practical issues in the introduction of road-user charges in historic cities in the UK

Michael Nevin Senior Consultant, Touche Ross & Co, Peterborough Court, 133 Fleet Street, London, EC4A 2TR, UK

Les Abbie Associate, Touche Ross & Co, Peterborouqh Court, 133 Fleet Street, London, EC4A 2TR, UK

The paper summarizes the results of a survey of 11 historic British cities undertaken by Touche Ross in 1992, to identify the central issues in the introduction of road pricing to complement traditional traffic management methods. The results of the survey suggest that the single most important constraint is public acceptability. The authors conclude that public concern could be overcome, and road pricing made more effective as a tool of traffic management, if some of the revenues generated were applied to public transport, and if the introduction of road prices were preceded by a process of consultation and public education. Keywords: Road pricing, congestion,transportpolicy

Until recently, interest in the concept of imposing direct charges for the use of road space in the U K was limited to transport economists. However, during the 1990s, a number of factors have conspired to place road pricing firmly on the political agenda. The first is continued growth in demand for road space, arrested only temporarily by the economic recession of the early 1990s. Historically, U K Governments have responded to demand growth by funding increases in road capacity directly from taxation revenues. In the 1990s, attempts to restrain the growth in public expenditure, combined with the wider desire of the Conservative Government to extend the role of private enterprise in the delivery of services previously delivered by the public sector, has led to a reassessment of the possible use of the road-user charges. There are three principal motives for charging for roads: • to raise revenue towards the recurrent costs of maintaining and repairing roads; • to raise revenue towards the capital costs of new road construction; • to regulate traffic flows. 68

Since the 1920s, revenue to cover recurrent road costs has been raised through vehicle licences. The prices of these are related to vehicle axle weights which are taken to be a valid indicator of the damage which a vehicle might be expected to inflict on a road surface. However, the costs of vehicle licences are fixed and thus not related to the use made of a road by a particular vehicle. Charging tolls to raise revenue towards the costs of road construction has traditionally been limited to bridges and tunnels in the UK, including the Severn Bridge and the Dartford Tunnel. Since the publication of ' N e w Roads by New Means' (Department of Transport, 1989), the British Government has actively sought to extend private financing of new road construction through the use of tolls. The purpose of charging for roads as envisaged in 'New Roads by New Means' was principally to raise additional finance for road construction rather than to reflect the social or economic costs of road use, or to regulate traffic flows. Indeed, road tolls become more effective as means of raising revenue as the demand for road space becomes less price-elastic. By contrast, where road prices are imposed to

0967 070X/93/010068~06 ~

1993 Butterworth-Heinemann Ltd

What price roads?." M. Nevin and L. Abbie

regulate traffic flows, it is desirable that demand for road space is price-elastic. Road prices are being used to regulate traffic in Singapore and certain Scandinavian cities, but their introduction on a pilot basis in Hong Kong generated fierce controversy, and similar doubts exist about how politically acceptable road charges would be in the UK. However, for a number of historic British cities other options to regulate traffic flows are limited. The potential for increasing road capacity is constrained by the physical layout of the city. Traditional traffic management methods such as parking restrictions, junction improvements, park-and-ride schemes, oneway systems and cycle and bus lanes may improve traffic flows for a time, but any beneficial effect from them is likely to be swamped by continued growth in traffic volume. The conclusion is that, as the 1990s progress, a number of traffic authorities will face a stark choice between worsening congestion or the introduction of some form of road-user charge to reduce road use during peak periods.

Road pricing Road pricing is an approach which goes directly to the heart of the problem by focusing directly on the real cost of road space and its value to users. It can help local authorities to: • manage urban congestion effectively by presenting users with the real costs of their actions; and • generate revenue, possibly for use in improving local transport infrastructure. Road pricing should not be seen in isolation from other traffic management approaches. It is designed to 'internalize' external costs such as time delays and vehicle operating costs (VOCs) imposed by the entry of additional vehicles onto a congested road network, by levying a charge on them. Certain methods of levying road-user charges are feasible only in certain types of built environment. The easiest practical method of implementing a roadpricing scheme is to levy a charge on motorists and lorry drivers as they enter a city, as is done in Singapore, Oslo and Bergen. This is the so-called 'cordon' approach. For such a method to be practical, it is necessary that there are relatively few entrances, and there are points on each entrance at which toll meters could be set up easily, so forming an effective cordon around the city. Thus, the implementation of such a scheme requires 'walled cities', or cities with only a few possible means of entrance. Cordon pricing is the simplest method of charging for road use. It can be refined by replacing manual with electronic toll gates into which vehicles' seasonal passes are inserted and debited at differential rates depending on the time of day, with more units debited at peak hours than at off-peak hours, rather like a British Telecom chargecard. Electronic toll gates were Transport Policy 1993 Volume 1 Number 1

