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Chapter 4 | Congestion charging and community attitudes

means, in effect, that these groups are enjoying a subsidy, equivalent to the payments

forgone. Even if the ‘subsidy’ were justified, in this form it is not subject to the normal

public accounting scrutiny.

There would be considerable advantages in terms of good governance to provide

subsides directly (and in a transparent way) and to ensure that all those that impose

congestion costs on others, are forced to face those costs.

The issue of exemptions and discounts is considered further in Chapter 5.

Strategic use of revenue raised (or earmarking)

Potentially the most important instrument for increasing the number of winners and

reducing the number of losers from congestion charging is the strategic use of the

revenue raised from the charges. There is a range of options, as illustrated in Figure

4.1. The first decision is whether to earmark revenue for transport or to absorb it

into consolidated revenue. If revenue is absorbed into consolidated revenue, then

the pivotal question is whether it is treated as additional revenue to a treasury or

whether offsetting tax reductions are made elsewhere.

Figure 4.1 Options for disbursement of (net) congestion charging revenue

Revenue

Consolidated revenue

Earmarked for transport

Neutral

(offsetting)

Additional

spending

General

transport

expenditure

Earmarked for

specific mode

Reducing

other taxes

Reducing

road taxes

General

mode

expenditure

Earmarked

for specific

projects

Early theoretical work on congestion charging focussed little on the revenue, treating

it strictly as a ‘transfer payment’. As Goodwin observed:

Motorists pay more, and the Treasury gets more, these two amounts cancelling out in

welfare terms as the Treasury can be assumed to spend the money wisely, in ways that

it was not necessary to define (Goodwin 2004a, p. 502).

This issue goes to the heart of congestion charging policy frameworks. There is a

widespread presumption that the revenue raised by a congestion charge will be

hypothecated to transport. However, the fact that efficiency gains are created in

the generation of the revenue (in contrast to the efficiency losses in raising taxation

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