A Congested Debate

Yet another stealth tax, or the key to unlocking a transformation in transport infrastructure? Greener Business examines the proposals for the Greater Manchester congestion charge.

There are moments when it is possible to witness a crossing of the Rubicon and to know that things, for better or worse, are no longer as they were.

When transport minister Rosie Winterton came to Rochdale Town Hall in June to announce that the Government was prepared to invest huge amounts in Greater Manchester’s transport infrastructure in return for a congestion charge such a crossing was witnessed.

The success of the county’s bid under the Transport Innovation Fund(TIF), a pot of money used to bribe (the word is from the transport select committee) local authorities to introduce congestion charging, had never really been in doubt. The scale of Government largesse was the main surprise.[img]

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THE TIF PACKAGE IN FULL

Greater Manchester’s proposed congestion charge is designed around a “twin cordon” system which will operate at peak times only. Vehicles will be charged according to their crossing of cordons. The scheme will use tag and beacon technology supported by Automatic Number Plate Recognition (ANPR). The scheme is proposed to go live in mid-2013. Drivers would pay a deposit for an electronic tag which would trigger charges for journeys into the city between 7am and 9.30am and between 4pm and 6.30pm.

Crossing the outer ring, roughly following the M60 motorway, heading into the city centre in the morning would cost £2. Crossing the inner ring, roughly following the inner relief road around Manchester city centre, would cost £1. Crossing each ring heading out of the city in the evening would cost £1. There would be no charge at weekends.

As part of the broader TIF bid infrastructural improvements will include:

• Up to 22 miles of new lines added to the Metrolink network – attracting 27 million additional passenger journeys and completing a total network of 103km and 70 million passenger journeys per year.
• Significant expansion of capacity on local trains delivering additional carriages for local services in Greater Manchester.
• Improvements to 41 rail stations including CCTV coverage, seats, shelters and better signing and information.
• A robust and reliable bus network in a legally binding partnership between public and private sector.
• 120 new yellow school buses, building up to a total fleet of 300.
• Eight new state-of-the-art interchanges.
• Doubling of park and ride provision on rail / Metrolink networks.
• Computer-driven information displays at all major bus and train stations giving passengers up-to-date information on when their bus or train will arrive.
• Intermodal smart card technology.
• Improved roadside information for drivers, warning them of accidents and delays.
• Integrated ticketing arrangements, including smartcards.
• More cycle lanes and secure parking for bikes.

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Ever since the Eddington Report – named after its author the former CEO of British Airways, Sir Rod Eddington – which argued strongly and at some length (if not altogether convincingly) that congestion carried an economic cost and that road charging was necessary to halt it, it had become merely a matter of time before the Government sought to introduce such a scheme.

The attraction of the report, with its emphasis on sustainability, was that for the first time it allowed Government to consider introducing a national congestion charge without the need for fiscal neutrality: i.e. without cutting petrol duty or road tax.

Eddington recommended that pilot projects should be run over large urban areas from which lessons could be learned before full national implementation. The civil service makes no bones about this Trojan Horse policy. Under TIF it was made clear that not only would any transport investment without a congestion charge be turned down but that any charging scheme had to be capable of rolling out nationally.

A 98-page guide provided to all those authorities that expressed an initial interest in TIF underscored the point: “As we encourage local pilots we are determined that they should evolve in a coherent fashion so that we would be able to move towards a national road pricing system in due course. This guidance is part of supporting this approach. That means identifying which functions could effectively be carried out on a common basis, or at least a consistent basis, across all schemes.”

Sir Richard Leese, the leader of Manchester City Council and one of the driving forces behind the bid, acknowledges the policy, but says that Greater Manchester’s bid was designed within these requirements as “standalone”.

“It is a scheme that was {pullquote}designed solely to benefit Greater Manchester{/pullquote},” he says. The claim is debatable. The size of the bribe is not. Greater Manchester is being offered around £2.8bn to spend on public transport improvements, mainly for phase 3b of Metrolink. This comes in the form of £1.5bn of additional government grant, a £1.2bn loan (repayable over 30 years) from the Public Works Board and £100 million which will be clawed from the private sector in planning gain.

The money to pay back the loan will come from the Congestion Charge as indeed will the money to run the scheme itself.

The charge will be up and running by 2013, affecting some 20 per cent of the local population – compared to the five per cent in London affected by its charge.

Figures bandied about by the Association of Greater Manchester Authorities (AGMA) suggest that a surplus after running costs of around £120 million is expected.

This seems optimistic given that London has found that the operating costs of its charge are so high that only by punitively fining those who refuse or forget to pay can it generate any surplus at all.