introduced in Oslo in December 1990, and more recently a similar system has been introduced on the Dartford Tunnel. More sophisticated schemes have been proposed in Cambridge and Hong Kong. In the Cambridge scheme, vehicles would be fitted with meters, operated by the insertion of cards containing credits. Free moving vehicles would not be charged, but the meter would start deducting credits in slow traffic in order to provide an incentive to vehicle drivers to find alternative routes or leave the network altogether. Three basic elements of time, distance and inertia would be combined to trigger payments above a threshold, provisionally set at four stops within any half kilometre, or alternatively when the time taken to travel any half kilometre rises above three minutes. Although theoretically superior to a cordon-pricing system, in that it would allow a closer approximation of road-user charges with the marginal costs of road use, the Cambridge scheme suffers from the potential disadvantage that charges would not be stable and predictable. Consequently, road users would not know in advance what the costs of their journey would be. This might provoke resistance to the scheme from road users. In addition, there could be practical difficulties in its operation: for example, ifa vehicle ran out of credits on its card and was stopped in heavy traffic. The Cambridge scheme indicates that, with advances in information technology, quite sophisticated charging structures have become theoretically possible. However, at least in the early stages as motorists become used to the idea of road pricing, there may be benefits in sacrificing theoretical optimality for practical feasibility and acceptability. Practical considerations would tend to support the selection of roadpricing schemes, which are: • easy to operate and enforce (pointing perhaps to relatively low-tech solutions such as toll gates, rather than high-tech options such as Smart cards, at least in the first instance); • perceived as equitable, related to ability to pay and the use made of the road; • based on fixed rather than flexible charges -although there could be more than one fixed charge, such as a higher charge in the rush hour than at non-peak times.

The Touche Ross survey In the period between February and June 1992, Touche Ross carried out a survey of local authorities responsible for traffic management in a number of Britain's historic cities. These cities were selected because they were all characterized by a street plan dating back many centuries and a built environment which could not be radically changed without destroying part of Britain's cultural and historic heritage. These factors suggested that the historic cities surveyed 69

What price roads?. M. Nevin and L. Abbie

might experience more acute traffic congestion than new towns designed for motor vehicles. They may also imply that traditional solutions to traffic congestion, such as extending road capacity or planning lower densities of development, are not available in the cities covered by the survey. Our survey was intended to gauge the views of responsible officials on such issues as: • • • •

the extent of the traffic problem that they faced: the costs imposed by this problem; how much it would be worth spending to address it; how they intended to address the problem, and in particular whether they had considered road pricing as a potential instrument in their traffic management strategy: • what practical problems they foresaw in implementing a road-pricing scheme.

The methodology used for surveying the selected authorities was a multiple-choice questionnaire divided into three main sections. The first section collated basic statistics on the city and its road network. The second section comprised questions about the extent of the traffic problem, the extent to which it had worsened in recent years, and forecasts of its future trends. The third section covered the measures being taken to address the traffic problem, with specific reference to road pricing as one possible method. In total, there were 19 multiple-choice questions. Apart from an opening question on basic statistics, the other questions were qualitative in nature, requiring the respondents to rank three or four options provided. Space was also provided for comments. In order to obtain honest responses, an undertaking was given that answers would be non-attributable. Of the 12 authorities to which questionnaires were sent, 11 replied and one did not. The survey results are summarized in the 17 questions in Table 1 and analysed below

Survey results The present situation The II cities covered by the responses have a combined population of 1.6 million people, with an average population of just under 150 000 each. With respect to the extent of the traffic problem, three of the 11 authorities regard the present level of traffic congestion during peak hours as very serious; seven regard it as moderately serious; and only one regards it as not serious. Again with one single exception, traffic flow during peak hours was described by all of them as subject to frequent delay or often at a standstill. The average time taken to complete a fivemile car journey during peak hours was estimated to be between 15 and 30 minutes by nine of the 11 respondents; between 30 and 45 minutes by one respondent, and approximately 50 minutes by one respondent. Traffic flows were judged to have wor70

