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Transport Blog
07 September 2006
Why the congestion charge should not subsidise public transport
Patrick Crozier

“The idea was to take money raised from the Congestion Charge and spend it on improvements to public transport.”

Bob Kiley, former boss of London Underground, said something very like this on his documentary for Channel 4 last week.

I hear this line of argument rather a lot and every time it sets my teeth on edge.  It does so because while sounding so terribly reasonable it is, I think, nonsense. It’s just that I’m not quite sure why.

Identify the assumptions:

  1. That the state should own roads

  2. That the state should raise revenue from roads

  3. That the profit should be spent elsewhere

  4. That mass transport is more deserving than individual transport

  5. That mass transport should receive subsidy

  6. That roads are where that subsidy should come from

Well, I’d question state ownership of roads in much the same way that I’d question state ownership of anything, though I think the sorts of roads we find in London would probably have to be owned by some kind of super-landlord.

I suppose my real objection is the idea that mass transport should receive subsidy.  First, because I don’t like subsidy.  Second, because I find myself asking why it needs subsidy especially since one of its main competitors (car-driving) suddenly got a lot more expensive.

Because it makes losses, perhaps?
Well, why is it making losses?  Profit is good (more or less).  They show that you are doing the right thing.  Therefore, losses are bad.  They (losses) suggest you are doing the wrong thing.

Well, what about positive externalities?
Right, well perhaps I should start by explaining what positive externalities are.  Typically when someone builds a railway the line doesn’t make that much money, if any, but those who own property near the stations make a killing.  A classic example is the Jubilee Line Extension.  Capital cost £3bn.  Gain to local property owners: £13bn.

So, the argument is that we all gain and so it is worth the state’s while subsidising new railways.

But you object?
Well, first of all, this in no way justifies the subsidy of existing railways.  Secondly, there is the assumption that the market will not provide. I think it will.

How?
By buying up the land around proposed stations.

But if everyone knows where the stations are to be built why would anyone sell?
The way you’d do it is by buying options.  So, I give you a tenner if you will agree to give me the option to buy your property at a certain price. 

So, why aren’t they doing it already?
My guess is it is because people believe the state will intervene and because it is very difficult to get planning permission for a new railway.  Another reason to abolish planning.

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