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Equity In The Context Of Road Pricing

While definitions of equity vary, they all involve defining groups of potential winners and losers from road pricing (Langmyhr, 1997). 

Two definitions of equity are often used – vertical equity and horizontal equity.

Vertical equity concerns the distribution of impacts by income and socio economic characteristics, and so relates very much to issues of affordability and individual’s ability to pay for access.  Such considerations also relate to whether a user charging scheme’s wider impacts are “progressive”; in other words, do all users pay the same amount for using the service provided, or is there a mechanism to ensure that, for example, the users who cause the most pollution or congestion pay the most for using the facility ? Whether a pricing system is equitable will largely depend on the extent to which it is progressive, regressive or neutral, and, as Santos and Rojey (2004) note, this will, in turn, vary between urban areas.

For example, in a situation where the majority of car commuters entering a charging zone are from affluent households, the likelihood is that a substantial percentage will not change their behaviour, and so pay the charge. In this instance, the pricing system would be progressive, even before subsidies and exemptions for people on a lower income are introduced. To use another example, in Singapore in 1998, it was demonstrated that car drivers showed less elasticity to changes in road user charges, than riders of motorcycles; the conclusion from this observation is that motorcyclists, who generally tend to be less affluent members of society, are more likely to be forced to change their travel behaviour as a result of charging, and so suffer the greater impact. The nature of this impact, however, in terms of both the first and second order impacts, requires further investigation.

Since it is often the case in cities that households and communities vulnerable to transport-related social exclusion are concentrated in central areas, and that the effect of pricing is commonly to reduce traffic levels in central areas, it often follows that residents of these areas are the main beneficiaries of reduced traffic levels. Such benefits might manifest themselves in cleaner air, reduced noise and visual intrusion (especially where it is larger goods vehicles that are targeted by the pricing regime), reduced community severance and improvements in road safety figures. In terms of the latter, the rate of road traffic accidents involving child pedestrians is so closely correlated with poorer neighbourhoods that it is frequently used as a formal indicator for social exclusion. (White et al 2000).

Vertical equity also concerns itself with the barriers that can prevent some members of society from participating with parity in services such as education, employment, health, leisure and retail. As a result, Vertical equity impacts are often complex and challenging to evaluate. 

Early attempts in dealing with equity in road pricing mainly involved analysing the impact of road pricing on vertical equity (see Anderson and Mohring, 1995; Fridstrom et al., 2000; Giuliano, 1994; Gomez-Ibanez, 1992; Langmyhr, 1997).

Vertical equity considerations can, by their very nature, be very sensitive, politically, especially when there is a perception that it is poorer households who are being disadvantaged. In Trondheim, Norway, for example, road pricing attracts much equity-related criticism on the grounds that high-income motorists and commercial traffic predominantly constitute the “winners”, with those likely to lose out being people who are on a low income and car-dependent families. The most commonly used solution in Trondheim is to use pricing revenues to improve public transport, and to allocate revenue, not only to public transport improvements, but also to walking and cycling.

The issue of whether revenues from a pricing scheme are re-invested in public transport is very important in the context of vertical equity considerations. If revenues are not redistributed in improvements to public transport, cycling and walking infrastructure etc, research has suggested that road pricing will generally result in gains for higher-income groups – those more likely to be car drivers - and losses for lower-income groups (Else, 1986; Cohen, 1987) and those without access to a car. 

Horizontal equity deals with the fairness of impact allocation between individuals and groups considered comparable in ability and need. The concept implies that consumers should “get what they pay for and pay for what they get,” unless a subsidy is specifically justified. It can also depend on the location and nature of charging. It is also referred to as spatial or territorial equity and relates mostly to impact on people living in areas affected by road pricing or those who need to make specific journeys.

Horizontal equity might be viewed in the context of the relative impacts of a scheme on different groups of road users, as defined by the type of vehicle they drive, or whether they use the road for personal or commercial reasons. The relative impacts on road users and public transport users might also be considered. A road user charging scheme might, for example, affect public transport negatively by encouraging more use of an already overcrowded system, or positively by reducing congestion and reducing journey times; (although it is likely that the former issue of overcrowding will have been pre-empted by building in improvements to public transport at the design stage). Of course, the distinction between car users and public transport users might also imply some issues of vertical equity, since use of these two means of transport will, depending on the city in question, be characteristic of people from different socio-economic groups.