sened during the past five years in six of the cities surveyed, and to have remained the same in the remaining five. In the five cities where traffic flows had not deteriorated during the past five years, the reason given was improved traffic management rather than lower traffic flows or increased road capacity. However, even in those cities where traffic management measures had eased traffic flows in recent years, a deterioration in future flows was anticipated. Eight of the 11 authorities projected further deterioration in road traffic flows over the next five years; two forecast that traffic flows would remain the same; and only one forecast an improvement because of better vehicle traffic control. The responses to the questionnaire also indicated that the traffic situation may be impeding new development in the cities surveyed. Three of the 11 respondents identified access and parking issues as serious obstacles to planning approvals frequently leading to delays in granting planning permission or to the rejection of development proposals. A further seven of the I l respondents identified traffic issues as a major constraint on development proposals. Only one respondent stated that traffic issues constituted only a minor constraint. The picture that emerges from the 11 cities surveyed is, with only minor exceptions, consistent between them. Road traffic is subject to serious congestion at peak periods, with frequent delays. The situation has generally worsened in recent years and is forecast to deteriorate in future years. It represents an impediment to new developments. Responses to the problem Ten of the I I cities surveyed have a comprehensive traffic management plan. This plan is mainly focused on measures to regulate traffic flows and other traffic management measures such as 'park-and-ride' schemes rather than new road construction. However, one interesting result to emerge from the survey was that only one traffic authority in the cities surveyed had attempted to quantify the economic costs of road traffic congestion in their city. The single exception was Cambridge, which has calculated the value of time delays for road users caused by congestion as £5 million per annum, Five of the cities surveyed had considered road pricing as a possible means of regulating traffic. Two (Cambridge and Richmond upon Thames) are pioneers of road pricing within the UK, and both propose systems which utilize electronic chargecards. One city has considered a cordon-pricing scheme; one has undertaken a general pre-feasibility study on road pricing as a possible traffic management mechanism: and one has examined a range of road-pricing methods and is actively considering a cordon scheme entailing a charge on entry to the city centre. In response to our question on major problems foreseen in implementing a road-pricing scheme, overTransport Policy 1993 Volume 1 Number l

"e

9. Does a comprehensive traffic management plan exist? 10. What is its annual average cost (£000s)? 11. Allocation of spending: New road construction Maintenance & upgrading of roads Traffic regulation & flow controls Other traffic management

solution

5. Average time (minutes): for a 5-mile journey at peak times 6. Have traffic flows worsened in the past 5 years? 7. Projection of traffic flows for the next 5 years 8. Are traffic issues a constraint in planning applications?

4. Traffic flow at peak hours

The problem 3. Extent of traffic problem

2. Present road capacity: Class 1 road (miles) Secondary road (miles)

Basic statistics 1. Present population

Serious

Major

1009/o

N/A

N/A

Improve

Worsen

100

Yes

Yes

Yes

22.5

22.5

Yes

Quite serious Frequent delay

15 N/A

85000

2

Very serious Frequent delay

18 2

84700

1

9~

17~o

1~o 73~

N/A

Yes

Major

Worsen

Yes

37.5

Very serious Often standstill

22 3

100000

3

80~o

20~

150

Yes

Serious

Worsen

No

22.5

Not serious Some delay

11 5

72000

4

N/A

N/A

No

Major

Worsen

Yes

22.5

Quite serious Often standstill

112 789

437000

5

7~o 4~

89~o

3600

Yes

Stay the same Major

No

22.5

Quite serious Frequent delay

9 200

100000

6

50~

50~o

500

Yes

Serious

Worsen

No

50.0

Quite serious Frequent delay

24 155

90000

7

N/A

N/A

Yes

Major

Worsen

No

22.5

Quite serious Frequent delay

45 355

181000

8

N/A

N/A

Yes

Major

Worsen

Yes

27.5

Very serious Frequent delay

8 26

160000

9

Table 1 Results of the Touche Ross road-pricing survey conducted in a sample of 11 historic British cities, February-June 1992

N/A

N/A

Yes

Major

Worsen

No

22.5

Quite serious Frequent delay

57 489

197000

10

20~o

80~

500

Yes

Stay the same Minor

Yes

22.5

Quite serious Frequent delay

21 19

101000

11

2"

t,,,

'....O bO

12. Estimates of indirect costs of traffic congestion in the city each year: pollution time delays for road users additional vehicle operating costs other 13. Has road pricing ever been considered for traffic regulation'? 14. Road pricing methods: cordon or tollgate prices electronic chargecards other 15. Major problems foreseen in implementing a road pricing scheme: selection of charge scale selection of payment points acceptability among road users administration political acceptability adverse commercial ettects lot the city central govt/DTp approval 16. Is road pricing currently under serious consideration'? 17. To what use should revenue from a road-pricing scheme be applied: to help fund road construction to fund traffic management measures to sabsidize public transport to fund general expenditure

Table ! continued

NA

No

No No No

No Yes Yes No No No No No

No Yes Yes No

No

No No No

No No Yes Yes No No No No

No Yes Yes No

2

N A

i

Yes Yes No

Yes

Yes

No No

No No Yes No No

No Yes No

Yes

5(XX)

