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Urban Road User Charging Online Knowledge Base

What Is Known About The Theme?

In the following section we provide some context to the theme of economy in relation to urban road user charging.
Access to goods and services
The health of the local economy is a vital element of everyday business in towns and cities. An important component of wellbeing in local economic terms is good access to business and services and the movement of goods and people.

Congestion and the negative connotations associated with it are viewed as an additional cost to business. This impact on the local economy is a key driver in seeking remedial transport policy measures, including URUC. However, URUC will add to the costs of travel by some modes and at some times of day, and this may be seen as reducing accessibility.

Policy makers are charged with seeking a balance in order to keep traffic moving and ‘ease’ congestion on the road network while at the same time encouraging economic development and prosperity. Urban road user charging is potentially contentious because it affects both sides of this balance.

The quality of the environment
There is substantial evidence from traffic calming and pedestrianisation schemes that removing traffic from shopping streets can increase trade, provided that access by car and public transport to the immediate surrounding area is maintained (Hass-Klau, 1993). It is less clear that this principle will apply to Urban Road User Charging, since the impacts of resulting traffic reductions on the environment will be smaller, and the restrictions on car use will be felt over a wider area. However, measures which reallocate traffic within the charged area so that it is reduced more in shopping streets may well help to boost retail activity.

The continuing prosperity of any local economy is subject to external influences such as national and global economic forces. The fluctuating nature of economic markets can lead to lack of confidence, which can in turn influence market performance.

Uncertainty over the effects of urban road user charging can intensify such lack of confidence. The lack of confidence in the effects of urban road user charging has been a major reason for many schemes not progressing towards implementation. Limited empirical evidence has made the problem worse. There is no simple answer to the question: how will urban road user charging affect the local economy?

Work by Whitehead (2005) suggests that there is the potential for RUC to damage city centres, both by deterring shoppers and visitors and by increasing costs to businesses. He maintains that business is sceptical regarding the length of time it may take for benefits of congestion relief and environmental improvements to filter through. This in itself will influence levels of confidence in urban road user charging.

For this reason, urban road user charging schemes such as that proposed for Manchester in the UK are being prepared and promoted as a multi-million pound investment package that includes extensive public transport measures prior to the introduction of the scheme. This is considered important in building confidence in a credible and viable alternative to the car when urban road user charging is introduced.

Whitehead also explains that whilst businesses may accept public transport improvements as a principal application of charging revenue, there is doubt about the merits of other measures such as streetscape improvements which are designed to induce greater numbers of people to visit city centres.

The interaction between firms and individuals in conurbations allows the sharing of knowledge and the development of new ideas. The clustering of activity in one area is known as agglomeration. Whilst transport cannot generate clusters, it can play an important role in facilitating their expansion by reducing travel time and costs, bringing firms, workers and consumers closer than would otherwise be the case. Conversely congestion may reduce the agglomeration effect by increasing travel time and costs.

The Eddington report (Eddington, 2006) attempted to consider the contribution that transport could make to productivity benefits within agglomerations. Not all firms within an area are equally agglomerated and therefore the improvements experienced as a result of a transport improvement will not be uniform. The contribution to the improvement made will depend upon the characteristics of the industry.

The service sector will always tend to cluster in an urban area; hence service sectors that agglomerate typically do so because of urbanisation economies. Services are located where good quality and large labour are in good supply, which helps to balance out the high costs of such locations.

The relationship between agglomeration and transport is a relatively new and untested one. Some Spatial Computational General Equilibrium (SCGE) modelling work by Laird et al (2005) suggests that transport affects the economy via the labour market, the goods market and the agglomeration economies. In particular, road user charging can influence the labour market by discouraging labour force participation through a decrease in the household wage (Parry and Bento, 2001).

Impact on Freight
There will be implications for the freight industry as a result of any urban road user charging scheme. Considerations for the freight sector are, however, an often neglected topic. The Confederation of British Industry (CBI) states that reliability and cost are primary considerations for freight movement, but increasingly congestion undermines that reliability and imposes significant additional costs including extra journey times and increased fuel consumption (CBI, 2006).

Eddington pointed out in his work the importance of journey time reliability and the impact that increasing congestion has on delays to freight deliveries, particularly where perishable goods are concerned, impacting heavily on supply chains and on low-inventory just-in-time production systems.

One study considered changes in freight operators’ behaviour as a result of the introduction of a time of day pricing initiative by the Port Authority of New York and New Jersey. The authors claim that their study is the first comprehensive study on freight response to peak pricing (Holguin-Veras et al, 2006). They found that freight users would be likely to employ one or a combination of the following three methods:

• Increase their productivity to offset the increased transport costs;
• Change to use untolled facilities; and
• Pass the costs on to consumers.

They speculated that the ability to pass on the costs depended on the nature of the “balance of power” between the carrier (i.e. freight operator) and the receiver. When the balance of power was in the receiver’s favour, it was considered that the freight operator would have no choice but to increase their productivity to offset the charges.

One element of scheme design (Chapter 3) is the decision on whether to charge commercial vehicles more than other traffic. The Norwegian toll rings and the Singapore ERP (Menon, 2000) scheme do, on the basis that they require more road space. London and Stockholm do not. The Auckland Urban Road user charging Evaluation Strategy (ARPES) recommended charging commercial vehicles at the same rate as cars on the basis that higher charges could harm business. (MOTNZ, 2006)