Cordon charges and the use of revenue – a case study of

EdinburghProf Chris Nash

Institute for Transport Studies

University of Leeds

Revenue use from transport pricinghttp://www.revenue-eu.org

Research Questions

What would a system of revenue sharing that maximised social welfare within the local political and institutional constraints look

like for Edinburgh– Who should set the charges?

– Who should collect the revenue?

– How should the revenue be spent?

Transport Policy in Scotland

• Devolved to the Scottish Parliament:– Legal provision for promoting RUC in

Scotland lies with local authorities; • Require approval of Scottish parliament • RUC revenue must be earmarked for

transport • But they can only influence local transport

(local roads, buses and trams)

– But vehicle and fuel tax is a matter reserved for Westminster

Case Study Approach• Confined to local authority decisions:

– Level of charges (fixed cordons), earmarking, investment in local public transport (buses and trams)

• Analysis of 3 types of regulation schemes:– Package to optimise regional welfare; – Package to optimise welfare of Edinburgh citizens; and– Edinburgh’s proposed RUC and investment package

• Tool:– MARS model

• Multi-modal strategic urban model of Edinburgh, Lothians and Fife

• Land use responses• Zonal model• Optimisation routine for policy instruments (tolls, bus freq.)

Edinburgh: MARS model study area

Regional welfare

• To maximise regional welfare– Cordon charges more than 3 times higher than

proposed (€10 peak, €5 off-peak);

– Invest in LRT

– Invest in urban bus services (not region wide)

• BUT– Revenue generation is very high (PVF is £3

billion)

– Insufficient ‘good’ transport projects for revenue surplus to be earmarked

City of Edinburgh Welfare

• To maximise Edinburgh citizens welfare:– Cordon charges more than 12 times higher

than proposed (€40 peak, €20 off-peak);

– No LRT and no increased bus services• Investment and operating costs + fares > greater

than Edinburgh residents’ user benefits

Equity

• Ability to tax residents of other LAs means:– Inequitable outcome is possible if

Edinburgh citizens control price setting and revenue use with no form of constraint

• However– Distributing revenue between local

authorities in proportion to trip origin is much more equitable

What happened?• CEC responsible for setting charges and

revenue allocation BUT proposed– Charges below level that maximised Edinburgh

residents welfare– A revenue sharing scheme

• Possible reasons why:– Consequence of excessive charges on retail and

business?– Subject to higher authority (PLI and Scottish

Executive approval)?– Only a limited number of good transport projects?– Acceptability?

Conclusion• Price setting and revenue use:

– Some form of control should rest with a higher authority

• Earmarking of revenues:– reduces efficiency & leads to a lower optimal

toll charge • Revenue distribution

– In proportion to trip origin seems pragmatic solution

• Price and revenue use for Edinburgh given local institutional constraints

– CEC proposals were efficient and equitable– BUT still not acceptable