3

Yes Yes No

No

No

No No

Yes No Yes No No

No No No

No

NA

4

Ycs Yes Yes

Yes

Yes

No No

Yes Yes Yes No No

Yes Yes Yes

Yes

NA

5

Yes Yes No

No

No

No No

Yes Yes Yes Yes No

No No No

No

NA

6

Yes Yes Yes

Yes

No

No No

No No Yes No No

No No Yes

Yes

NA

7

Yes Yes No

No

No

Yes No

No No Yes No No

No No No

No

N'A

8

? Yes No

No

Yes

No Yes

No No Yes Yes No

No Yes No

Yes

N/A

9

Yes Yes No

No

No

Yes No

No No Yes No No

No No No

No

NA

10

Yes Yes No

No

No

No No

Yes Yes Yes No Yes

Yes No No

Yes

N A

11

x..

5

e~

What price roads?: M. Nevin and L. Abbie

whelmingly the most important was acceptability among road users. All respondents saw this as a major practical obstacle to road pricing. Three other issues of secondary importance were: • selection of charge scale, identified by four of the 11 respondents as an important consideration; • selection of payment points, also identified by four respondents as important; • administration of the system, identified by three respondents as important. The possible adverse commercial effect of a roadpricing scheme was identified as a constraint in two cities. Two other issues, identified by one respondent each, were political acceptability and central government approval of any possible scheme. Our final question related to the use to which revenue for a possible road-pricing scheme should be put. A clear theme emerging from the responses was a desire to 'ring fence' road-pricing revenues. All respondents believed that road-pricing revenues should be allocated to subsidies for public transport. All but one thought they should also be used to fund other traffic management measures. Three of the respondents believed they could be used to help fund road construction. Only two believed that road-pricing revenues should be used to fund general local government expenditure.

Conclusions We draw the following conclusions from the survey results. Firstly, the road traffic problem in Britain's historic cities is serious. Secondly, all the cities surveyed either already have a comprehensive traffic management plan or are in the process of preparing one. However, only one authority anticipates that this will actually improve the traffic situation. The goal of the others is to mitigate its worst effects. Most authorities forecast a continued deterioration in the traffic situation in the medium term. Somewhat surprisingly, with only one exception none of the authorities surveyed had estimated the economic costs of traffic congestion in terms of pollution, additional vehicle operating costs or time delays for road users. The only basis for calculating how much it might be worth spending to address the problem was therefore the judgement of local traffic managers and political leaders. In addition, the absence of congestion costs estimates makes it impossible to calculate the level of road prices that would be economically efficient (ie prices which reflect the marginal costs of road use). The survey identified the major practical barrier to road pricing as being its public acceptability. To some degree, public resistance to road pricing may also reflect ignorance of the costs of a 'do nothing' option

Transport Policy 1993 Volume 1 Number 1

to road users. The survey also provided a clue as to how public resistance might be overcome: namely, by integrating it within a comprehensive traffic management strategy, and allocating revenues from road pricing towards the costs of public transport subsidies and other measures to improve traffic conditions for all users. Our overall conclusion is that the problem of congestion is likely to worsen in Britain's historic cities. Road pricing is a potential instrument that could assist in tackling it. Public acceptability is the major barrier to introducing road pricing. Political leadership is likely to be necessary at both city and national level to win public support for road pricing as part of an integrated programme to improve traffic conditions. However, before such leadership can be exercised, detailed research is required on the economic costs of traffic congestion and on the possible impact of road pricing on traffic flows. There is little information on how traffic flows might be expected to respond to road prices. In the limiting case where they do not respond at all (ie where the price-elasticity of road demand is zero), the imposition of road prices would be totally ineffective as a means of regulating road use, and there would be no alternative to the use of 'command and control' methods such as banning certain types of traffic from using certain roads or lanes during peak times. Our survey suggested two methods by which the elasticity of demand for road space might be increased: • by hypothecating revenues raised from road prices to public transport subsidies, in order to make public transport cheaper relative to private transport and thus encourage a shift of peak hour traffic from private vehicles to modes such as buses and trains which make more efficient use of limited space; • by a process of consultation and public education to make road users aware of the costs of road use and the alternatives available prior to introducing road prices. The first measure would reduce the cost of public transport relative to private transport, and thus encourage a substitution effect. The second measure would assist in changing the preferences of road users, and thus shift the demand curve for road use downwards. Used in combination with road-user charges, these measures would help to overcome road users' objections and enhance the effectiveness of charges in reducing pressure on urban road space during peak periods.

References Department of Transport (1989)New roads by new means: bringing in public finance, CM 698, London: HMSO

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