Number 59 - May 2003
The London Congestion Charge: Cautions
By Wendell Cox
This op-ed article appeared in the Daily Telegraph (London) on February 17, 2003, the morning that the London Congestion Charge took effect. By Wendell Cox (Filed: 17/02/2003) If you've got to work in central London today, then congratulations. It may not feel like it, but pricing roads makes sense, as it makes sense to pay for groceries at the checkout rather than through the general tax bill. Just as the Russians no longer stand in bread lines, British drivers should stop queuing. They queue because government has failed to provide sufficient road capacity, but at least there has been progress. The Blair Government's recent rejection of the theory that "building maternity wards makes more babies" has brought at least a chance that increased road demand will mean more road capacity, instead of the doctrinaire hectoring about public transport that makes politicians and misinformed environmentalists feel good, and drivers feel bad.London's congestion pricing scheme is without precedent. Singapore applies a similar charge, but the area covers less than one fifth of that of London's, with one fifth of the employment, and with far fewer entry points. The challenge is much greater in London.Looming larger than congestion is the future of central London as an international business centre. The scheme's impact could be positive, but the risk is that a negative impact might not be evident until it is too late to take corrective action.There are two principal concerns here. The first is that it is not enough for the Mayor to commit to use the money raised to improve London's transport. Not every pound spent on transport purchases a pound of value, as London Transport proved 20 years ago, when costs per mile escalated at well above the rate of inflation.The Mayor may have learned a little about the economics of public transport since then, and his transport director, Bob Kiley, may not have brought with him from America the blatant disregard for cost control that pervades public transport there.Unfortunately, it does not augur well that Transport for London's quarterly bus performance reports on the internet do not even contain a pound sign.After the demise of the GLC, London Transport began to put its bus services out to competitive tender. The result is a bus system with costs per mile which are little more than half the 1985 rate, which has added more bus services than operate in Milan, Munich, Vienna and Brussels combined. Unsurprisingly, passengers have returned.Mr Livingstone should pay heed to the recent report from Alistair Darling, the Transport Secretary, which noted the importance of ensuring new transport funding is not eroded by cost inflation. A simple test can be applied: any additional public transport service should cost no more per mile than similar services that are already provided.The Transport for London annual report should have to provide a complete accounting of the costs of the improvements and their relative productivity. The Mayor has a unique opportunity: if he can ensure the new money reaches the street in service, congestion charging is much more likely to be successful. The second concern is more serious. The charge will work only if it discourages cars, but not people, from entering central London. There is a popular perception that reducing automobile use is an inherent good. It is not. Automobile use is accompanied by, and even creates, economic activity, and it is not always simple to reduce one without the other.This was illustrated vividly in Washington DC last autumn, where shopping travel slumped because of the activities of two guys with a car and a gun.These potential economic consequences are no small matter. Central business districts continue to lose market share to other parts of their metropolitan areas and some are experiencing declines in total employment. Over the past five years, the world's largest central business district, Tokyo, has lost nearly 100,000 jobs.From 1990 to 1999, more than 200,000 jobs were lost in the 11 central arrondissements of Paris. Central London is unique in having added 200,000 jobs over the past decade, an increase which almost equals the total employment inside the Singapore charging zone. Even so, central London has still created fewer jobs over many years than in the suburbs and the South East.The congestion charge could drive people and businesses away. Once gone, they are not easily brought back. They might go to Canary Wharf or Croydon but they might leave town altogether, to the M25, Toulouse, or even Bangalore.When companies do go, public relations considerations often conceal their real reasons for leaving. Politicians in Washington State, for example, still do not comprehend the extent to which their unfavourable tax policies impelled Boeing to take flight to Chicago. A business exodus can be well underway before it becomes obvious to City Hall. London is a world city in a world that needs them less every day. It will be as vital for Mr Livingstone to monitor employment and shopping trends as to look at traffic levels.Congestion pricing makes all the economic sense in the world, but it remains to be seen whether it makes economic sense in central London.· Wendell Cox is principal of Wendell Cox Consultancy in St Louis. He was a member of the Los Angeles County Transportation Commission and the US Congressional Amtrak Reform Council. He is a visiting professor at the Paris Conservatoire National des Arts et Metiers.
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