Horizontal equity also often refers to the geographical and spatial distribution of impacts, particularly to the way in which spatial patterns of mobility can be affected by a charging scheme. Again, such considerations might also have a vertical equity component, where the population of a less, or more, affluent neighbourhood is affected by its proximity to a cordon, or by the way in which a scheme causes changes to traffic flows. Such impacts depend, to a large extent, on the particular characteristics of a given charging scheme, and on any subsidies or exemptions that are provided. For example, in Singapore the expected impact of migration of businesses from the centre, as a result of the introduction of a road pricing scheme, did not occur; this is probably because of the relatively small size of this particular urban area. Labour mobility into the city also did not diminish with pricing, since many commuters were already using public transport, and pricing improved public transport services because of reduced congestion. Furthermore, top management employees either paid the charges for road use or had them reimbursed by their company - a survey by the Automobile Association indicated that about 30% were being reimbursed in this way – which also had implications for vertical equity considerations.

Related to this, the spatial characteristics of a pricing scheme can affect both land values and land-use patterns. The experience of Singapore has also showed that, for an initial period, some companies and commercial establishments advertised that they were attractive because they were located just outside the charged area, close to firms who were located inside. This led to agglomeration effects, with increased development on the periphery of the congestion charge area. Therefore, on two occasions since 1975, the Singapore authorities have enlarged the charged area, as a response to some previously residential areas on the periphery becoming developed commercially.

Another example of spatial variations in the impacts of an actual road pricing scheme is provided by Stockholm, Sweden, where the introduction of congestion taxes have increased car travel costs by around 5% for the residents of the outer suburbs, 11% for the residents of the inner suburbs and 31% for residents of the inner city. Cost-benefit predictions suggest that inner city residents suffer the greatest net losses due to the congestion tax despite actually reporting a favourable attitude towards it.

Pricing schemes might also be defined in terms of whether they are progressive or regressive. One school of thought considers that congestion charging will be regressive, since people with higher incomes have a higher value of time, and hence more often feel that the time gain is worth the charge.

A key consideration in assessing the equity of a given pricing scheme is whether the scheme has as its primary objective the reduction in traffic in order to address the problems of congestion and/or pollution, or the objective of raising revenue. If the latter objective is the motivation for introducing pricing, then hypothecation and “revenue recycling” issues are important. This is because revenue raised will usually contribute towards financing road building and other infrastructure-related projects, so any assessment of equity issues should consider which sectors of society stand to benefit from such hypothecated investment. As an example, road pricing projects in Thailand, Malaysia, the Philippines, China and Taiwan have been deliberate in using road pricing schemes as a means of financing road infrastructure projects (TRB 2005). By the same token, schemes whose objective is primarily that of improving the environment by reducing traffic, so curbing emissions, should be evaluated, in terms of equity, according to who benefits from, for example, cleaner air.

Impact Groups

The concept of equal access applies to a number of key ‘impact groups’. These can be summarised as follows:

  • Car users who travel in and out of the charging zone;
  • People who are located, often resident, inside the charging zone;
  • People who are located, often resident, outside the charging zone; and
  • Public transport users who travel in and out of the charging zone.

When considering key impact groups it is important to recognise that there is no ‘one size fits all’ approach. The available evidence might appear to suggest little more than a pragmatic approach when considering equity in relation to road pricing. Thus each proposed road pricing scheme should probably be judged on its own merits, geographical location and factors including the local economy.

Hau (1992) considers that the fundamental problem with congestion charging is that three groups of people are made worse off by the charge:

  1. Those who pay a toll because they face higher (motoring) costs;
  2. Those who avoid paying the toll; and
  3. Those who travel in areas adjacent to charging zones and may suffer increased volumes of traffic and congestion due to diverted traffic.

For the purposes of this report we will consider the four impact groups already mentioned throughout this chapter. In each case we debate the issues that are relevant to key impact groups in turn. There will inevitably be some subjective comment made here. However, we have wherever possible included case study evidence as examples.

