An idea for the new mayor: pay-as-you-go roads

The new mayor, whoever they are, should start charging drivers based on how much they drive, not sim

London is an increasingly congested city, and with the population expected to continue to grow by as much as 2 million over the next twenty years, congestion is only likely to get worse, with negative consequences for liveability, air quality, carbon emissions, and economic competitiveness.

One policy however could make a substantial contribution to reducing congestion on London’s roads: pay-as-you-go congestion charging (road pricing). Though the case for congestion charging has been more popular on the left than the right, it is founded on good market principles – one of the first people to argue for it was the Chicago-school economist Milton Friedman. Road pricing is simply an economically efficient way of allocating an increasingly scarce resource (road space). For that reason, the theoretical case for road pricing is now accepted by most economists and the policy is supported by a wide array of business organisations.

Smart technologies are making road pricing ever less costly. And it should not be difficult to design a scheme for London which actually reduces the costs of using a car for some car owners – those that use a car infrequently, or on non-congested roads.  

One simple idea might be for the Mayor to refund to all car owners the cost of their annual vehicle tax, while introducing road pricing at the same time, perhaps paid for via the Oyster Card. Those that make little use of their cars could well find themselves better of at the end of the year than currently.

Similarly, discounts could be offered on less polluting, greener vehicles. Integrating congestion charging with the Oyster Card would allow people to make a direct calculation as to the costs and benefits of using the car versus other means of transport. Indeed, the mayor could go futher, promoting a London travel card (or a London travel account – cards could soon be superceded by smart phone accounts) for use on public transport, private cars, car clubs and even cabs and taxis.

The principle that we should pay more to travel at busier than quiet times, or more popular than less popular routes is already well established - notably on the railways. While the Congestion Zone covers less than 2 per cent of London's roads, it has been widely accepted, and demonstrated that road charging can be effective. And while congestion charging schemes have been rejected in referendums held in Edinburgh and Manchester they have passed the test of public opinion in other cities like Stockholm. The key seems to be to introduce the scheme first and once it is established and it has been tried and tested by the public, only then hold a vote on whether to remove it.

A Taxi enters the congestion charging zone. Photograph: Getty Images

Ben Rogers is the director of the Centre for London think tank, and the author of 10 Ideas for the New Mayor.

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump