Categories

Archives

Congestion prices, carbon taxes, and the art of the possible

If you ask an economist about transport policy, it’s a certainty that they will mention congestion pricing at some point. It’s easy to see why. Currently, we manage our roads like a Soviet supermarket: access is rationed by queues rather than prices. As a result, we get inefficient outcomes.

latvian-bread-line

The New Zealand transport system?

The theoretical and empirical case for congestion pricing is strong. In places where it has been implemented, such as London and Stockholm, it has increased vehicle speeds, improved accessibility, cut pollution, and improved safety. Not bad.

Because congestion pricing works, it tends to become quite popular once people can see the results. Although a majority of Londoners and Stockholmians opposed tolls at the outset, around 70% of residents in both cities now support them. But all of this raises a question: why haven’t more cities implemented congestion pricing?

I was thinking about this when reading a pair of articles that David Roberts (Vox) recently wrote about carbon taxes – and why they may not necessarily be the best policy for preventing climate change. Many of the points that he raises are also relevant to a discussion of congestion pricing.

In the first article, Roberts discusses the benefits of carbon taxes (efficiency) and the problems associated with applying them to complex markets. He argues that:

Believing a single tool will accomplish everything requires seeing the economy as a frictionless machine, a spreadsheet, not what it is: a path-dependent accretion of past decisions and sunk costs, to be tweaked and unwound.

As a result, it may make more sense to intervene more directly in specific markets – say, by regulating coal-fired power plants out of existence or subsidising alternatives. The equivalent in the transport space would be to manage congestion by cobbling together a raft of policies that look unrelated at first glance – e.g. transformative investments in rapid transit and cycling, bus lanes or high-occupancy-toll lanes on more roads, and higher parking prices.

In the second article, Roberts addresses a more challenging issue: politics and the art of the possible. He argues that carbon taxes are seldom effective in practice due to several factors that make implementing them and raising the tax to an effective level a risky proposition. These include concerns about distributional impacts, or the degree to which poor people will bear the impact, and low willingness to pay to avoid harms. Both of these factors seem potentially relevant to congestion pricing as well.

Roberts points out that many of the policy recommendations made for carbon taxes are economically sensible but respond poorly to political constraints. For example:

Many conventional economists, along with some of the few conservatives who take climate policy seriously, favor a “tax shift”: using the carbon tax revenue to reduce other taxes, preferably “distortionary” taxes like payroll or income.

The idea is that you double your impact: You get less of what you don’t want (carbon) and more of what you do want (work) — more efficient markets on both sides. Harvard economist Greg Mankiw is a big proponent of this perspective, as is Bob Inglis, one of the few conservatives actively working on climate change policy.

The main thing to note about tax-shift schemes is that they address few of the political barriers facing carbon pricing.

A carbon/income tax swap would be doubly regressive — raising a regressive tax to lower a progressive one. Reducing payroll taxes might have a net progressive effect, but it is very difficult to imagine the politics working.

In the past, I’ve taken a similar view on congestion charges. I’ve argued that we shouldn’t raise money from tolls. Rather, the revenues should be distributed back to households, and especially low-income households who might be most adversely affected.

But, Roberts suggests, offering to return the revenues will not necessarily make carbon taxes (or congestion pricing, I suspect) popular with the public. Instead, a more popular approach might be to tax something bad – e.g. carbon emissions or road congestion – and reinvest the revenues in something good, like renewable energy or better transport choice:

On the 2014 National Surveys on Energy and Environment, a carbon tax with no specified revenue use polled poorly. But things changed when different uses of the revenue were offered alongside the tax.

USA Today describes the results:

[A] different picture emerges when survey participants are asked about three possible uses of the tax revenue. If used to fund programs for renewable power like solar and wind, 60% back the tax overall, including 51% of Republicans, 54% of Independents and 70% of Democrats.

A smaller majority supports a tax if the revenue is returned to them via a rebate check. While 56% overall favor this idea, support ranges from 43% for Republicans to 52% for Independents and 65% for Democrats.

The third option — using the tax revenue to reduce the massive U.S. fiscal deficit — is not popular with any political group. It is opposed by the majority in each.