For car users who travel in and out of the charging zone, with a charge to cross a cordon into a charging zone, differences are marked, with those making short journeys across the cordon experiencing the greatest proportional cost increase. With multiple cordons or distance-based charges, the differences are less acute, but more complex. There are also considerations which concern the nature of the user or journey. Disabled drivers are a key group in this regard. They often have little choice but to use a car and so road pricing or charging is considered an unfair levy should there not be exemptions in place. This also applies, to a lesser extent, to people travelling at times of the day when public transport is not available.

For people located inside the charging zone (i.e. residents), the impact of a scheme depends upon the details of the spatial structure of the scheme. Road pricing is often defined by cordons - a ‘line’ that is crossed to enter and leave a charging zone. Fridstrøm et al (2000) analysed the spatial impact of road pricing cordons using the concept of the spatial accessibility for each zone, segregated by modes as the indicator. Their work suggests that the main adverse impact of a charging cordon is its boundary effect, and another key finding was that a small cordon would have the most significant effect on residents living inside the cordon. Of course, any cordon will have some impact on people residing, and having commercial interests, within it, particularly if they own a car, unless they are entirely exempt from charges.

The key perceived benefits for those living and working within a charging cordon are reduced congestion and a better environment, for example improved air quality, as a direct result of there being less traffic. 

There are however a number of other factors to consider in terms of equity, and the case study of London is a good example. The Congestion Charge in London is an £8 daily charge for driving or parking a vehicle on public roads within the zone between the hours of 7.00am and 6.00pm, Monday to Friday. Payment of the daily charge allows drivers to drive within, exit and re-enter the charging zone as many times as required in one day. Furthermore, residents within the charging zone receive a 90% discount on vehicles registered at an address within the charging zone.

It is considered that lower income car users in the charging zone or area will be adversely affected, in particular if they have to use their car. The charges that would accrue over time might be considered unjust, simply because someone is resident within a charging zone. It could be argued that 80p per day (which is £4 a week, approximately £16 a month) remains a fixed cost and/or an additional motoring cost that could adversely affect those on a lower income. Much depends on the individual’s necessity to use the car and if indeed they have an alternative choice to use public transport, walk, cycle etc. However, in the case of London, residents pay the 80p per day for parking a vehicle in the charging zone regardless of their travel needs.

When ALS was introduced in Singapore, there was considerable speculation that the restrictions would accelerate the trend towards decentralisation from the city. In practice this did not happen because Singapore is too compact in size for companies to decentralise. Furthermore, it was found that the mobility of labour did not appear to diminish with pricing, as public transport usage was high anyway, and pricing appeared to improve public transport services due to reduced congestion.

It is also important to consider people located outside the charging zone, particularly those who are resident just outside the boundary of a scheme. Whilst residents, might not pay a charge for travel or parking in their immediate locality, there may be other factors that change as a result of introducing a road pricing scheme. In a study of the Singapore ALS, Holland and Watson (1978) indicated that the cordon gave a greater advantage to commercial firms located just outside the cordon, with all the implications for the development of land, but this problem might be addressed by the introduction of time-based, distance-based, or delay-based pricing regimes (Jones, 2002).

Case study work conducted in Edinburgh, Scotland, looked at both the economic case and cross-boundary acceptability issues for the proposed scheme. The scheme proposed before the Public Inquiry was a two-cordon scheme, including one cordon inside the ring road, and one outside of the historic city centre. It was also suggested that Edinburgh residents outside of the outer cordon be exempt from the charge. This matter was of considerable concern to the residents of neighbouring authorities, who would not be exempt from the charge, and hence there was a degree of concern over whether all residents would be receiving “fair” treatment. (Saunders, 2005)

As Hau (1992) suggested, there might also be an adverse impact on people who travel in areas adjacent to charging zones. Drivers may experience increased volumes of traffic and congestion due to diverted traffic, and some will react by driving around the cordon to avoid the charge.

