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 Indeed, the mayor could go futher, promoting a London travel card (or a London travel account – cards could soon be superceded by smart phone accounts) for use on public transport, private cars, car clubs and even cabs and taxis.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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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.