The Economic Impacts of the Congestion Charge in London - Case Study Example

The Economic Impacts of the Congestion Charge in London, U.K Introduction The London congestion charge was established in seventeenth February, 2003and a congestion charge zone determined. Due to an increase in number of commuters within central London and the inability by the transport system to handle the income, it became necessary to introduce the charge. The main aim of its initialization was to reduce traffic congestion within the city while simultaneously increasing the revenue for the London transport system. As expected and as the main objective, the traffic flows in London reduced drastically upon the introduction of the charge. From an environmental point of view, the implementation of this charge greatly reduced air pollution within London streets (Draft Transport Strategy, 2004). Other reasons for the introduction of the congestion charge included to improve the public bus services by encouraging more people to use them as an alternative to using private means (TfL, 2004). The improvement of transport reliability and quick access to the city was also a major reason, more so with respect to the speedy distribution of goods and services within the city (TfL, 2004). The target area was Central London which covers approximately twenty two kilometres square; 1.3 percent of the Greater London area. Further, in February 2007, the congestion zone liable to the charge was extended into parts of west London making it one of the largest charge zones in the world. Initially, the charge was five pounds for vehicles entering the Central London Zone but since then, a number of reviews have been made on each type of vehicle and their engine capacities. Other vehicles have also been exempted from the duty. The charge, according to Stephen (2004), is only feasible during working days from Monday to Friday. Moreover, the government introduced penalties, for non-payment of the charge, of between sixty and one hundred and eighty pounds. This move has had several impacts on the economy and the environment of the city and has been discussed in detail by many a scholar. Amount of Charge Initially, the charge was set at five pounds for each vehicle entering the charging zone. Reviews in 2005 increased this by three pounds; therefore increasing it to eight pounds a day. This rule however applies to fuel cars only. This means that electric cars, hybrid cars, alternative fuel cars and LPG converted cars are exempted from the congestion charge. The Transport for London (TfL) registers the individuals commuting using vehicles powered by bio-fuel, electric vehicles or alternative fuel solely; not diesel of petrol. Public transport vehicles are also exempted from the charge and more particularly, buses with more than nine seats and registered for use in London. Motorcycles, bicycles, people registered as disabled, emergency vehicles, breakdown vehicles, vehicles used by NHS staff members and firefighters are also exempted from the charge according to Lucy (2005). The charges are as follows: Standard vehicle charges on daily basis (£8 post-July 2005), fleet vehicle charges on daily basis (£7 post-July 2005), resident vehicles (£4 per week after July 2005). With regard to engine capacity, while the above conditions may hold, the driver is supposed to pay either of the charges which ever is higher, of course public buses remaining exempt. For cars below 3000cc, the charge is £8 while those above 3000cc are entitled to a charge of £25 daily. As the charges increase, there has been an increase in purchase of exempt vehicle. Moreover, as the charges increase with time, a steady decrease in the number of commuters is significantly showing the effect the charge has created in the city and among commuters (TfL, 2006). Traffic Flow The observed reduction in the general levels of traffic volume has been attributed to the introduction of the congestion charge in 2003. The flow of vehicles in and out of the charging zone during the charging hours has been approximately the same today and two weeks after its introduction (Clakr, 2005). This is an indication of a maintained reduction and effectiveness of the charge. In determination of traffic flows within the city, comparisons have been carried out of periods before the implementation of the charge and after its implementation. For instance, in May 2002 the average speed within the congestion zone was estimated at around 13km/h with a total of over 722 thousand vehicles excluding motorcycles cycles and bicycles. After the implementation of the charge, the average speed increased by four km/h giving a figure of 17km/h. This change was significant and indicates an increase of about 31 percent according to Clakr (2005). The total number of vehicles reduced to five hundred and seventy six thousand indicating a percentage of over twenty percent. Cars were the major contributors to the decline showing a percentage decrease of thirty nine percent greater than the average percentage decrease. As expected, the number of cycles increased at an average of eight percent with the motor cycles taking the lead of ten percent. Another sector that indicated an increase was the buses and coaches contributing seven percent of the total upward trend of the transport sector (Ernst & Young, 2006). Conversely, the number of vehicles accessing the zone during weekdays increased during the period between February and May in the year of the charge’s introduction. Due to reduced congestion, four percent increase in the number of vehicles accessing the zone