The same seems to hold true in the case of congestion pricing. In their excellent textbook on transport economics, Kenneth Small and Erik Verhoef cite surveys that find that people prefer toll revenues to be either reinvested in better road infrastructure or used to improve public transport.

This points to a paradox. The best way to get people to support such a scheme may in fact be to promise to put some tolls in place (albeit tolls that they can avoid by making different choices about how and when to travel) and then spend the revenues on giving them more transport choices.

Incidentally, I would stress the word choice in that sentence. There’s a reason why people want carbon tax revenue to be put towards renewable energy projects: it promises to give them options to avoid the tax altogether. In New Zealand, where 80% of electricity is generated from renewable sources, even a high carbon tax would have a small impact on households’ power bills. People in other countries would like to be in that same happy similar position.

The same is likely to be true for transport. If we implement congestion pricing, it might make sense to pair that with investments in public transport, walking, and cycling to allow more people to avoid the tolls. That will be more likely to lead to a win-win situation: People who value being able to drive on uncongested roads will get to pay a small price to do so, while everybody else will get to choose whether to pay the toll or travel differently.

What do you think about the politics of congestion pricing?

63 comments to Congestion prices, carbon taxes, and the art of the possible

  • Mr Plod

    Thanks, Peter. Excellent post on a potentially complex, dry and polarising subject. I’m definitely in favour of a congestion tax that funds alternatives even if they are not ones I would use, for example in an area I don’t go to. When the system benefit is obvious and I’m part of the system count me in.

    • Ricardo

      Once again all these supposedly great ideas penalise the poor. Put more effort into resolving flows and you will get a better result.

      • We’ve spent sixty years solely focussed on traffic flow and it neither:

        A. Works, nor
        B. Works for poorer people.

        • Early Commuter

          I agree from a descriptive perspective, but anybody observing driver behaviour can see massive efficiency gains

          As I’ve noted before, if we could apply something like Six Sigma/Kaizen discipline to driver behaviour, I reckon we could get 50% more efficient roads.

      • Peter Nunns

        In order to build MOAR ROADS you’d have to raise taxes on everyone – e.g. by putting up rates or fuel taxes. But the gains in mobility resulting from that strategy would primarily accrue to higher-income people, who generally value their travel time more highly. (The elasticity of value of travel time with respect to income is close to 1.)

        In other words, you’re proposing to tax the poor to benefit the rich. Not exactly Robin Hood.

  • Brian

    The paradox is that the premise of managing demand through pricing is to achieve better transport outcomes without the need for so much spending. Yet to get it in place you essentially need to add another tax and then spend that extra amount on more transport stuff.

    Odd.

    • Matthew W

      Exactly. It begs the question as to what we are trying to achieve. Although having said that even if we do spend the proceeds on transport goodies, having congestion free roads will still be a massive boon.

    • Nick R

      Don’t forget that the baseline for this is spending heaps on peak road capacity. We’re pouring billions into this in Auckland. So pricing roads means no need to build more peak road capacity, or at least much reduced spend by not trying to further increase the capacity of the busiest trunk links.

      Whether you spend hypothecated road pricing revenue on alternative transport options is immaterial, you’ll save billions not building more peak road capacity.

      • Matthew W

        Isnt it immaterial whether you spend the money on roads or PT, if its unnessecary. Its hard to see how you would get much less overall spend if you hypothecate congestion charge revenue.

        • Peter Nunns

          Congestion pricing would give us good information on whether there is a need to spend additional money on roads. If the tolls that people are currently paying to travel on a road exceed the cost of expanding capacity, then there’s a case to do that. If the tolls are consistently lower than the cost of expanding networks, then there isn’t. And in that case, we can choose to spend less on transport and use the money for other investments with a higher return.

          There’s no prima facie way of saying which is the case, but I sort of suspect that we’d find that we’d over-built a bit.

          • Matthew W

            Agreed. If you hypothecate spending you cant use the money for its best use though. Having said that if we can get road prickng via this method we could change things eventually.

            I was in Manchester when they had a referendum on congestion charging. They were going to get a whole lot of extra LRT and a busway I think if they voted for congestion charging. It was going to be a two cordon scheme with the outer cordon relatively wide. Anyway it didnt go ahead, and never looked like doing so. That has made me a bit sceptical of this approach.

