11 April 2003
Transport for London's new head of street management, Peter Hendy, opened a can of worms last week when he mused on whether local authorities would bother to introduce congestion charging if the Treasury claws back any extra revenue raised.
His observations will have struck a chord with councils beyond the M25. Hendy told a conference in Scotland that TfL would receive £125m less from the government for the 2003/06 Spending Review than it had been led to believe before it was published. It will also have £200m less from the Treasury in 2005/06 than in the preceding two years.
These reductions have been in black and white since the Spending Review was published but Hendy was the first to draw attention to them. His comments were a welcome gift for the London Assembly's anti-charge Tories, who seized upon it as evidence that the expected £130m the charge is expected to generate a year is not really additional.
Mayor Ken Livingstone defended the charge last week when he told the Assembly that cancelling the scheme would cost £81m in contractual penalties and £650m in revenue over the next five years.
For the number of councils eyeing the congestion charge with envy, these revelations muddy the waters. It is politically desirable to have less crowded roads, but extra money is even more desirable.
The safety catch was that charge revenue under London's scheme was earmarked for public transport improvements for ten years. But that is now open to question.
According to leading road pricing consultant Martin Richards, it is impossible to hypothecate revenue, whatever the law says. `This is the flaw in the hypothecation argument. There is no way to guarantee it,' he claims.
The issue is that it is largely pointless for a council to raise hypothecated revenue unless it is an addition to what it would receive anyway. But if this revenue goes into the authority's general funds, it is indistinct among contributions from the Treasury and other sources.
Therefore, if the Treasury cuts its contribution, is the hypothecated revenue still additional, or does it just compensate for money that would previously have come from the Treasury?
Richards, who advised on implementation of the London charge, says that in London's case, Livingstone was not prepared to earmark charge revenue for any specific projects, and simply put it into TfL's general revenue.
He says that Edinburgh City Council may have found a solution to this. `The only way to get near to that is if you do what Edinburgh has, where they have set up a separate company to receive the charge revenue.'
Edinburgh's scheme is designed to lock in the Scottish Executive's contribution by channelling revenue to Transport Initiatives Edinburgh. This is an arm's-length company established to deliver a tram system and other new infrastructure using charge revenue and a £375m contribution from the Executive.
`We could not stop the Executive cutting its contribution, but it would be obvious they had done it and would impact on schemes they had approved,' a spokeswoman said.
Research evidence suggests that road pricing by itself is not popular, says Richards, but when it generates money for transport improvements it can be acceptable to the public. `The Act says charging must be introduced to reduce congestion, not simply to raise revenue, but very few councils would do it if there were no extra revenue stream,' he says.
Vince Christie, transport policy officer at the Local Government Association, doubted that councillors would take the political risk of introducing charging if they felt the government would claw back an equivalent sum.
The exception so far is Durham County Council, which has imposed congestion charging on a narrow cobbled street near Durham Cathedral. A spokesman said: `The scheme pays for itself and what little is left over goes to a mobility service for disabled people. The object was traffic deterrence, not making money.'
There may be several councils that will make this claim about congestion charging schemes in future. But when it comes down to raising extra revenue, how many will really be focusing on traffic deterrence?
PFapr2003
