London congestion charge has been a huge success. It’s time to change it

A sign marking the edge of the congestion charge zone. Image: Getty.

It has been 15 years since London’s congestion charge was introduced by the city’s first mayor, Ken Livingstone. Livingstone hoped the charge would reduce congestion, radically improve bus services, make journey times more consistent for drivers and make increase efficiency for those distributing goods and services throughout the city.

Key measures show it has been a success: in 2006, Transport for London (TfL) reported that the charge reduced traffic by 15 per cent and congestion – that is, the extra time a trip would take because of traffic – by 30 per cent. This effect has continued to today. Traffic volumes in the charging zone are now nearly a quarter lower than a decade ago, allowing central London road space to be given over to cyclists and pedestrians.

Congestion charging zone in Central London. Image: Transport for London.

The charge covers a 21km² area in London. It’s a simple system: if you enter the zone between 7am and 6pm on a weekday, you pay a flat daily rate. The charge has risen gradually from £5 in 2003 to £11.50 today. Residents receive a 90 per cent discount and registered disabled people can travel for free. Emergency services, motorcycles, taxis and minicabs are exempt.

Recipe for success

Today, city leaders in places such as New York are facing resistance, as they consider introducing their own congestion charge in the urban core. But the same thing happened in London, 15 years ago: notable push-back came from Westminster Council, which took the issue to court, claiming it would cut residents off from education and healthcare services, but lost. If it weren’t for the 1999 law which centralised certain powers to the mayor, the charge may not have been realised at all.

London’s congestion charge succeeded for two key reasons: it had a clear and convincing premise, and it was just one part of larger efforts to improve travel across all forms of transport in the city. The case for congestion charging was simple: the charge would reduce traffic in the city centre and generate funds to reinvest in improving public transport services.

On the day the congestion charge was introduced in London, 300 extra buses were added to the Central London bus network to give people an alternative to driving and avert the anticipated mayhem. One year later, Livingstone reported that 29,000 more passengers had entered the charging zone by bus during the morning rush hour, compared to a year before. Between 2002 and 2014, the number of private cars coming into the zone fell by 39 per cent.

Getting busy

But while car numbers are down, the number of private for hire vehicles – your minicabs and Ubers – is up. Trips by taxi and private for hire vehicle as the main mode of the journey increased by 9.8 per cent between 2015 and 2016 alone – and 29.2 per cent since 2000. Today, more than 18,000 different private hire vehicles enter the congestion charging zone each day, with peaks on Friday and Saturday nights.

This has reduced the speed of traffic through the city centre, which in turn has affected the bus network. City Hall investigated and concluded that traffic congestion was the primary reason why bus usage was down in London: the slower the speed along bus routes, the greater the fall in passenger numbers.

Breakdown of revenue collected each year from the congestion charge, and the net income after costs accounted for. Image: author created from Transport for London Statements of Accounts and Annual reports for years 2003 to 2017.

Taxis and minicabs are exempt from paying the congestion charge, presenting a further, financial challenge for TfL. While minicab registrations have soared from 49,854 in 2013 to 87,409 in 2017, the income from the congestion charge has flat-lined. Last year, TfL registered its first drop in congestion charge income since 2010.


Stockholm solution

Now, authorities are looking abroad for solutions. Inspired by cities such as Stockholm, the London Assembly (the city’s government scrutiny body) has recommended extending the congestion charging zone and replacing the daily flat rate with a charging structure which would reflect when and where drivers enter the zone and how much time they spend there. In Stockholm, the zone covers 35km², capturing two-thirds of the city’s residents in a scheme with varying charge levels depending on the time of the day – the maximum daily charge does not exceed 105 Swedish Krona (about £9.20).

The London Assembly also recommended devolving the national vehicle exercise duty (an annual charge for private vehicle ownership, based how polluting the vehicle is) to the Mayor of London’s office. This would give city leaders another means to encourage sustainable travel.

In his 2018 Transport Strategy, Sadiq Khan – London’s current mayor – aims to have four out of every five trips through the city made by public transport, cycling or walking by 2040 – up from two-thirds today. The congestion charge will be kept under review, but the strategy hints that it could be merged with the city’s Low Emission and Ultra Low Emission Zones (the latter is set to start in 2019), which offer cheaper rates for low-emission vehicles, to help tackle air pollution.

Khan and TfL have a huge budget hole to fill, having lost their £700m a year operational grant from national government. Khan’s manifesto pledge to freeze fares will cost £640m over his term, and at the same time passenger numbers and fare revenues are down £240m. A reformed congestion charge could not only ease traffic – it could provide a much-needed new revenue stream for TfL. The mayor also seems to be investigating ending the exemption for minicabs.

