Talking Taxes: Lessons To Be Learned from London’s Congestion Charge

In early 2003, London imposed a highly successful ₤5 ($10) [now ₤8 ($16)] ‘congestion charge,’ a daily fee for driving or parking on public roads within the central city aimed at reducing traffic congestion during peak workday hours, 7 a.m. to 6:30 p.m. As New York’s Mayor Bloomberg has now proposed a similar charge for parts of Manhattan, it’s worth it to take a look at some reasons why London’s program worked and if it would be a viable option for New York City. New York’s plan would be similar in charging most drivers $8 to enter Manhattan south of 86th Street from 6 a.m. to 6 p.m. weekdays.

Payment - The London system allowed for extreme ease of payment which most certainly helped its appeal. The charge could be paid on a daily, weekly, or annual basis in advance and also on the day of travel into the city, before, during or after your trip. Additionally, there were a number of methods and places to pay the fee from retail outlets and kiosks, to telephone, internet and text messaging options. New York has the resources and sophistication necessary to implement all the methods, and should in order to allow travelers the most pain-free payment possible.

Revenues - In London, approximately 80 percent of revenues acquired from the tax each year are earmarked for transportation system improvements in the city including expansion of subway service and bus lines. The fund dedication was a major selling point for the program. Improvements to the public system made it a more desirable option as driving became more costly, and expansion to new areas ensured that lower-income households had proper access which eliminated some regressive effects. The New York plan clearly proposed public transit improvements accompanying the charge and this process would be necessary on a continued basis. An expansion of the public transit system must accompany any congestion charge program if you rightly assume that the fee will encourage more people to use public transit.

Enforcement - Londoners have also become strangely accustomed to the thousands of tiny cameras positioned around their city which enable the congestion charge program to be easily administered. Cameras at entrance points into the charging zone recorded snapshots of each cars license plate. At the end of the day, these images were then compared to generated lists of who had paid the fee, making it simple to identify those who had evaded the law. This could be the most contentious point among Americans who have consistently opposed systematic invasions of privacy, no matter what the benefit. The New York plan did include the proposed installation of such a security systems, but it is unclear how much support exists for this method.

The London congestion charge did prove that such a tax actually works to decrease traffic levels while still being affordable. The number of private vehicles in central London dropped 27% from 2002 to 2003 while the number of buses, taxis and bicyclists all increased significantly indicating a shift to more traffic friendly forms of transportation. Average speeds during high congestion hours have risen 17%, from 8.9 mph to 10.4 mph. Minutes of delay experienced dropped 30% from 2003 to 2005. The program did face lower revenue flows than were initially projected, but this was mostly due to success in reducing the number of drivers. Furthermore, the congestion charge has been met publicly with approval and benefits outweighing the costs almost 2 to 1.

While the implementation process would be complex and new to New York, the congestion problems and potential benefits from reduction could be significant enough to outweigh initial discomforts. The New York proposal has many of the same features that made the congestion charge successful in London. Although it seems highly unlikely that Bloomberg’s proposal will pass this month given lack of support from the General Assembly, I think it remains a viable option for the future in New York or other US cities.