            Congestion charging is different from carbon taxes in a number of ways but most importantly the payers of a congestion charge get a direct benefit – congestion free roads. I personally have not seen this aspect pushed by politicians promoting a scheme and I think it is could be a key. I dont have any evidence to back that up, but my reasoning is: If you promote a congestion charge and say the benefit is all this extra PT, the assumption is that that is the primary benefit. Hence someone who thinks they will continue to drive will not see a major benefit to themselves. But if you say we will have a charge that near guarantees a travel time of 20 min from Takapuna to Newmarket any time of day, you could get a lot more support.

  • Matthew W

    Im just going to leave this here:

    http://offsettingbehaviour.blogspot.com/2016/04/against-hypothecation.html?m=1

    Also, did London and Stockholm start off with a hypothecated narrative? It seems like the real takeaway is if you just have a bit of leadership and do something you know is good, people will quickly come to see the benefits.

    • Both Stockholm and London, and Singapore have mature PT networks. Auckland doesn’t.

      Although now London’s are under enormous pressure in part because of the diversion from driving. Partly, I think, this is the behind the huge cycling boom.

      • Bruce

        Yes I was about to say the difference being that both London and Stockholm have extensive PT networks.
        I’m not overly familiar with Stockholms but I know London’s pretty well. There are very very few areas in London that can’t be accessed easily by PT. In fact the vast majority of Londoners have multiple choices (Underground, Overground, National Rail, Bus with various fare options available). There is little reason or need for most people in London to drive especially considering that PT is often a lot faster than driving. Compare that to Auckland where rail coverage is pretty minimal. Buses are for the most part infrequent and unreliable if they even are within a reasonable distance of where people live or work. Until those things are improved in Auckland a congestion charge (beyond a token minimal amount) would be quite hated by most and wouldn’t do much.
        A city the size of Auckland really should have it’s existing rail network PLUS a Northern Line to Albany (preferably linked through to Westgate and the Northern Line out there). There should also be an airport line (again looped through to Manukau also) and really there should be an Eastern line through the likes of Botany probably connecting with the Manukau/Airport Line.
        This would of course require government funding but should really be underway by the time the population hits 2 million.

        • Matthew W

          “Buses are for the most part infrequent and unreliable if they even are within a reasonable distance of where people live or work. Until those things are improved in Auckland a congestion charge (beyond a token minimal amount) would be quite hated by most and wouldn’t do much.”

          This is key. It is important to remember though that if and when we have congestion free roads via pricing, the buses will run a heck of a lot better as a result of this. But I agree, ideally we should implement genuinely continuous bus lanes (ideally median) along our arterials, up frequencies, reduce stopping frequency, improve boarding measures (off vehicle tagging, two door loading etc) and run them as a network. Most of that could be rolled out over a couple of years.

        • Another key difference is the amount of stuff you have within a short walk once you get off the train (or the NEX if you want). European cities have higher density, plus you can usually walk for more than a couple of 100 metres without having to cross a 6-lane highway. In cities like London or Paris, even the metro can often bring you within a 10 minute walk of your destination.

          Auckland was built for cars. New areas are still being built for cars only. Go admire our newest rat maze at Millwater.

          As a consequence, shops don’t really need to cluster together. Neither do they cluster at places where you can get easily using PT. Nobody can reach either the station or the shops without a car anyway (*). Note how Albany station and Albany mall are a kilometre apart, both flanked by parking lots, and separated by big roads. In my experience, whenever you go shopping around on the North Shore for anything else than groceries, you’ll end up driving kilometres from shop to shop. If you have to do that kind of trip on PT it will take days rather than hours.

          (*) Except for some lucky few. The older town centres (eg. Takapuna, Birkenhead, Milford) tend to be OK. On the other hand, areas like Albany or Wairau Valley are impassable without a car.

    • Missing Link

      I recall Brisbane City jacked up on-street parking charges and hypothecated the increased revenue into cycle infrastructure. I think that experiment worked pretty well.

    • Early Commuter

      I was also going to quote that blog!