Leese, without divulging the exact figures, acknowledges the Manchester surplus figure is “about right” and says it will be achieved by keeping the running costs down to 20 per cent, compared to the 45-55 per cent seen in London. This suggests that revenues are being targeted at upwards of £250 million a year.

In one sense getting £2.8bn to spend for taking out a 30-year £1.2bn loan is a good deal and there are signs that some of the measures being considered will have a real impact on the subregional transport infrastructure. The counter argument is that, whatever the value, this is simply another tax: a pig dressed up with lipstick. And that taking £2.5bn out of the public’s pocket each decade can hardly benefit the local economy.

Then there is the key question of revenue reversion. If the surplus from any scheme reverts to the government after 30 years, then the business basis for the scheme is weakened. Supporters say that this will not happen; that the surplus will always be ring-fenced for local transport improvements. Opponents simply point to numerous cases where revenue promises made by central government have been broken.
Clarity on this particular issue is simply a matter of trust.

There is now a 12-week consultation period, and the voice of business is set to play an important role. The AGMA has made a number of statements which suggest it will need to avoid massive opposition from the private sector to progress.

Leese knows that under the current Government and in the current economy he faces an uphill struggle to win hearts and minds. In this respect he is keen that the whole package, not just the proposed charge, should be discussed and the charge should not be regarded as a tax.

“It is a charge for taking a specific route at a particular time,” he says. “Those who choose to pay will gain the benefit of a reduced journey time.”

Businesses, particularly SMEs, seem to be against, though United City, a business group led by property developer Chris Oglesby of Bruntwood, is seeking to change that.

“It is {pullquote}a fantastic deal for Greater Manchester{/pullquote}; from a business point of view a nobrainer. Manchester could lead the way in having a world-class transport system and most of the cost would be picked up by central government,” he says.

Other business groups – notably the Momentum Group led by Andrew Simpson, the managing director of Peel Holdings – are campaigning for a referendum, in the not unwarranted expectation that if one takes place the scheme will be rejected.

Momentum argues that the charge is a tax, the system as it is planned will not ease congestion and that in undertaking such debt the councils are simply rolling dice and hoping for a pair of sixes.

The fundamental weakness of the pro-lobby is that the congestion charge is merely a mechanism to lever the public grant, yet the thrust of their argument must be its justification.

That there is an easily calculated total economic cost to congestion is by no means a given. Professor Phillip Goodwin, one of the country’s leading transport experts, sums it up nicely:

“I cannot endorse statements of the form ‘congestion costs the economy £15 billion a year’.... This is a convenient, consensual fiction. It is calculated by comparing the time spent in traffic now, with the reduced time that would apply if the same volume of traffic was all travelling at free flow speed, and then giving all these notional time savings the same cash value that we currently apply to the odd minutes saved by transport improvements.

“This is a pure, internally inconsistent, notion that can never exist in the real world. (If all traffic travelled at free flow speed, we can be quite certain that there would be more of it, at least part of the time saved would be spent on further travel, and further changes would be triggered whose value is an unexplored quantity). {pullquote}It is a precise answer to a phantom equation{/pullquote}.”

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Durham

Durham was the first UK city to introduce the congestion charge in October 2002.
Drivers are charged £2 to enter a small area (essentially a couple of streets) between 10:00 and 16:00 Monday to Saturday.
With the traffic now being controlled by CCTV, a ticket machine is linked to an automatic barrier in the carriageway, which lowers when drivers pay to leave the zone.

Singapore

Singapore was one of the first cities to adopt congestion pricing back in 1975, charging S$3 to enter the congestion zone during rush hours, adding other charges along with a second cordon area in later years. Said to be a “system of flexibility”, toll rates are raised and lowered every three months along with a different rate of charge depending on the time of day.
The Land Transport Authority of Singapore also teamed up with telecom provider Sinqtel to bring the country Easi-ERP – a mobile phone-based version of the system allowing motorists to pay via their monthly mobile bill.

Milan

Italy’s fashion capital is one of Europe’s most polluted cities and has the world’s highest rate of car ownership. So, in a bid to reduce traffic and pollution, Milan introduced the congestion charge in January 2008.
Known as Ecopass, motorists are charged between £1.50 and £7.50 to enter the city’s eight square-kilometre centre, with some lowpolluting cars exempt. The charge applies on weekdays between 07:30 and 19:30.
Nearly 90,000 cars enter the centre on a daily basis which, according to traffic officials, is 40 per cent lower than before the charge.

Stockholm

Implemented on a permanent basis in August 2007 after a six month trial run. Drivers are charged between 10 and 20 kronor (capped at 60 kronor per car) weekdays between 06.30 and 18.29.
There are a number of differences between the original trial run and the real thing. Taxis are no longer exempt and cameras scan motorists’ number plates, as opposed to the trial run where motorists paid electronically. All motorists have 14 days to pay the charge after driving within the zone.

