Does business oppose congestion charging?

Projected avoidable costs of traffic congestion (BITRE)

I’m very disappointed with the line one of the State’s largest employer associations, VECCI, is taking on road congestion charging. This issue was raised in a report prepared by consultants Acil Tasman for the Competition Commission’s (VCEC) inquiry into a State-based reform agenda.

Congestion imposes such a high cost on business – whether freight or personal business travel – that I’d expect the great majority of VECCI’s members would be better off with pricing. The Bureau of Infrastructure, Transport and Regional Economics puts the current cost of congestion in Melbourne at around $3 billion per year, rising to $6.1 billion by 2020 with unchanged policies.

VECCI says it is opposes the idea of congestion charging for three reasons. First, motorists already pay both the CBD Congestion Levy and the fuel excise. Second, there’s no spare capacity in the public transport system to take displaced motorists. Third, the economy can’t handle another tax on top of the forthcoming mining tax and the carbon price.

In regard to VECCI’s first objection, the obvious point is that these existing imposts on motorists aren’t working – many Melbourne roads are still congested at peak times. Despite the lofty title, the CBD Congestion Levy is actually a tax on parking. It’s only had a very minor impact on traffic because most drivers don’t pay it personally – their employers do. It isn’t in any event peak-loaded and of course it does nothing to manage the level of through traffic. And as per the name, the levy only applies to the CBD. The $0.38 fuel excise tax (no longer indexed) does reduce the overall level of travel by motorists, but has no appreciable effect on congestion because it doesn’t vary with the level of traffic or time of day.

So far as the “no spare capacity on public transport” objection is concerned, a congestion price only has to remove a relatively small number of vehicles in order to get traffic moving at an acceptable speed. The vast majority of motorists won’t come seeking a seat on the train – they will continue to drive but, rather than pay with time as they do at present under congested conditions, they’ll pay in cash. Their numbers may increase over time, but so will public transport capacity. Also, revenue from congestion charging should be applied to improving public transport and increasing capacity.

VECCI’s argument that the economy can’t handle another tax is about as nakedly political as you can get. Australia is one of the world’s most vibrant economies and has been growing for 20 years. Motorists, both business and private, can afford to pay their way. In any event, a congestion charge isn’t a tax — as the name says, it’s actually a charge. Motorists pay directly for the quantity of road space they use and get a direct and immediate benefit – faster travel. That means motorists who travel more pay more. It also benefits drivers from all income strata by enabling them to reduce delays when they make high value trips.

I know VECCI’s a broad church – it has a diverse membership – but it’s a bit stunning when a policy that would lower the cost of doing business in Melbourne is opposed by business. In fact it beggars belief. Business should be insisting on congestion pricing and leaving the Government to sort out the politics.

However lame VECCI’s arguments are, they highlight the key challenge with congestion pricing – the problem isn’t establishing that it’s a good idea, it’s selling it politically. For example, the Victorian Government’s immediate response to the Competition Commission’s report was to issue a statement saying it isn’t considering congestion pricing. It’s vital the option be kept ‘live’ for when conditions are more favourable. In the meantime we’ll continue to suffer the costs of traffic congestion and pay well over the odds for other solutions that aren’t anywhere near as cost-effective and provide much lower benefits.

We have the technology to implement comprehensive metropolitan-wide congestion pricing but the politics would be very hard in the short term. Robert Doyle’s problems with tolls on EastLink when he was Opposition Leader indicate how fraught the issue of pricing can be. In the first instance, it would be easier to pursue a “second best” scheme in the CBD modelled after a cordon like London’s, with revenue ploughed back into public transport and city centre amenity improvements. The CBD already has excellent public transport and few people are going to worry about the equity implications of executives paying substantially more to drive to work.

15 Comments on “Does business oppose congestion charging?”

  1. T says:

    If tolls for road usage actually reduced traffic, then Citylink and Eastlink routes wouldn’t be congested. But they are – they’re completely clogged at peak hour. So why would a congestion levy reduce traffic if toll routes don’t reduce traffic? I fail to see the difference. If motorists are already willing to pay to use the toll route, why wouldn’t they pay a congestion levy? And if everybody is simply willing to fork over the dough, how is this going to reduce congestion? If a congestion levy were coupled with a SIGNIFICANT improvement to public transport, then we might have something. But until there’s an alternative, it’s not going to entice drivers off the road. It’ll just make driving slow AND expensive.