Public transport users who travel in and out of the charging zone constitute another impact group that should be considered. Road Pricing has been accompanied by better quality surface public transport in London and Stockholm. Such improvements can reduce inequities, in as much as non-car owners would have experienced lower quality public transport before road pricing. A feature of many road pricing schemes is that a proportion of the revenue gain from a road pricing scheme is re-invested in other measures, including public transport. In Shanghai, a qualitative analysis (Ma et al, 2005) of an Electronic Road Pricing Proposal concluded that there would be limited adverse implications in terms of equity, provided that the revenues raised were reinvested in public transport. From this point of view, the “winners” can be considered to be public transport users, including those on a low income who cannot afford to pay road pricing tolls. This assumes that pricing structures for public transport remain relatively constant and do not increase as a direct result of the road pricing scheme.

In Edinburgh, a range of public transport improvements were promised before charging was due to commence in the planned, now abandoned, scheme.  It is noted that bus service improvements were defined late in the planning process. This resulted in a lack of demonstrable benefits and alternatives for car users. The main view of Edinburgh’s neighbouring authorities was, therefore, to oppose the concept of road pricing due to the lack of planned benefits, including public transport schemes.

Equity and Social Exclusion

In terms of social inclusion, adequate mobility is regarded as essential for people to participate fully in society. It can affect an individual’s ability to obtain (fairly) key goods and services such as education, employment, health etc.

People who are often considered the more vulnerable within society include:

  • Children;
  • Young people;
  • Unemployed people;
  • People in low paid work;
  • People from minority ethnic communities;
  • Disabled and mobility-impaired people; and
  • Older people.

These groups will each have specified needs in terms of access, and policy makers are obliged to avoid any measures or policies that will have an adverse impact on these members of society.

The treatment of equity impacts focuses on the differences between individuals and the opportunities they experience in terms of mobility. There should be a particular focus in this regard on enabling the key groups identified to gain equal access to goods and services.

A view-point from outside of the transport sector is expressed by the UK Government’s Social Exclusion Unit (SEU), in its publication “Making the Connections: Final Report on Transport and Social Exclusion” (SEU 2003). In this report, the SEU identifies ways in which people facing social exclusion are disproportionately affected by some of the impacts of road traffic, which it specifies as pedestrian accidents, air pollution, noise pollution and community severance caused by busy roads. The report argues that individuals are impacted in terms of both their quality of life and access to goods and services; more specifically, the report quotes research that advises that,

  • children from the lowest social class are five times more likely to die in a road accident than children from the highest social class
  • the short-term effects of air pollution may bring forward the deaths of 12,000 to 24,000 “vulnerable people”, in the UK
  • there is a clear relationship between traffic volume and quality of life, which includes the level of social interaction with neighbours, and the extent to which children are allowed to play outside, (with 43% of parents surveyed saying that they were concerned about busy roads)

SEU(2003) points out that UK Government policies are already in place to try to combat some of the transport-related disadvantages experienced by some communities, particular in the context of air and noise pollution. For example, the UK’s National Strategy for Neighbourhood Renewal includes a specific target to improve air quality in “the most deprived areas”. This is in addition to the national policy to achieve minimum standards of air quality throughout the country, which compels local authorities to draw up air quality plans, and to designate Air Quality Management Areas (AQMAs) where the problem of air pollution is the greatest. (Some AQMAs have been created as a response to industrial pollution, but the large majority are associated with traffic pollution in town and city centres). Similarly, local authorities have the power to create Clear Zones, so that air quality in designated parts of urban areas can be managed by the exclusion of certain types of vehicle.

A group of people identified as being at risk of transport-related social exclusion consists of households and individuals who are on a low income – and there is an over-representation of disabled people, people from ethnic and religious minorities and women in this group. The evidence base shows that people on a low income are likely to be disproportionately affected by road pricing because they might have less choice and less flexibility in terms of when and how they travel. For example, people in low-paid employment are more likely to be bound by rigid shift patterns, and are more likely to be restricted by child-care arrangements; in the context of personal mobility, people on a higher income are more likely to be able to afford public transport fares, as well as run a private car. Furthermore, older and disabled people, who are more likely to be on a low income than other members of society, are also more likely to find that they have fewer accessible and affordable alternatives to the private car.