      Raising taxes is not a bad thing in itself. More taxes means more cops, nurses, doctors, soldiers, and buses. All positive things.

      • Peter Nunns

        After all your hectoring of us for focusing on outputs (e.g. PT service provision) rather than outcomes (e.g. mobility), you come in and say that hiring cops etc is a good in and of itself?

        • Early Commuter

          I am operating on the assumption that greater inputs in terms of police numbers etc., given equal efficiency, will lead to greater outputs and positive outcomes

          PS I seldom criticise outputs, they are excellent proxies for outcomes, but I do criticise a focus on inputs and processes (a road is an input, road-hours-available is the output service, and mobility is the outcome).

          • Peter Nunns

            Your distinction between inputs and outputs is vague. To me, a police officer is an *input* into crime prevention, not an *output* of a crime prevention strategy.

            On a separate note, you’ve now made eight comments on this thread, or one in every four comments thus far. Our user guidelines discourage commenters from dominating comment threads, especially if they are hiding behind a pseudonym. We’ve tried to get in touch with you by email to suggest that you rein in your comments, but you also seem to be employing a made-up email address.

            We really discourage this kind of behaviour, and as a result I’m going to delete any further comments you make on this thread. It’s not contributing to a good discussion. Please be more restrained in future comment threads, or we will do the same.

    • Peter Nunns

      Yeah, I’d read that. I agree with him on the economics, but not on the political economy. Historically, some of the most successful and sustainable government programmes have had hypothecated revenue streams – for example, Social Security in the US. That programme gives people the sense of a link between what they’re paying in and what they’re getting out that is sometimes absent across the whole of government.

      In other words, people don’t like to be taxed, but they are happier about it if the money is going to a *specific* thing that they like. That’s certainly picked up in the surveys on carbon taxes cited by Roberts. If you want to implement a new tax, hypothecation is probably a great way to sell it. But I can see why a libertarian critic of government intervention (like Eric!) wouldn’t want people to go out and do that.

      • Early Commuter

        That’s a slippery slope to line item budget reviews – which the US also does, with negative effects.

        Surely we need to buy packages of good things e.g. health outcomes, and spend less time worrying about how much their toilet seats cost?

    • Dan C

      The London congestion charge was introduced with a package of public transport investments and the charge was expected to deliver funds for further public transport improvements.

  • 01anthony

    I think once Auckland has the CRL, and more dedicated bus lanes along some key arterial roads, then I would 100% agree with congestion pricing.

    • David B.

      I think that’s an interesting view. I’d have a couple of questions on that though – first, are we likely to still need a congestion charge once those are in place, and secondly what about people without access to frequent public transport?

      It’s seems logical for a congestion charge to be applied to anyone who lives close to frequent public transport, so that they are encouraged to switch to public transport, but surely fairness demands that it should not be charged to those who have no nearby access to the frequent network?

      • The first, most practical, and doable condition is many more longer duration connected bus lanes. Fare integration is only a couple of months away…

      • I agree to some extent, but the decisions that people make about where they live have consequences (i.e. costs to society)

        I appreciate that not everyone has the luxury of choice, however.

      • 01anthony

        My answers to your questions
        1. Yes a congestion charge once effective public transport choices are available would be needed. not everyone will jump on a train once the CRL is built. It will however give more people the option to due to increased frequencies etc.

        2. But everyone would have access to frequent transport choices. You can still access a park and ride for example if you live in a rural area.

        I think frequent buses travelling on dedicated bus lanes would be amazing along many arterial routes in Auckland. One of the quickest and easiest (cheapest) forms of encouraging public transport.

        • The biggest problem with the CRL, immensely important as it is, is that it is at best six years away from opening. What can we do before then? Prioritise a full network of buslanes and bus ways on arterials and the centre city. Bring AMETI forward, accelerate the New Network, and all supporting necessary hard infra, and maintain the current pace of on street and off road cycle amenity. Cobble together the best form of bus priority, with stations, on the North Western, to make up for the huge fail there by NZTA + government to be building a real busway their now as part of the current upgrade. Order sufficient trains to optimise the pre and post CRL network. Extend the Northern Busway, first, before widen general traffic lanes, as this at least gets the buses off the motorway. Queen St/ Dom Rd LRT, and some form of rail to Airport/Mangere. Plan for a Rapid Transit Harbour Crossing next. Reform funding structures to make them mode-blind. Price driving.

