Evaluate the success (or otherwise) of the congestion charge now in operation in London? In the light of your evaluation and relevant economic arguments discuss the case for introducing congestion charges in other congested areas.

ECN 117: Economics in the News 030150498 Mehul Kishor Somani

The Congestion Charge is a transport strategy to reduce traffic congestion that has been put in to operation in Central London by the current mayor of London, Ken Livingstone. The way it works is that there is a five pound daily charge from Mondays to Friday between 7am to 6.30pm for vehicles that wish to travel in 8 square miles of central London.

The program has been has highly rewarding to government revenue. It is expected to raise revenue between a hundred and thirty and a hundred and fifty million pounds per annum, this figure excludes a further thirty million that could be made from penalty charges.

This increase in government revenue could be highly beneficial as it could be used to increase the quality of public transport and thus be used more by the public. If the usage of public transport increased, it could mean that more employment could be needed to accommodate this increase.

Although the scheme is expected to create a lot of revenue, the program has cost the government two hundred million pounds to set up. If the estimated figures are correct the government will make up the money spent in under two years. But due to the fact that the government has invested so much money in to the scheme it may have had to cut back in other areas such as the health service. This could mean that areas such as the health service may decrease the quality of their service.

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One of the main issues that the scheme was introduced was to decrease congestion in central London. Congestion is the main cause for air and noise pollution. By introducing the congestion charge scheme, 50,000 fewer cars are traveling in to central London thus it has decreased the level of congestion and in affect decreased the amount of noise and traffic pollution which will help stabilise any problems caused by pollution (e.g. acid rain).The Managing Director of Surface Transport at TfL Peter Hendy said:
“Congestion Charging is proving to make a real difference for the better for
those who work in and visit London."
“Traveling into and through Central London by road is now quicker and more
reliable than at any time in recent memory.
“Bus services too are vastly better, quicker and more reliable since the start
of congestion charging. London’s buses are now providing a truly high quality
alternative to the private car in Central London."
Central London consists of many shops and business that rely on passing trade, and due to the congestion charge there has been a decrease in people coming into central London for a variety of reasons. The ‘Footfall Index’, a measure of people visiting retail
centers, indicates a 7 percent year-on-year decline within the charging zone,
and that retail activity in central London during the first half of 2003 was
notably lower than the equivalent period in 2002. (Graham Goodwin Senior Press Officer
Congestion Charging - 6 Months On). Thus meaning that there has been a drop in trade which has affected the businesses in central London. Due to this there have been many job losses as a result because businesses have to make up the money that they are loosing in the fall in customers with their labour, which increase the unemployment in London, thus would cost the government in unemployment payments.

London is the biggest city in England and Central London is the largest congested area, it alone can be the same size of a small city. One of the reasons that the congestion charge will be successful in London is due to the fact that central London is of a size that the government knows that the two hundred million pounds being invested in to the scheme will be almost certainly made back with in two years, if not sooner. In other smaller congested areas, it would not be practical due to the size of other cities and it also will not be as financially viable. This is because other smaller congested areas have not as much congestion as central London thus not as much revenue will be created by the scheme in other areas.

The congestion has been said to be highly successful in central London.

(Graham Goodwin Senior Press Officer Congestion Charging - 6 Months On)
”The congestion charging scheme directly tackles four key transport priorities
for London: reducing congestion; improving bus services; improving journey time
reliability for car users and making the distribution of goods and services
more reliable, sustainable and efficient. It has also raised significant funds
to improve London’s transport system.”

If the congestion scheme has helped central London reduce congestion, improve its bus service, making the distribution goods and services easier and raised funds to help the local transport system then it is very likely that the same scheme in other congested areas will have the same affect. The success can be seen in the congestion charging scheme in London so quickly because of the size of it. In other areas the success may not be able to be seen as quickly, but in the long run the outcomes will most likely be the same.

The reason the congestion charge has been successful in London is that people have the option of travelling by tube, this scheme would be difficult in other congested areas as no where has the facility of the tube system. Not all congested areas have this service. It is because people have transport options in the central London congestion scheme that it is fairly successful. If some cities did install the congestion charge, it would give people whom are unable to pay the charge or refuse the charge limited ways of travelling. Some cities only have the bus service. This would decrease the quality of the bus service due to overcrowding and make it less efficient.

The congestion charge has decreased the number of cars travelling through central London by 16%; this would decrease the pollution in central London. If the congestion charge was installed in other congested areas it would mean that the country as a wholes pollution would decrease, this would then help such environmental issues like acid rain and global warming.

As the point earlier was made, much passing trade has been affected due to the congestion charge. If the congestion charge was installed in to other congested areas, it would be doubtful that they would be to cope with the loss in trade, and thus have to make more people unemployed as a result of the revenue lost by the charge. London has been able to cope due to its large population, but other congested areas being smaller wouldn’t be able to survive the charge.

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