BITRE | Working paper 74 revenue) appears to remove or weaken the discipline that is normally associated with the allocation of public funds. Goodwin observes that the revenue disbursement is critical in the evaluation of any congestion charging scheme. However, regardless of the main objectives of congestion charging, he argues that treating revenue use is of secondary importance: 86 … did not provide an implementable policy, and that it was necessary to replace it by explicit consideration of the revenue, in which the beneficiaries were as visible and influential as the motorists who paid it (Goodwin 2004a). This view is echoed by others. Ison (1998) noted that ‘experience abroad suggests that equity and the use of the resulting cash flow are likely to be the most significant points that would need to be addressed’. In this context, Graham and Glaister (2006), from their modelling of the impact of the spatial effects of the mooted national road pricing scheme for Britain, also concluded that the use of the revenue was critical to the distributional impact and hence to scheme acceptability. The differential impact of pursuing ‘revenue neutrality’ (where other taxes are reduced to offset the revenue raised) and ‘revenue additionality’ (no offsetting tax reductions) was explored by Graham and Glaister. 69 Both cases produced net benefits for the community but, not surprisingly, motor vehicle users were worse off with revenue additionality. They are paying higher charges for road use with no offsetting reductions in other taxes and charges. Under the proposed revenue neutrality package, rural areas experienced an increase in congestion around 25 per cent, compared with a small reduction under the revenue additionality option. The increase is due to the lower average cost of road use in rural areas because of the reduction in other motoring taxes. Small (1992) has suggested what is, in effect, a compromise between revenue neutrality and additionality. In this case there would be some additional expenditure combined with some offsetting reductions in taxes and charges. In essence, revenues from congestion charging could serve both as a substitute for other revenue sources (revenue neutrality) while still contributing to substantial new services, along the following lines: • replace regressive sales and fuel taxes • provide a travel allowance of US$10 a month for every employee in the region regardless of mode of travel to work • rebate local rates, and/or • improve transportation throughout the area (Small 1992). Earmarking revenue to transport is generally supported, particularly when compared to the option of ‘swelling the government coffers’. Earmarking can certainly be effective in influencing community attitudes. One study that found that acceptance ratings for a proposed pricing scheme rose from 35 per cent to 55 per cent once the scheme included a commitment to dedicate the revenues to transport rather than towards consolidated revenue (Wachs 2003, p. 12). 69. Note that current UK legislation requires that all revenues raised by a local authority through congestion charging must be spent on transport purposes within the area for a period of years. (Also, the contribution from the Central Government is meant to take no account of the congestion charging revenue).
Chapter 4 | Congestion charging and community attitudes While earmarking is pivotal in community attitudes, so too is the choice of the specific transport project to which funds will be directed. Allocating funds to lowreturn transport projects that do not make the grade under normal budgetary circumstances would not necessarily generate community support. Earmarking congestion charging revenue is pivotal to how the community views the scheme. Community attitudes to congestion charging are likely to be strongly influenced by the application of the revenue to areas from which they would benefit directly including transport investment and tax relief. The general options for the use of the revenue are to enhance public transport, to improve the road network or to reduce other, more distorting taxes. Each of these options is explored below, followed by a brief analysis of the practical limitations that are often encountered. Enhancing public transport The proposition An obvious use of revenues is to expand public transport, for two basic reasons. Firstly, the demand for public transport is likely to increase following the introduction of congestion charging (reflecting a fall in the relative cost of public transport). Secondly, the desired behavioural change (‘getting people out of cars’) is likely to be greater the more attractive are the alternatives to driving. Politically, enhancing the alternatives of driving reduces the burden of the new charges on road users by providing greater ‘transport choices’. Box 4.2 Funding for public transport encourages community acceptance of congestion charging An important consideration of congestion charging schemes is the automatic presumption that the revenue raised will be allocated to public transport. However, the causality was reversed for one of the pioneering congestion charging schemes in the US: the I-15 High Occupancy Toll (HOT) lanes in California were introduced to fund a new bus service in the corridor (Schreffler 2003). While the service did not achieve the mode-shift aims, the charging system is generally regarded as successful: ... the I-15 corridor bus service that provided much of the political support for the HOT lane approach did not necessarily fulfil expectations. The intent was to attract new bus riders in the corridor in order to remove cars from the I-15. Instead, the new bus service attracted reverse commuters and riders who did not switch from driving alone (Schreffler 2003, p. 21). From an equity perspective, funding public transport is commonly regarded as a way ofoffsetting the perceived ‘regressive’ nature of congestion charging. For instance, when exploring the option of introducing congestion charges to the East River Bridges in New York, it was observed that ‘using toll revenues to improve communities as 87