01 September 2013

For whom the road tolls

Road congestion, as my father was fond of remarking when he worked for the AA, has been one of Britain's most successful growth industries of the last 100 years. The supply of facilities to enable people to get from one part of the country to the other in a reasonable time has been consistently outstripped by demand, and numerous studies have shown how this negatively impacts both our quality of life and our economic output. Official government estimates put the opportunity cost of sitting in one's car instead of sitting in a meeting to UK plc at £8bn per year.

I was considering these costs sitting in my own car, as we crawled towards the Dartford Crossing today on the M25, shuffling forwards to pay our £2 toll. The Dartford Crossing, with its levy for users, is a somewhat singular type of highway in the UK, a country that has traditionally abhorred the idea of road taxes paid at the point of consumption. But when Parliament created the holding company to build the final phase of this river crossing - the Queen Elizabeth II Bridge, opened in 1991 - they granted them a 20 year licence to collect revenue. It was naively expected that the government of the day would scrap the toll once the debt had been repaid and a suitable maintenance fund had been accumulated, which was deemed to have occurred on 31 March 2002. 

But here's the cunning bit. They were allowed to carry on charging the toll, because they stopped calling it a toll. Under an unnoticed clause of the 2000 Transport Act, they could create the catchily-titled "A282 Trunk Road (Dartford-Thurrock Crossing charging scheme) Order 2002" that allowed the continuation of the crossing fee, because it officially became a charge and not a toll, as of 1 April 2003. The underlying reasoning here being, like a dog barking in a neighbour's yard, once people get used to something, eventually they stop noticing it. So more than 2 years after the expiry of the original toll concession period, they continue to pocket a toll. I mean a charge. Plus ca change, plus c'est la exact change please...

From a productivity point of view this creates a dilemma for the government. The Dartford Crossing is very much a part of the £8bn problem of economic inefficiency - and one that is deliberately created in order to raise revenue. There is nothing accidental or random about the travel delays caused to some 50 million journeys every year; in effect, the £100m or so raised is an indirect subsidy by motorists to the cost of economic underperformance. How much money would be injected into the UK economy by removing the tollgates and letting the traffic run freely? Sir Rod Eddington, in a 2006 report for the DfT, estimated a total closure of a single junction of the M25 cost the economy about £64,000 per hour. What's the opportunity cost of that congestion vs the value of the tolls to the Exchequer?

A similar problem dogs the controversial HS2 rail link, which came under further attack last week when a report by the Institute of Economic Affairs claimed the actual cost could reach £80bn. Even if we accept the government's assurances that costs will rise no higher than £42bn, their own calculations have promised a mere £48.2bn of economic gain over an unspecified period of time. A highly likely slip of a mere 15% to the budget will wipe out any overall profit.

Maybe, as a backstop measure, the government can look to the example of Dartford to recoup some of the costs, by installing toll booths across the HS2 tracks south of Birmingham, and passengers can file through the train to pop a £1 coin into the coin buckets each time they pass through? This would obviously reduce some of the economic benefits to the country, but would provide some much-needed revenue to fill the government's coffers. In fact, it would probably negate any economic gains to be made, once the construction itself had stopped, but, as they found at Dartford, no matter how inconsistent it may be to levy a random tax, after a while people don't really notice that sort of thing when you have no choice in whether to pay.

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