  • mfwic

    I am 95% in favour of congestion pricing. The 5% is because as you say it is regressive and impacts on lower income people to a greater extent. The key is finding ways to reduce that. As you say giving choices is important and my view is the best way to sell congestion pricing is to ring fence the money raised so it must be spent in that same area or even corridor. For example a toll on the harbour bridge could only be used to subsidise cross harbour buses or build a rail system. That would mean people including (lower income) could get a gain to partly offset their direct loss. The alternative is to offset income tax at the lower levels and leave the higher marginal rates where they are but beacuse it isn’t directly linked how would we ever ensure it stayed that way.

    • Early Commuter

      We know the north shore is full of richer people, so it’d be easy to have a heavy southbound toll over the bridge in the mornings (including the one out towards Westgate), maybe $10/day, then for those coming from west and south like myself it could be $1.50 or so to make up for our socio-economic conditions.

      • mfwic

        Which is why you will never get a toll. People simply won’t accept a road toll as a means to redistribute wealth no matter how efficient that might be. Fact is nobody cares. At least ring fencing shows people they can actually benefit from being charged.

  • Early Commuter

    I am all for congestion pricing ONCE we have a proper PT network

    What would this PT look like?
    1. 24/7 buslanes on all major arterials with 3 minute frequency buses 5-5, 7 minute frequency outside this
    2. 3 minute frequency trains 5-5, 7 minute frequency outside this

    Then… charge, charge, and charge some more!

  • mfwic

    Greg Mankiw linked above has been influential mainly through writing some very good text books used to teach economics. His Principles of is used by lots of universities for 101 courses and his Macroeconomics is a good 2nd year macro book if you can be bothered with macro. He writes well and so it is easier to understand him than most lecturers. He was one of the so called New Keynesians who tried to give macroeconomics a foundation in micro. They failed, but his work on sticky prices is one of the big insights. The joke at the time was that New Keynesianism had joined the differing schools together. The Keynesians agreed the neolibs were right about everything, and the neolibs agreed to be called Keynesian!

  • Why is an uncongested road more efficient than a congested one?

    The problem with a Soviet bread queue wasn’t so much the queue, as the risk you’d get to the front and they’d have run out of bread. If you go to a free market supermarket in New Zealand, you’ll also find that there’s a queue for the checkout – it’s more efficient for customers to wait a bit than to pay a vast number of staff who would just be standing around most of the time.

    The same applies to roads. Congestion doesn’t prevent you making your trip – it just may take longer. Whereas road pricing, if it is to work, inherently does prevent some people making their trips. Does the benefit of a smooth trip over a congested one, outweigh the disbenefit to those who are priced off the road completely?

    Maybe it does, I don’t know. But you can’t just assume that’s the case. (It’s certainly more likely to be true if there’s an uncongested alternative in the form of public or active transport).

    It’s entirely possible to have congestion be so bad that some trips simply can’t be completed, which is more analogous to the Soviet bread queue. But that’s not the case in Auckland by a long shot.

    • mfwic

      The first answer you will get is that a moving traffic stream carries more people than a stopped one, so you should limit the number of cars crowding on to maximise flow. Pricing is one way to do that. There are some flaws in the theory of that argument generally holds. The second point is that by pricing a good too low or making it free, then people try to use too much of that good. The people at the front of the bread queue ask for more loaves than they would if the price was set so supply and demand were equal. That means the people at the back who could be starving will miss out on bread and satisfied people at the front get more than they need.

      • Matthew W

        And the third answer is not only does it move more people and goods, but it moves them much faster.

      • mfwic

        Just to clarify the flaw. The graph usually given for traffic flow is flow on the x versus speed on the y. The graph slopes down to a turning point at capacity and then drops back under itself for the congested part. The flaw with that is it is usually measured upstream of a bottleneck so the forced flow part doesn’t make much sense.

        • Matthew W

          Yes I assume there is a bit of uncertainty as to what flow rate you can “safely” allow on a given piece of road to avoid congestoin. However I think your point that moving traffic has a higher flow rate than stopped traffic is probably true!