Norway

With the goal to raise enough cash for transport projects to happen within the country, including bridges, tunnels, cycle and walkways. Norway led the way in Europe back in 1990 when it introduced congestion charging across three cities: Oslo, Bergen and Trondheim.
With one of the earliest schemes introduced in Bergen in 1986, today the scheme, run across all three cities, operates weekdays from 06.00 through to 22.00.
The system is fully electronic using a system called AutoPASS. Motorists can pay the fee at a manual barrier or purchase a tag.

Valletta

A state-of-the-art congestion system was introduced in Malta’s capital city of Valletta in May 2007.
Recently nominated for the Best European Transport Strategy Award, the automated system called Controlled Vehicular Access (CVA), works on a wider array of innovations.
With camera systems in place to monitor and photograph vehicles entering the CVA boundary, the system automatically calculates the time vehicles remain inside the charged zone, calculating the fees due for access and parking. Motorists can then either check their account online, set up a direct debit or await their postal bill.
The CVA exempts local residents, as well as certain vehicles including electric, public transport and motorcycles. It operates Monday to Friday 08:00 to 18:00 and Saturday 08:00 to 13:00.
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There is also the problem that the AGMA’s own transport surveys undertaken by the Greater Manchester Transportation Unit suggest that Manchester may not be quite as congested as it claims. Between 1996 and 2005 traffic journeys within the county fell by one per cent, while rush hour traffic into Manchester city centre fell from 28,000 cars to 25,000. The same type of fall was seen in most of the county’s other town centres.

The overall congestion growth is due almost entirely to motorway traffic, and under the proposed scheme this traffic will escape charging unless it turns off the motorway.

Leese sidesteps this by citing a number of national studies which have shown substantial congestion growth in Greater Manchester traffic. “The charge is not just about congestion now, but congestion in the future,” he says. This is a common theme. Much of the argument in favour of a congestion charge has been based around an “independent” study of the cost to the local economy of not tackling congestion. It concluded that by 2021 some 30,000 jobs that would otherwise be created would be at risk. This made congestion a “hidden tax” according to Leese.

The figure has been widely quoted in the national media, was used by Lord Smith, the chairman of the AGMA, in the House of Lords, by Leese himself during a local television debate and, most tellingly, by the Transport Secretary Ruth Kelly in actually announcing the TIF scheme to the Commons.

The figure comes from the socalled Greater Manchester Model: an economic model developed for the AGMA by Oxford Economics. The computer model allows various assumptions to be inputted and then shows their effect.

In this case Manchester Enterprises, the economic development body for Greater Manchester, undertook a series of models, one of which assumed an annual economic growth of an extremely high 3.6 per cent every year until 2021. It is this extreme model from which the figure was extracted. That such a “what-if” figure could be used as a central plank of the economic argument will merely reinforce the viewpoint of those who have little faith in the arguments of politicians.

Leese agrees that the model was optimistic on growth figures and says that new modelling is being undertaken. He also denies that any printed materials that have been published have used the 30,000 figure: “The figures we send out as far as I am aware say that one in seven of jobs that would be created are at risk”.

Opponents of the scheme will no doubt leap on such revelations, but their own arguments fall precariously close to propaganda, notably in their determination to paint the maximum charge (£1,200) as the average charge. Figures from the bid suggest this will be around £600 a year.

Another weakness in the case for this particular congestion charge is that it is a means to repay a loan (though the cost of the scheme itself is paid for by the grant). This leads to the logical absurdity that the more successful it is in reducing congestion, (and the predictions are for a reduction of between 10- 15 per cent) the less income it generates to meet its core purpose.

If the case for a congestion charge in Greater Manchester is weak, it does not follow that the case for rejecting the whole package is strong. Those behind the scheme say that to concentrate on the charge alone is to lose sight of the bigger picture. The package of infrastructural improvements, including inter-modal smartcard technology and a hugely expanded tram system, would be a step change in urban provision, giving Manchester a public transport system to match anything in Europe.

It is a substantial carrot and, given that a national road charging scheme appears almost inevitable in the long term, rejecting it, says Oglesby, would be “a complete disaster”.

“Even if you disagree with the charge it’s a hell of a deal.”

There is also the point that the work on the new transport infrastructure will start at precisely the time when the economy generally is slowing rapidly. The investment could help shelter Manchester from the worst effects.

There are two debates to be had. Does Manchester need a Congestion Charge and, even if it doesn’t, should it still accept the bribe?