The ConversationAfter 15 years of operation, London’s congestion charge can be celebrated as a success. It has set the bar for other cities – demonstrating that road pricing can only be successful as part of strategy that offers efficient, sustainable alternatives for car drivers. Looking ahead, the congestion charge needs reform to meet the financial and logistical challenge of providing a good transport system for Londoners.

Nicole Badstuber, Researcher in Urban Transport Governance at the Centre for Transport Studies, UCL.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

High streets and shopping malls face a ‘domino effect’ from major store closures

Another one bites the dust: House of Fraser plans to close the majority of its stores. Image: Getty.

Traditional retail is in the centre of a storm – and British department store chain House of Fraser is the latest to succumb to the tempest. The company plans to close 31 of its 59 shops – including its flagship store in Oxford Street, London – by the beginning of 2019. The closures come as part of a company voluntary arrangement, which is an insolvency deal designed to keep the chain running while it renegotiates terms with landlords. The deal will be voted on by creditors within the month.

Meanwhile in the US, the world’s largest retail market, Sears has just announced that it will be closing more than 70 of its stores in the near future.

This trend of major retailers closing multiple outlets exists in several Western countries – and its magnitude seems to be unrelated to the fundamentals of the economy. The US, for example, has recently experienced a clear decoupling of store closures from overall economic growth. While the US economy grew a healthy 2.3 per cent in 2017, the year ended with a record number of store closings, nearly 9,000 while 50 major chains filed for bankruptcy.

Most analysts and industry experts agree that this is largely due to the growth of e-commerce – and this is not expected to diminish anytime soon. A further 12,000 stores are expected to close in the US before the end of 2018. Similar trends are being seen in markets such as the UK and Canada.

Pushing down profits

Perhaps the most obvious impact of store closures is on the revenues and profitability of established brick-and-mortar retailers, with bankruptcies in the US up by nearly a third in 2017. The cost to investors in the retail sector has been severe – stocks of firms such as Sears have lost upwards of 90 per cent of their market value in the last ten years. By contrast, Amazon’s stock price is up over 2,000 per cent in the same period – more than 49,000 per cent when considering the last 20 years. This is a trend that the market does not expect to change, as the ratio of price to earnings for Amazon stands at ten times that of the best brick-and-mortar retailers.

Although unemployment levels reached a 17-year low in 2017, the retail sector in the US shed a net 66,500 jobs. Landlords are losing longstanding tenants. The expectation is that roughly 25 per cent of shopping malls in the US are at high risk of closing one of their anchor tenants such as a Macy’s, which could set off a series of store closures and challenge the very viability of the mall. One out of every five malls is expected to close by 2022 – a prospect which has put downward pressure on retail real estate prices and on the finances of the firms that own and manage these venues.

In the UK, high streets are struggling through similar issues. And given that high streets have historically been the heart of any UK town or city, there appears to be a fundamental need for businesses and local councils to adapt to the radical changes affecting the retail sector to preserve their high streets’ vitality and financial viability.


The costs to society

While attention is focused on the direct impacts on company finances, employment and landlord rents, store closures can set off a “domino effect” on local governments and businesses, which come at a significant cost to society. For instance, closures can have a knock-on effect for nearby businesses – when large stores close, the foot traffic to neighbouring establishments is also reduced, which endangers the viability of other local businesses. For instance, Starbucks has recently announced plans to close all its 379 Teavana stores. Primarily located inside shopping malls, they have harshly suffered from declining mall traffic in recent years.

Store closures can also spell trouble for local authorities. When retailers and neighbouring businesses close, they reduce the taxable revenue base that many municipalities depend on in order to fund local services. Add to this the reduction in property taxes stemming from bankrupt landlords and the effect on municipal funding can be substantial. Unfortunately, until e-commerce tax laws are adapted, municipalities will continue to face financial challenges as more and more stores close.

It’s not just local councils, but local development which suffers when stores close. For decades, many cities in the US and the UK, for exmaple Detroit and Liverpool, have heavily invested in efforts to rejuvenate their urban cores after years of decay in the 1970s and 1980s. Bringing shops, bars and other businesses back to once derelict areas has been key to this redevelopment. But today, with businesses closing, cities could once again face the prospect of seeing their efforts unravel as their key urban areas become less attractive and populations move elsewhere.

Commercial ecosystems featuring everything from large chain stores to small independent businesses are fragile and sensitive to change. When a store closes it doesn’t just affect employees or shareholders – it can have widespread and lasting impacts on the local community, and beyond. Controlling this “domino effect” is going to be a major challenge for local governments and businesses for years to come.

Omar Toulan, Professor in Strategy and International Management, IMD Business School and Niccolò Pisani, Assistant Professor of International Management, University of Amsterdam.

This article was originally published on The Conversation. Read the original article.