      • OK, so then why not price to achieve maximum throughput rather than free-flow? And the maximum throughput is still going to be much more congested than free-flow.

        • Peter Nunns

          I’d expect congestion pricing to attempt to optimise usage, much as AT’s on-street parking pricing policy targets a 70-90% occupancy rate. For what it’s worth, on road links throughput tends to be maximised at 70-80% of free-flow speeds. (Outcomes are a bit more complex if you throw intersections in the mix.) It wouldn’t be that hard to price to achieve those kinds of outcomes.

          And yes, as you observe, at some times of the day the optimal toll would be zero. That’s a feature, not a bug: if it costs $5 to drive at 8am and $0 to drive at 10am, people who don’t need to travel at 8am will have the option to change their travel patterns to save money.

      • Jamie Walton

        Just wondering whether the bread ration line analogy is really all that applicable: Wouldn’t the starving make sure they were at the front of the queue? (And the satisfied give the queue a miss for a while, until they felt hungrier (and/or had been tipped-off that the store was about to be re-stocked with fresh bread that they could sell on the black market and make a killing)?)

        Also, just because some people don’t have enough money to pay the price of something doesn’t mean they don’t want it (or “value” it); they just can’t get access to it because it’s out of reach financially. (It’s pretty obvious from the language used in economics that economics was designed for the rich. As you intimate, all the New (“Bastard” – as they even call themselves) Keynesians really did was put a fig leaf over the long-held classical/neoclassical view/attitude that 90% (now 99%) of people have to be relatively poor (and as economists know that it’s the rich who ultimately fund their salaries/careers with grants, they self-censor to suit).)

        Anyway, I think road pricing, and investing the revenue into public transport, is a good idea; purely on public policy grounds (once the public transport offerings are at a useable base standard).

    • Dave B (Wellington)

      Road pricing does not so much prevent people from making trips, as deter them from making frivolous or low-value trips. The alternative is to spend a fortune increasing road-space to accommodate all journeys indiscriminately and everyone ends up paying whether they use it or not.

      This is the phenomena behind ‘induced traffic’. If you provide an expensive new road at no direct charge to users, of course trivial journeys will multiply as people take advantage of the ‘free’ facility.. Why would they not? Conversely if you take a road away (or start charging for the use of it) then a proportion of journeys will stop being made as those who made them no longer consider them worth making.

      It is criminal how much money has been unquestioningly sunk into expanding road-capacity based on traffic-numbers alone, with no idea of the value of the trips being provided for.

      • Jamie Walton

        Totally agree with you Dave, just wish to remind everyone that some poor people really do have to use the roads to get to their jobs or appointments for job interviews or whatever, and those jobs or job interview locations may not (currently) be well-served by public transport, so they have no choice. (I think it has been stated on this blog before that this situation could be addressed with some form of (hopefully effective) compensation for low-income people.)

  • Nick

    I was living in London at the turn of the century when they were talking about introducing the £5 congestion charge.

    At the time I said they’d have to fix their PT system first. I would occasionally not be able to board a train because it was too full and I’d have to wait 5 minutes for the next one. Once I had to wait 15 minutes because three trains went past too full for me to board! Can you imagine having to wait 15 minutes for a train?

    …I’d been living in London for a few years and I’d forgotten just how non-existent Auckland PT was by then…

  • Congestion pricing allows richer people to haul empty traffic-blocking car passenger-side seats while making poorer people wait longer to haul traffic-blocking empty car passenger-side seats. Smarter to first build/lease single-width cars to right-size vehicles given current road-width.

  • david lupton

    Peter I don’t know whether Roberts’ analysis of carbon taxes is right or wrong, but I don’t think it makes sense to try to apply it to road pricing. Roberts apparently concludes that “Believing a single tool will accomplish everything requires seeing the economy as a frictionless machine, a spreadsheet, not what it is: a path-dependent accretion of past decisions and sunk costs”. So he suggests multiple tools. You seem to imply that the same would apply to road pricing. Would it also apply to the sale of bread? I am sure the Russian planners thought that when someone suggested selling bread on the free market. Actually pricing works very well as a single tool for most commodities.

