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Congestion charging


As part of the Mayor’s Transport Strategy, the London congestion charging scheme was implemented in February 2003 with the aim of tackling congestion in central London. A £5 charge was introduced for those driving into the eight square miles between 7am and 6.30pm, Monday to Friday (£5.50 for fleet vehicles).

A separate automated scheme was set up for fleet operating companies allowing monthly accounts to be set up, where pre-payments can be made, and vehicles can be registered for a £10 annual payment for each vehicle. Though costly, this reduces the administrative burden on business to some extent.

The cost of setting up the scheme was £200m, with an annual operating cost of about £115m. In the first year, net revenues were projected at £130m but the actual net revenue realised was £70m, rising to about £97m in 2004/05. Transport for London’s monitoring exercise has shown that congestion in the zone has fallen by 30% while the volume of traffic within the zone is down by 15% – meeting the targets set.

Mixed response from business

The CBI has supported the principle of the congestion charge scheme as part of a wider package of measures to improve the transport environment in the capital as a whole. From the outset we pressed for improved public transport services and adequate funds from central government – these have been addressed to some extent. But other key areas, such as improving the environment for services and deliveries, parking, loading and unloading, have not been adequately tackled. Some recent changes to the scheme are welcome, such as the reduction in the fleet threshold to ten vehicles and the inclusion of cars in the automated fleet scheme.

Overall, the impact of the scheme on business has been mixed and the jury is still out. In a recent CBI-KPMG survey (April 2005) a third of London businesses said the existing congestion charging scheme has added to their costs or led to a loss of customers, while 22% reported that it had brought about a worthwhile improvement.

Some businesses, primarily those in the services sector, have gained through efficiencies arising from quicker travel across central London and better journey time reliability. However, for a number of sectors including delivery companies, retail and distribution, logistics and utilities (some of whom operate hundreds of vehicles) the scheme has added significant costs without delivering commensurate benefits. While tolls on cars may encourage people to transfer their journey to public transport, no such choice exists for freight. Moreover, some firms have had to employ an additional person to manage the charge. There is no clear evidence that the benefit of time savings to firms has been sufficiently large to lead to tangible improvements in productivity (eg in the form of extra deliveries), which might otherwise have been expected to counterbalance the direct cost of the charge.

Price increases

The rise in the congestion charge to £8 (£7 for fleets) has raised major questions about the fundamental purpose of the scheme. Transport for London and GLA Economics’ impact monitoring studies show that any negative impact on business is negligible - but other studies point to the contrary. It is important therefore to have an independent assessment of the impact of the charge.

Westward extension

The westward extension of the congestion charge will come into effect in February 2007 and will end at 6pm instead of 6.30pm. We opposed the proposed westward extension of the zone. From the outset we have said that there should be no fundamental changes to the scheme until a proper assessment has been undertaken. Any further extension of the charging zone should only be considered if the scheme delivers net benefits to business; an extension will further reduce congestion and a cost-benefit analysis shows a clear overall benefit.

With an implementation cost of £125m stacked up against a net revenue as low as £10-£30m, there is not a persuasive case for the westward extension. It is not clear to what extent congestion will actually be reduced, given for example, that the extended residents’ discount would increase traffic in the central zone. Instead the £125m could have been better deployed in other critical areas including improving the environment of services and deliveries, and tackling specific bottlenecks on roads.

We will continue to press for further improvements in the scheme and for more effective tackling of wider road management issues, as well as for an independent assessment of the impact of the charge on business.

We are continuing to monitor the impact of the charge on members. Email your views to Minakshi Roy.

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