indicated a positive effect on the congestion charge as noted by Ernst and Young (2006). Accidents One year after the introduction of the charge, reports indicate that a three percent decrease in number of accidents occurred during weekends and during weekdays; the accidents fell by a quarter. On the contrary, though an increase in the number of cycles was recorded, they did not yield a significant departure from the accidents record. The charging zone particularly saw a reduction in the number of accidents by about eleven percent during the second year of operation after its introduction. This means that other road safety measures have vigilantly tightened their rules after the introduction of the charge (TfL, 2007). While considering accidents involving the pedestrians, reports have indicated that there is no significant change in the accidents even with reduced congestion with the percentage in this category wavering between thirty one and thirty four percent considering two years before and after its introduction. The impact however is the severity of injuries caused by the accidents with figures showing a decrease of over twenty percent of severe injuries. Slight injuries have also reduced by a percentage of ten percent after the introduction of the charge (Martin, 2005). The vehicles involved in accidents also show a reduced trend and a positive achievement of the charge though other factors have significant roles to play. One year after its introduction, taxi accidents decreased by thirty percent as compared to a slight increase in the first year of its introduction. At the other end, the number of passenger buses involved in accidents has continued to reduce showing a fourteen percent decrease in the second year of operation (Martin, 2005). The Immediate Impact After its introduction, on the first day, a decrease estimated at about twenty five percent was recorded due to the charge and partially the fact that most schools were on half term break. While most of the motorists personally paid the fee, others paid through the fleet service and a small percentage failed to comply. After two weeks of monitoring, the decrease was estimated at around twenty percent. According to the survey, the major decrease about sixty percent was attributed to transfer to public transport (John, 2003). Twenty percent of the motorists decided to avoid the route while the rest either switched to car sharing, reduced the number of journeys, travelled during the hours not covered by the charge or opted to use motorcycles and bicycles instead of private cars (TfL, 2007). Use of the Public Transport Public transport in this context includes the use of national rail, buses and underground level travel. From recent studies, since the introduction of the charge, most motorists opted to use the public transport system to avoid paying the charge. In 2003, after its inception, a thirty seven increase in the number of passengers entering the charging zone by bus was recorded. While half of this was attributed to the normal growth of the public transport sector, the rest could only be considered an effect of the charge. The reliability of the routes used by the buses improved tremendously after the introduction of the scheme while excess waiting had dropped by more than thirty percent in the first year while a further eighteen percent was recorded in the following year (Tom, Steve and Vesna, 2008). On the contrary, the number of people using the national railway system remained stable in the first year and the subsequent one. The number of kilometres lost by buses during years prior to its introduction was recovered in the first year and in 2005; the increases rose to thirteen percent. While the bombing in 2005 of an underground commuter train killed fifty two individuals, the general status of the use of the underground travel indicated an increase after the introduction of the charge. Between 2003 and 2005, the passengers’ increase in buses led to the restructuring of bus fares and the move from single fares to off bus tickets. A good sign for the country was the introduction of free bus travel for children under sixteen. After the bombing, an increase was recorded in the bus sector of public transport although this was as a result of security fears of the underground rail according to Tom (2008). Underground Patronage There was an unusual report in this sector of public transport in the first year after the introduction of the scheme. Economic factors and prolonged closure of the central line were attributed for this occurrence. However, a recovery and subsequently a five percentage increase were recorded in the following year. This did not last long because the bombing of the underground caused majority of commuters to withdraw from the system. Actually, a four percent decrease was reported after the dreadful attack. Otherwise, there was an overall increase of two percent in the underground patronage in the periods after the introduction of the congestion charge (Santos, 2004). Business and Economic Impact The introduction of the congestion charge coincided with a temporary economic slowdown and more so, the international economic conditions were not favourable to the general economic performance of the United Kingdom. By 2004, the charge had no significant impact on the economy but the retail shops within the inner London reported improvement in their rental values and the rental yields fell faster indicating a positive impact within the zone. A more positive effect of the charge to businesses was reported in 2005 where it was reported that businesses