    I agree with your original sentiment that road pricing should be used to replace rates and fuel taxes. I think that could be sold – a big argument against road pricing is that it is an ‘extra tax’. Reducing rates and fuel costs would resolve the equity issue: the number of poor people driving to the cbd every day is small. Most poor and aged would benefit from lower fuel prices and rates. Using the money to buy carrots might work in Verhoef’s Amsterdam but it might backfire in Auckland. There are plenty of people out there who would not want to pay more to travel by car so that some other people can have new trains.

    • David I get the appeal of a tax shift as a way to sell road pricing but it is a simple idea that on further consideration is fraught with unintended consequence. For example, most poor people rent, their landlords would receive the tax shift. The market sets the rent level, it is unlikely that rents would fall simply because landlords paying lower rates. This plan would in effect be to shift the tax burden from property owners to one of the poorest cohorts in the city; the driving poor.

      However this is a group that would indeed benefit from significant improvement in PT service. Default on car loans is a widespread problem in poor communities, as is food money being diverted to buy petrol. The burdens of auto-dependency already fall heavily on lowest income earners. Improving public transport service so that more households can reduce the number of vehicles they need to own should indeed be an aim of our transport agencies. Instead our daft economic metrics brag about vehicle ownership rates as a sign of success; it’s simply a measure of how lopsided of urban infrastructure is.

      • Brendon Harre

        Maybe the best solution is that LG be given the option to use real time/place congestion charges as a revenue source by central government, on the proviso that the system targets -maintaining free flowing traffic -not maximising revenue gathering.

        It would then be up to rate-payers to vote for what to do with this revenue -rate cuts, more PT, cycle-lanes, more of some other LG service…..

        In the long run, especially if EV use becomes widespread, a congestion charging system could evolve into a full road pricing system that replaces fuel taxes and road user charges.

        Other tweeks could also be added -carbon tax charges for ICE, charges based on axle number and weight and therefore actual damage to the carriageway….

      • david lupton

        Patrick I come across this argument all the time, that doing this or that will affect the poor. The cynic in me says that if you hear someone argue that a policy will impact the poor or the disadvantaged, the greatest impact will be on themselves. Let us be clear, a lot of poor people nevertheless rely on driving cars in Auckland. However few of them are driving to the cbd in the peak, and the ones that are generally will already have a pt option. On the other hand many of them are driving to non-central locations and don’t have pt options. They are your driving poor, and they are the ones that will benefit from reduced fuel taxes. If there is a rational argument for subsidising public transport services (and there is) we should do so. But don’t confuse the issues.
        And yes the price of rentals is set by the market, but it is supply and demand, and supply by landlords depends on profits.

        • No David, that is a silly attempt at diverting a serious problem. Taxation can be regressive or progressive, and in an auto-dependent city a shift of the tax burden from property owners to drivers is regressive. I am entirely in favour of road pricing but the details of implementation are critical. Using it to give landlords a tax break does not look nearly as workable [see main text above] nor as fair [my point] as using those revenues to improve alternatives to driving in order to expand the numbers of people and places with true movement options. Road pricing won’t just affect the CBD, no one is seriously proposing a cordon type of system for Auckland.

          • david lupton

            It was not an attempt to divert a serious problem, silly or otherwise. The simple fact is that we currently pay for roads through fuel taxes and rates. The burden falls unfairly on motorists who have to use cars to get to work, don’t work in the cbd and do not have pt alternatives. Road pricing is a fairer method of paying for roads as it charges rich and poor alike the cost of their journey. If by chance that takes away some benefit that poor groups enjoy, my question is whether that benefit could not be delivered some other way. It is absurd to have the city of Auckland grind to a halt each day in order to preserve some questionable benefit it gives to poor motorists. Lets address congestion by implementing the best solution for addressing road congestion – ie road pricing and then look at addressing the needs of the poor by implementing a solution that addresses the needs of the poor, which I am sure will not include high fuel taxes and traffic congestion.

          • Jamie Walton

            I don’t think anyone is suggesting “to have the city of Auckland grind to a halt each day in order to preserve some questionable benefit it gives to poor motorists.”

