Discuss the merits of road pricing (25)

Authors Avatar

Katie                Easter Homework

Discuss the merits of road pricing (25) 4

  1. Road Pricing – a direct charge for the use of road space

Negative externality – these exists where social costs of an activity is       greater than the private cost, congestion is an example of a negative externality

  1.  For example, The London Congestion Charge – a flat rate indirect tax levied on all vehicles entering a designated charging zone between 7 am & 6 pm, Monday-Friday. It was introduced in Feb 2003 at the rate of £5 per day. It was  to £8 per day in July 2005. In Feb 2007, the charging zone was doubled in size to cover a substantial zone in London. This is an example of hypothecation (a situation where revenue from tax is  directly allocated to some other purpose) as most of the new revenue has been used to improve bus services

Another example of road pricing is in Singapore you must buy a car permit for 10 years, which costs up to £75,000.

  1. Road Pricing is beneficial to an economy as it is a way of internalising the external costs of congestion and makes the polluter pay. The fact that the ‘polluter’ now has to pay for the negative externalities exerted by the congestion they cause, means that they will be less likely to use their cars as often, to avoid the charge, or use alternative (more economical) means of transport such as the train or tube, or they may simply think twice about using their car if it isn’t necessary. The London congestion charge has, for example meant that congestion in the extended zone has decreased by 20% and there are 8-12% less vehicles being used on a daily basis that before the charge. Showing that road pricing has decreased congestion.

The hypothecation of road pricing has meant that the £120 million raised per year can be spent on improving public transport services. This means that, as these more environmentally friendly methods of transportation are improved, people will be more willing to use them as an alternative to cars, meaning a further reduction in congestion, and thus a reduction in the harmful emissions the economy produce. Meaning there are less negative externalities in the form of pollution being exerted by the economy. Less pollution means a decrease in money the government have to spend through the NHS on diseases that are caused by pollution from car emissions, such as asthma, lung disease lung cancer etc.

Join now!

The reduction in congestion will mean a decrease negative externalities in the form of:

  • Wasted fuel – fuel is an extremely finite resource, in every single economy, the reduction in congestion means less fuel is wasted waiting in traffic jams. If people have to spend less on fuel they will have more disposable income to spend on other things such as leisure and shopping. This will boost demand in the economy. Causing the Demand curve to shift to the right, meaning a  in unemployment, an  in output,  productivity &  economic growth
  • Wasted time – as ...

This is a preview of the whole essay

Here's what a teacher thought of this essay


**** Some very good points here. The evaluation at the end is particularly strong and the writer makes a good case for congestion charging. They have not researched sufficiently into existing and proposed schemes where the use of technology overcomes many of the problems raised.