In an interview I gave on Friday for the Today Tonight show on traffic congestion I was asked a very standard question. ‘Won’t congestion pricing have particularly adverse effects on low income travellers and mainly benefit the rich?’
I have been asked this question countless times over the years in relation to a various taxes - taxes on alcohol, cigarettes and gambling all hit low income earners rather heavily. The standard economic response to this question – and one that I endorse – is that one should not be overly concerned with the impact of taxes on the consumption of particular items but should look at the overall impact of taxes and transfers on welfare. Particular taxes may be regressive – impact primarily on poor people – but the overall taxes and welfare transfers should be designed to compensate for such regressivity if one wishes to avoid it.
While there is certainly an element of truth in this explanation with respect to congestion tolls there are even more important issues. These tolls should not discourage car ownership but should encourage more selective use of cars. The opposite has been the case over recent decades since we know that cars are used more intensively rather than less. Some households make virtually all journeys by car – going to work, taking the kids to school and sports events, visiting friends and, of course, doing the shopping.
In my view we should think of public transport alternatives or of walking or taking a bicycle for many routine journeys that we make each day where large amounts of materials need to be carried. Trips to work and school are often repetitive tasks that can often be programmed to be dealt with via public transport, walking or by ‘park-then-drive’ actions. Certain trips require use of a car either because they are unexpected – the need to pick up a sick child from school – or because they involve transport of a large quantity of goods – for example, the weekly shopping.
Good road pricing should encourage greater selectivity in car use with the largest possible car ownership to facilitate the accomplishment of journeys which require a car. Generally I am in favour of hefty congestion charges, and petrol charges that are large enough to encourage the substitution of alternative fuels, but low car ownership costs.
This will encourage the type of car usage discussed for the US by John Quiggin – less usage of cars partly as a response of fewer journeys taken and increased reliance on public transport but also because, as I have emphasised above, car users more stringently rationalise their use of cars across tasks .