    • Oz says:

      A toll that varies by time of day (or level of congestion) could be trialed. My hunch is that with skilled pricing flow regimes would change dramatically.

    • Simon says:

      The price obviously isn’t high enough. And as Oz says, it doesn’t vary in response to congestionion levels.

    • Daniel says:

      Actually when tolling was introduced, it did reduce traffic. I know of many people who factor the tolls into their transport route, and methods of transport. Yes, it’s congested now and it has tolls. But I would expect it would be even more congested if it didn’t have tolls.

    • Alan Davies says:

      The owners of privately owned toll roads set their price to maximise revenue, not to manage congestion.

      • T says:

        Makes sense, so congestion pricing would be set at a level to basically force people to either drive at an alternate time or chose an alternate mode of transport? I think that would be great if, for example, it went hand-in-hand with a push to require offices in the CBD to have staggered start and finish times, allowing people to chose to start earlier or later and finish accordingly. It would also be helpful if offices encouraged employees to work from home one day a week, where possible, on a rotation. That, along with the money being spent to upgrade public transport, would probably see great improvements in traffic flow. But I still think pricing alone will not have enough of an impact to make it viable for government to implement it. Imagine the political suicide if drivers are slugged on road pricing for the privilege of sitting in gridlock!

        Also, keep in mind that office work is quickly becoming obsolete. Many more people will be working from home 10 years from now, and even more 20 years from now. So, while population might increase, I think it’s possible that Gen Y’s penchant for uber-technology and flexible working conditions will change the shape of peak hour traffic. If Gen Y ran the world, we’d all be working from our MacBooks at cafes, have meetings via FaceTime, and reading reports on our iPads. That’s probably the best solution to traffic congestion. Going to work in an office is so 1980!

  2. Oz says:

    Maybe the reality is that the VECCI attitude to variable space-time charging is actually determined by “equity” implications of executives paying substantially more to drive to work? …rather than providing a competitive road network freight business solutions to reducing and managing congestion points.

  3. Anton says:

    I’d like to focus my comment on one particular argument of the VCCI against a congestion tax – that there is no spare capacity on public transport. As Daniel Bowen says in his blog today at in peak there is no capacity (I’d argue on dual track Melbourne ought to be able to manage up to 12 trains per hour, but that’s beside the point). But certainly in off-peak/weekends there is much more capacity.

    In my view we ought to look to reduce the current 30 minute frequencies for the stations beyond Ringwood and Dandenong in the inter peak to 20 minutes. Similarly, lines such as Glen Waverley ought to run every 10 minutes from say 6 AM to 9 PM. Tram frequencies may be expensive to increase, but many bus routes would not be – Smart Buses also should run every 10 minutes 6-9 weekdays in view. Those 2 simple and relatively cheap steps would be a massive increase in terms of capacity for public transport. They would have the potential to increase the share of trips taken by public transport in the Melbourne metropolitan area.

    And finally I like Oz’s comment, I’m sure variable tolls according to time of day would firstly be cheap to implement, and secondly over time would see congestion reduce. Perhaps also on our most clogged freeways (eg the Monash from Toorak Road to Warrigal Road) peak only tolls could be introduced, with funds raised going towards sensible ideas like improving public transport or say improving car pooling schemes.

  4. Simon says:

    The idea that there is a fixed level of kilometres to be travelled that needs to be accomodated is wrong. People will travel less in response to higher travel costs, and this isn’t a bad thing. Over time they adjust their travel patterns – with many choosing to live closer to work, or choosing to walk, cycle or use public transport. Again, these are all good things.

  5. another Simon says:

    There’s a real difference between the available alternatives for someone choosing to drive into the CBD, which is the centre of our public transport network, and driving along the toll roads, where there may not be PT alternatives.

