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

Cordon charges and the use of revenue – a case study of Edinburgh. Prof Chris Nash Institute for Transport Studies University of Leeds. Revenue use from transport pricing http://www.revenue-eu.org. Research Questions.

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

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  1. Cordon charges and the use of revenue – a case study of Edinburgh Prof Chris Nash Institute for Transport Studies University of Leeds Revenue use from transport pricing http://www.revenue-eu.org

  2. 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?

  3. 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

  4. 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.)

  5. Edinburgh: MARS model study area

  6. 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

  7. 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

  8. 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

  9. 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?

  10. 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

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