performed better in the charging zone than any other part within London. However the change was not quite significant and was not wholly attributed to the congestion charge (TfL, 2004). Most businesses within the congestion zone continue to recognize the importance of decongestion of the city and more so indicators like the employments within the area have increased. Particularly, in 2004, the congestion zone recorded a forty nine percent increase in employments’ a deviation from the Greater London that recorded thirty two percent. Financial and businesses within the area have been in the front line towards the provision of jobs in London (TfL, 2004). Conclusion According to the various monitoring agents and researchers checking the effectiveness of the charge, it is evident that it has been successful in meeting its objectives. These are the reduction of traffic volumes and therefore a faster flow of traffic and congestion reduction. In order to cut down on global warming and green gases emission, TfL should consider increasing charges for poorly maintained vehicles. This vehicles emit exhume large volumes of carbon dioxide and such like gases that greatly contribute to green house gases effect (Tom, 2008). Further in reduction of the gas emission, residents who were exempted from the charge should be charged if their vehicles emit 226g/km and above of carbon dioxide. In order to curb the vice of non-payment of the congestion charge, the need for the establishment of an accurate system is inevitable. Systems using the GSM communication should be utilized in an attempt to introduce an automatic congestion charge payment. Smartnav, for instance, is an intelligent satellite system that would be relevant in accomplishing this noble task as noted by Ronald (2004). This system combines the in-vehicle unit and a remote server that can remotely update changes occurring in the charging system and also provide information to the driver on the amount due. The in vehicle unit on the other hand utilizes a GPS receiver and a dual band GSM/GPRS modem which offers both direct speaker driven vocalized information and visual information (Ronald, 2004). Other proposals would be to ensure adequate public transport alternatives and the recruitment of motivated and skilled staff for proper running of the system. Public consultation should be carried out in the event of review and subsequently ensure focused stakeholder engagement (Dailymail, 2010). Since its inception, the carbon dioxide emission decreased by nineteen percent indicating the achievement of the objectives of the charge. Twenty charging points have been introduced within the city and more surprisingly, heavy goods vehicles pay double the established price rather than using the engine capacity in commonly used in London. Since its introduction, it ensured a decrease of more than ten percent in peak hour traffic (Pete, 2007). Other cities like the Trondheim, Norway have introduced the charge which covers an area of 1.5 kilometres square and a population of around one hundred and forty thousand. About ninety percent of the vehicles use electronic tags which reduces the chances of non payment. Though variable with the London system, it was introduced with an aim to raise funds of building more ring roads (Dailymail, 2010). References Clakr, A. (2005). Transport for London axes C-charge debt collection agency. The Guardian News and Media Limited Retrieved from: http://www.guardian.co.uk/environment/2005/mar/15/londonpolitics.freedomofinformation. 6 January 2008. Dailymail (2010).Increase On London Congestion Charge. Retrieved from: http://www.dailymail.co.uk/news/article-516090/Porsche-threatens-legal-action-25-London-congestion-charge.html Draft Transport Strategy Revision (2004): Central London Congestion Charging, Report to the Mayor in Consultation with Stakeholders, Businesses, Other Organizations and the Public. Ernst and Young (2006). Review of Transport for London’s Assessment and the Economic Impacts of the Congestion Charge Report (3rd). Retrieved from: http://www.london.gov.uk/mayor/economic_unit/docs/impacts-of-cc.rtf John, W. and Gagy, H. (2003). World Transport Policy and Practice. Earthscan Publisher, London. pp 234 Lucy, S.(2005) Detailed Assessment London Congestion Charging. City Hall, London. Retrieved from: http://www.tfl.gov.uk/tfl/cclondon/cc_intro.shtml. Martin, O. (2005) Smartnav Intelligent Satellite Navigation System in Congestion Charge.Trafficmaster PLC, Cranfield Beds pp7. Pete,T. (2007). Lessons Learned Implementing London’s Congestion Charge Scheme. Deloitte Services LP. Houston, Texas. Ronald, E.H. and Roy, M.H. (2004).Transport and Environment. A journal in environmental science and technology.Vol 20 Royal society of Chemistry, London. Santos, G. and Rojey, L. (2004). Economic and Distributional Impacts of Road Pricing: Facts Behind Congestion Charging 31 (1), pp 22. Stephen, I. (2004). Road User Charging: Issues and Policies. London Congestion Charging. Ashgate Publishing Ltd, London. pp151 Tom, M., Steve, F. and Vesna, M. (2008) London City Guide. Lonely Planet, London. pp 385. Transport for London (2004). Congestion Charging, Update on Scheme Impacts and Operations. Retrieved from: http://www.tridatacom.co.uk/Downloads/papers/Papers/RIN%20Congestion%20130405.pdf Transport for London (2006) Central London Congestion Charging: Impacts Monitoring Annual Report (4th). Mayor of London, London. Transport for London (2007). A Proposal to Increase Congestion Charge to CO2 Emission. Retrieved from: http://www.tfl.gov.uk/assets/downloads/ERCC-leaflet.pdf Read More