Congestion charge: a failure of arithmetic

Only three more days now until yet another beloved totem of the Ken Livingstone years – the western extension zone (WEZ) of the congestion charge – sleeps with the fishes. Even by the standards of late-period Ken, this was a truly bizarre policy – a congestion charge that did not, even in the slightest, cut congestion; and a tax which gave some of London’s wealthiest people an 80% discount.

With their usual unerring feel for the London political pulse, various Ken groupie blogs are already in pre-mourning for the WEZ, which Ken has promised to reintroduce if he wins in 2012 (though they do seem finally to have realised that defending the bendy bus is a lost cause). Boris Johnson has been accused, variously, of ignoring the results of a consultation on the zone or of sacrificing £55 million of precious revenue from it to TfL, revenue which could have kept down fares.

Actually, we did have rather a large consultation on this subject – it was called the 2008 mayoral election, you may remember it – which Boris fought on an explicit pledge to “get rid of” the WEZ. And as for fares, I seem to remember that Ken put some of them up by 25% in the same year that the WEZ was introduced, without even the excuses of cuts in government subsidies, a massive investment programme to pay for, etc.

On that £55m figure, too – as so often with Team Livingstone – when you look closely, large amounts of money seem to be unaccounted for. Net revenues to TfL in the final year of the C-charge without the extension, 2006/7, were £123 million (see page 3 of this.) Net revenues in the first full year with the extension rose to only £137 million (page 8 of this.)

That is a difference of £14 million, not £55 million. Even the rise in gross revenues (that is, before costs) was only £37 million, not £55 million.  “Transport for Livingstone” put about the £55m figure back in 2008, as part of its campaign to keep the WEZ.

There’s one other thing that Boris’s opponents always forget to mention. In January, the charge in the original central zone, which continues to operate, will rise by up to a quarter – from £8 currently to £9 or £10, depending on how you pay.

TfL states (p47 of this) that this will raise between £20 million and £25 million more (though it also stands to lose some penalty revenue, because the charge is being made easier and simpler to pay.) Knowing its tendencies, that might be an underestimate.

So even if you work on the basis that drivers’ money belongs to TfL rather than to them, the actual revenue impact of Boris’s changes to the congestion charge on the London coffers will be broadly neutral, or even slightly positive.

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Boris Johnson: western extension of congestion charge will be axed today

Cars pass congestion charge signs on Earls Court Road (Photo: AP)
Cars pass congestion charge signs on Earls Court Road (Photo: AP)

Boris Johnson will later today confirm the complete scrapping of the western extension zone (WEZ) of the congestion charge from Christmas Eve. It’ll be part of a “mini Comprehensive Spending Review” announcement by Boris in which the implications of the cuts to London’s budget announced by the Government will be spelt out.

The congestion charge for the remaining central zone is expected to rise to £10 a day (or £9 if paid through a new automated payment channel.) There will also be above-inflation fare rises on public transport and some cuts in services.

TfL, aka “Transport for Livingstone,” has been fighting a fierce rearguard action to keep the WEZ, claiming that its demise will increase congestion and air pollution. In fact, its  own reports show the WEZ has had virtually no impact on congestion, and no discernible impact at all on air pollution. (It has, however, as the same reports make clear, seriously damaged many local businesses.) TfL has successfully dragged out the process; but finally, two and a half years after they voted for it, the people of London will get what they voted for.

TfL also claims that scrapping the western extension will sacrifice revenues of £55 million a year (Ken Livingstone, Boris’s opponent, prefers a figure of £70 million). That seems like a lot of money to give up in an era of tight finances. Expect to hear a great deal of these figures from the likes of Labour’s Val Shawcross today. In fact, however, both figures are clear exaggerations of the extra revenue the western extension brought in.

To see the true position, you need to compare two TfL reports, the fifth C-Charge Impacts Monitoring Report (covering financial year 2006/7, the last year of the unextended C-charge), and the sixth Impacts Monitoring Report (covering 2007/8, the first full year of the extended charge.) The WEZ was introduced in February 2007, near the end of the 06/7 financial year.

On page 3 of the fifth report (for the unextended scheme) it states that “the scheme generated net revenues of £123 million in 2006/7 (provisional figures.)” On page 8 of the sixth report (for the extended scheme) it states: “Net revenues from the combined scheme in the year 2007/8 were provisonally £137 million.” That is a difference of £14 million, not £70 million.

TfL stopped producing these reports after 2007/8. But it may try to claim that the 2007/8 revenue figure is unusually low, because one-off startup costs of the WEZ have been set against it, and that the actual, gross increase in revenues in later years is therefore higher than £14m. But actually, most if not all the start-up costs of the WEZ were incurred in the year before 2007/8, because that’s the year it started.

The reports also include detailed breakdowns of costs and revenues (on pages 123 and 220, respectively.) These show that operational, publicity and enforcement costs were, in fact, almost exactly the same – £90 and 91 million  respectively – before and after the WEZ.

TfL reached its figure of a gross increase in revenues of £55 million by adding in an extra £40 million for costs for “TfL staff, traffic management and TfL central costs” to offset net revenues in the first WEZ year: a classic bureaucratic gambit.

Helpfully, the stats also show how much gross revenue was really received.They show that the actual gross increase in revenue after the WEZ was £37 million, not £55 million or £70 million.

At best, then, the extra revenue generated by the WEZ is only two-thirds of that which is claimed; at worst, it is only a fifth of it.