    I share Alan’s dissapointment with VECCI. They have a broad membership (including my company), but often their views reflect attitudes of the middle aged men in large cars who run the organisation. I believe that London’s example of a simple cordon with explicit siphoning of funds raised directly to improved PT services would be well recieved, including by businesses that would benefit from mobility in the CBD.

  6. Sam says:

    This is an excellent summary of the confusing and ill-considered VECCI stance on congestion charging. They don’t get it. VECCI and the Gov’s position on this is being guided (tempting to say ‘driven’) by a perceived fear of lost custom and business activity. It’s similar to the cling to car parking; ‘if you make it hard for people to drive, they won’t be able to come to my shop and buy trinkets, and i’ll have to move, and city centre will DIE as a result’. Ridiculous. The city will thrive. This discussion needs to be framed around ‘net access’. Sure, some car drivers may stop driving in, but the space and time that will be freed up for tram & bus (and the fruits of a much needed revenue stream) will result in a net increase in city access. Seems simple. Am I missing something?

    I thought Doyle was nearing ‘new urbanist’ status since the Swanston St epiphany, but maybe not…

  7. The Editor says:

    I think we need to get into the real world on this.
    You are also making a lot of assumptions and logical leaps:
    1) “Revenue from congestion charging should be applied to public transport”… Govts don’t like to hypothecate taxes – has this happened in any realistic way with the CBD parking levy? NO!
    2) Just because “the CBD has excellent public transport” doesn’t mean that those who are travelling to and from the suburbs or regions experience this excellence throughout their whole journey – figures from the train company say that many train lines are at or near capacity.
    3) “Most drivers don’t pay it (CBD Congestion Levy) personally – their employers do”. Not sure about this. Most `early bird’ parkers would be paying for themselves, I daresay.
    4) “Those who are currently driving will not turn to PT”. Congestion pricing is usually justified as something that will drive people out of their cars and onto PT.
    VECCI would need a bit more convincing about congestion charging before it lent its support.
    Chris James
    PS Also, how can something be “a bit stunning”. It either is “stunning” or it isn’t!

    • Alan Davies says:

      In London, revenue from the congestion charge is applied to public transport improvements. Congestion charging is politically unthinkable without hypothecation – the savings to the Government in deferring expenditure on major transport works would swamp any potentially foregone revenue. See the independent evaluation of the parking levy done by Hamer, Currie and Young, which confirms my contention that the levy had little impact on traffic because it was mostly paid by employers. My point about the impact on PT is that only a small proportion of drivers – say the last 5% – actually turn free flowing traffic into congested traffic. So only a small proportion would possibly be looking to PT (I think most of them would simply delay or reschedule their trip).

      On the “stunning” issue, you’re the professional editor so I accept your judgement! I’ll try harder in future, just as I’m sure you’ll be attentive to using question marks at the end of questions.

  8. jack horner says:

    A few thoughts on common memes in this debate:

    ‘Public transport has no spare capacity’:
    1. You need to unpack this a bit. Public transport has plenty of spare capacity offpeak. And probably at all times in many places that are not the radial rail routes that gather most attention (spare capacity includes ‘ability to increase services if existing services are full’).
    2. In any case, so what? Is there no vision for the future? The obvious riposte is that there should be congestion charges *with* a serious long term PT capacity expansion project. With the second leading, to be realistic.

    ‘People will just pay and keep on driving’
    1. A congestion charge is a charge varying by time or place to discourage people from driving at the most congested times and places. Observations of existing tolls which don’t have these features are not a good indicator of how people would respond to a congestion charge.
    2. It depends what you mean by ‘people’? Who, when, where, how many? All people, most people, some people? In the short term, in the long term? On what routes (since the response will obviously be different between PT rich areas and PT poor areas)? These distinctions are important. Some people will pay to continue driving, and good luck to them. Some (and more in the longer term) will change their behaviour. All change is at the margin.

    Similarly with many other pub-argument statements about transport, such as ‘people prefer the convenience of cars’ All such statements starting with the word ‘people’, without specifying exactly what you mean by ‘people’, should be rejected in any rational debate . You see them often enough in the reports of highly paid officials and consultants, not only bloggers.

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