Realist, not conformist analysis of the latest financial, business and political news

About That London Congestion Charge Rise

From our Swindon correspondent:

From the Evening Telegraph

Sadiq Khan has been forced to hike the congestion charge to £15 a day to help fill a financial black hole in London’s transport system caused by coronavirus, the Evening Standard can reveal.
When the congestion charge was first introduced into London, one of the disappointments by the local government was that it didn’t raise as much money as expected. Because something they hadn’t really considered is that some people change their behaviour when a thing is taxed. Maybe many can’t avoid it, but some will.
The point of a congestion charge is similar to the point of parking charges. It’s to allocate a scarce resource better, and the best way to do that is to charge people for it. Yes, you spend the money on the local residents, but it’s not supposed to fill financial black holes.When you start thinking like that, you get into all sorts of problems. If a town centre charges more than it needs to, you risk people not coming to your town. Maybe they go elsewhere for their shopping (this happened with Swindon under Labour) which has economic effects. But you’re also into Laffer territory, where your total parking take falls. You might make more per shopper, but you reduce the number of shoppers.
In the case of London, re-introducing the charge, while also having buses as a bit risky probably means a lot of people will carry on working from home. £15 to go into the office + parking each day?
What would have been a better idea would have been to just told the transport unions that they’re going to have to take a short-term haircut. No money coming in, take it or leave it. That’s most of the cost of the rail network: the drivers and staff.
0 0 votes
Article Rating
Notify of

Newest Most Voted
Inline Feedbacks
View all comments
4 years ago

If you take the bus/cycle/walk instead of driving because of the congestion charge, is that tax avoidance, and if not, why not?

4 years ago

Sadiq is increasing the price of doing something fewer people actually pay to do. It’s going to be a bit like hiking the prescription charge in an area where hardly anyone pays it. This is not going to work out well. If the purpose of the charge is to reduce congestion, to make traffic flow a little more predictably, and the roads a little emptier for the walkers and cyclists then it should be a charge on all vehicles entering the zone, which would have to include the disabled ( sorry guys ), EVs, and other exempt categories.

bloke in spain
bloke in spain
4 years ago

“The point of a congestion charge is similar to the point of parking charges. It’s to allocate a scarce resource better, and the best way to do that is to charge people for it. ” Did it to allocate a scarce resource better? Not sure about that. My experience of the introduction of both London’s congestion charge zones is not much happened to the density of traffic. But the average value of cars using them rose. Very noticeable at th4e start when traffic volumes dropped. Definitely discernable as volumes crept back up to their previous levels. Not hard to work… Read more »

Would love your thoughts, please comment.x