Thursday, March 15, 2007

Pricing rejected - Melbourne's congestion will worsen

The Victorian Government in their response to the VCEC Final Report , Making the Right Choices: Options for Managing Transport Congestion, have come down decisively against moves to implement (or even think about implementing) road congestion pricing. I made a submission to VCEC supporting pricing so I am disappointed but not terribly so. I half expected this outcome.

The Government does not seem to have much of a clue about dealing with congestion in Melbourne and Mr Pallas seems to be a poor Minister for Roads and Ports. While the Government refuses to allocate road lanes on St Kilda Road to bicycle traffic on the grounds that this would limit access to Melbourne by cars (‘People have a right to drive their cars, and they have a right to do it without being impeded up on … for the purposes of looking after 2000 cyclists’) at the same time it levies a levy on parking in Melbourne city to do exactly that.

The Government’s response states ‘Government policy on road use charging is clear on this point: the Government will not toll existing roads and will only accept the use of tolls to fund new roads in defined situations…’. Thus any road pricing that is introduced will target cost-recovery rather than congestion – a flawed approach that means tolls are too high and do not address congestion.

It bears repeating even if it has been said many times. Road pricing to address congestion seeks to internalise external congestion costs – not to recover the cost of road projects. User-pays is the inappropriate principle to achieve efficiency in managing traffic flows.

The Government’s response does support various supply measures but refuses to even trial tolled high occupancy lanes on new lanes constructed (Response 16) or to even undertake a feasibility study of road use charging (Response 17). It does not want to learn since the ‘Government’s policy on tolling roads is well known’. Nor will it allow an external advisory board to be established to consider a ‘broad range’ of congestion control options (Response 31). The cat will not be allowed out of the bag!

On the positive side The Government accepts the need to monitor and report on the success of the parking levy (Response 18), it will discuss with the Commonwealth ways of eliminating ‘fringe benefit’ arrangements that encourage citizens to drive cars rather than use public transport (Response 20) and, most importantly, it will consider off-peak fares for public transport (Response 22) and time-of-day charging for CityLink and EastLink.

The opposition problems the Government has experienced over pricing traffic on EastLink have made it phobic about any form of road pricing. This has not been helped by opportunistic sniping from the sidelines by dills in the Liberal Party trying to make some cheap political capital. Neither major political party has shown any willingness to display principle and support the only measure that will satisfactorily deal with Melbourne’s congestion problems - to charge motorists the full cost of making journeys on congested roads.

The refusal to accept VCEC’s suggestions on congestion pricing is discussed in the Age.


derider derrida said...

I think it was Alan Blinder who bemoaned the fact that economists are least influential where they're most agreed and most influential where they're least agreed.

Pollies solemnly listen to the economists on questions like competition regulation, fiscal policy and education policy. They ignore them when it comes to questions where leftie and rightie economists agree - things like water policy and congestion charges.

Fred Argy said...

Well put derider. There are many other examples where economists and politicians disagree.

This is especially so in the tax area such as land tax, poll (lump sum) taxes, across-the-board GST and betterment taxes. In some of these cases, equity issues arise but the losers can often be compensated (directly or indirectly) without unduly sacrificing economic efficiency - as indeed Howard showed with the GST (although he also compromised on the tax itself).

Labour market deregulation is another example. It is a real tricky one because compensation is difficult (as quality of life factors are involved) and risks nullifying the efficiency and employment benefits. So as an economist I would not advise a government to go as far as Howard has gone in deregulating the labour market and welfare system. I would advise them to strive for the same employment outcomes through other means (an issue I have writen extensively about).

By the way why do you insist on word verification every time one blogs in (often more than once)? No one else does!

hc said...

Fred, The word verification is a pain I agree. I'll turn it off for a while and see how it goes. Sometimes even I cannot post! There is also some sort of bug with the New Blogger.

The reason I use WV is spam. Loads of it. Moreover it repeats every day - the same nonsense. I was spending too much time manually deleting spam comments.

But I'll try again later this evening and see if these cretins have gone away.

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