            All I think Patrick is saying is there are ways to implement policies in a way that are win-win (less congestion and better public transport), and there are also ways to directly assist those who need assistance as part of or alongside that implementation.

            With regard to the generalisation that “Actually pricing works very well as a single tool for most commodities.” (from 4:07 am) – does this statement assume that everyone has the same amount of money and are free to choose to spend it on whatever the want most?

          • Brendon Harre

            Jamie I think what David was saying was for most commodities the pricing mechanism works reasonably well. Obviously not for everything -I am a psychiatric nurse and can not see for instance how mental health care could be provided by a ‘pricing mechanism’. What we have in NZ is a classic mixed market economy and while there may be some disagreement re the mix of public versus private markets. I don’t detect that anyone in this conversation wants to go to the extremes of libertarian free market or communism public only services.

            Jamie we don’t directly regulate food,clothing, hygiene products and many other necessities to ensure it ‘directly assists those in need’, we use other tools -grants, benefits etc. Why don’t we do the same with road pricing? Have one tool to more efficiently allocate public right of way space and another tool to deal with any resulting equity issues?

            David’s proposal is very important for supporters of PT, because of the space efficiency of PT, congestion charging incentives the use PT systems relative to car/road based systems. Supporting a virtuous circle of increasing patronage, increasing economies of scale, decreasing costs, increasing frequencies/service levels, more patronage….. This will most benefit many vulnerable groups -those that cannot drive, the elderly, the disabled, the poor….

          • Jamie Walton

            Thanks Brendon, I agree with the gist of what you’re saying, and I certainly didn’t intend to sound like I was attacking what David was saying either (and I certainly didn’t intend to sound like I was advocating extreme libertarianism or communism). I thought I was saying what you say: “Have one tool to more efficiently allocate public right of way space and another tool to deal with any resulting equity issues?” – I was just using different words – and I think Patrick was saying the same thing as well, just using some other different words.

            I can’t easily see how any of us are saying anything that is in opposition to one another (although maybe there’s some nuance in the details of implementation that evade me?).

            I think we all agree that “the space efficiency of PT, congestion charging incentiv[is]es the use [of] PT systems relative to car/road based systems. Supporting a virtuous circle of increasing patronage, increasing economies of scale, decreasing costs, increasing frequencies/service levels, more patronage….. This will most benefit many vulnerable groups -those that cannot drive, the elderly, the disabled, the poor….” (this is almost exactly what I tried to explain to a senior planner in Melbourne 15 years ago, but the idea was dismissed with the immediate response that “we can’t pick winners and losers” and that was the end of the conversation – I didn’t know what she meant by that and was left flummoxed; I still am).

            I was questioning the generalisation about pricing, and the applicability of it to public services in particular (as you, rightly in my opinion, also express doubt about in considering your own experience working in the mental health field). I just don’t think it’s true that the price of something shows how much people want it: I know people who pay high prices for houses they don’t really want or need (the houses are left empty), and I know other people who really do want and need a house, but can’t get one; this is not an economically-effiecient situation. Obviously, the reason is some people have access to lots of money and some people don’t, so their relative ability to buy things (at any price) is not the same (even though their relative desire to have those things may be inversely proportional).

            FYI, we do regulate food, clothing, hygiene products and many other necessities, and it’s not that long ago that we regulated the price of some of these things also, so that everybody could afford them (I don’t think I’m advocating communism here, I think that was the rationale for the price controls on some things, e.g., bread).

            P.S. The question in my previous comment has a typo, it should read: does this statement assume that everyone has the same amount of money and are free to choose to spend it on whatever they want most?

  • Dan C

    why would using congestion charging revenues to reduce income tax be regressive? Surely that depends how income tax is implemented.

    For instance in the UK, the first NZ$23400 of income is tax free, taking the poor out of the tax system. If we used congestion revenue to offer a similar tax break to low income earners, how is that regressive? The rich wouldn’t end up paying a smaller share of the tax burden.

    • Dan it’s the suggestion that it offset property rates that would be regressive, as rents are set by the market and would not drop, essentially it would be a transfer to property owners, especially investors with multiple properties, from all drivers. Which in a city with poor PT means many lower income people. That’s all I think.

Leave a Reply