Microeconomics Assignment -Congestion charge

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Microeconomics Assignment -Congestion charge

When driving into central London nowadays, vehicles are subjected to a charge which is known as the congestion charge. The congestion charge came into force on February 17th 2003 and is applicable between the hours of 7am and 6.30pm Monday to Friday excluding bank holiday.

        The Original purpose and introduction of the congestion charge was to reduce congestion in London which in turn will hopefully reduce pollution and to use the revenue generated from the charge to increase the quality and quantity of London transport system.

        In this essay I will discuss the positive and negative externalities that have arisen from the congestion charge and whether or not it has been a success


When the congestion charge was first introduced in Feb 2003,it main aims were as stated in the congestion charge guidelines document to reduce congestion, make improvements in bus services, improve the journey time for car users and to make the distribution of goods and service more efficient and use the revenue generated to improve London transport system. When first introduced the congestion charge was £5 but since July 2005 has been increased to £8.Certain vehicles are exempt from paying e.g. taxis, emergency services, licensed minicabs, blue/orange badge holders and alternative energy sources. Residents are permitted to a discount.

The congestion charge is eight square miles in distance in the heart of London and drivers can pay the charge through several sources, e.g. telephone, text, internet, post. Drivers that travel into London charging zone on daily basic can experience a discount by purchasing weekly, monthly or annual passes.

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        A positive externality that has arisen from the congestion charge is that all the revenue generated from the charge must be reinvested in transport for London. It reported that 130million a year is raised from the charge .Of  which 84million has being spent on new buses,36million on increased road safety e.g. street lighting and 4million on CCTV cameras on buses to enforce bus lanes and cut down on crime on buses. Since last spring 300 new buses, and 6 new routes and night routes have been introduced using the revenue generated from the congestion charge.



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