Congestion Tax

The Sydney Morning Herald has run reports now for two days in a row on the imposition of congestion taxes on the CBD and other parts of the city. Today there are two stories and an editorial. The first article yesterday, seemed to indicate that an RTA study had indicated popular support for the idea of imposing one on the city, but the main piece today seemed to suggest the opposite.

Most disappointing was Eric Roozendaal the NSW Roads minister ruling it out, not because its unnecessary but because:

“This market research survey from six years ago did not indicate Sydneysiders would support a congestion tax and I can categorically rule it out,” he said.

“The RTA and Government are constantly looking at ways to improve traffic flows through the building of better road infrastructure and better traffic management.”

The problem with this being that, in general, improving flows merely increases the numbers of cars using the road and in pretty short time we have the same problem again.

The Lord Mayor Clover Moore, quoted in the same piece, makes a slightly better case for not imposing a congestion tax,

I don’t support it at this time for Sydney because we don’t have that efficient effect of public transport system and disappointingly we don’t appear to have a commitment from the Government to do something about it,” she said.

but it remains a cop out. There should be alternatives if we are going to propose it, but these can be done in conjunction with imposing a congestion tax. Unfortunately imposing a tax never sits well with anyone and certainly it seems the media is unwilling to explain it in a way other than just imposing a charge to keep people away.

The logic of a congestion tax is that by reducing even a small amount of total vehicles on the road who are making unnecessary trips or encouraging car pooling, the roads are freed up for the rest of the cars, who get a faster trip. On top of this, there are other benefits like less pollution. Also, unlike the tolls imposed on other roads, it should be time varying. There is no reason to impose it in off peak times

However there are good arguments against it. One concern is that it is a regressive tax. The rich are barely effected and the poor can’t afford to pay and suffer as a result. As Tim Harford pointed out in his book The Undercover Economist this is not necessarily so. Certainly in London it was mostly the well off who would drive into the city, the poor already caught public transport, so it was in effect a progressive tax. He acknowledges though that in other places this may not always be the case, but it is possible to redress this in other ways.

One way would be to decrease registration costs, which would deliver more cash into people’s hands which they can then either choose to spend on paying the charge, or alternatively save by reducing their trips into the city. The other side is of course you use the money to increase the amount of public transport infrastructure.

For Sydney at least it is difficult to see how flows can be improved, given that the street layout will not change significantly. Jason at Catallaxy recently summarised a talk on the effect of government spending in reducing congestion costs, highlighting that reductions in congestion from road improvements are extremely cost ineffective and that congestion charging was one of the few tools left to tackle the issue.

I think that a plan involving congestion charging could be politically salable if introduced in the right way. Our current experience with tolling is that it is done for the purpose of raising money for infrastructure. As John Quiggin points out in this AFR article, pricing based on the historical accident of government not having enough cash to fund it doesn’t make sense, but pricing based on congestion does. If issues such as fairness can be addressed as well as providing better public transport facilities there is no reason it couldn’t be a popular way of reducing congestion.


19 Responses to Congestion Tax

  1. Rod Clarke says:


    Essentially this would turn out to be a “Bloke Tax”

    Alot of men choose manual labour that involves them being out and about often with a mobile workshop in the back of their ute.

    afterall their already hit with

    1) poor public transport to their workplaces (like the manufacturing hubs around Revesby, Wetherill Park, Seven Hills etc)
    2) Petrol Taxes
    3) Disproportionate Rego costs

    And we all know how hard it is to get a Tradesman in Sydney – this tax would make it harder for everyone.

    They really should just make public transport free

  2. Sacha says:

    How would free public transport alleviate congestion in the CBD?

  3. Steve says:


    The suggestion I’m talking about is just for the CBD. However it could be extended to other areas of congestion if they were bad enough.

    I actually think it could be a good thing for people who need to travel about for their jobs. At the rates tradesmen charge, the cost of paying a toll is probably well less than the billable time they might lose in traffic congestion. If it means they can get to one more job in a day then they are likely well ahead of paying $10 in tolls between the various jobs.

    The important point to remember is that you only charge these things at time of high congestion to force the people who can travel at other times off the roads.

  4. Steve says:


    It would no doubt have some effect by changing the relative costs. It wouldn’t change other behaviour though like shifting the times people travel, encourage car pooling etc.

  5. james says:

    No, but it would encourage bus-pooling.
    I agree with Rod that a more positive step would be to make public transport free. Somewhere during the greiner years it got lost that public transport is supposed to be a public service – it doesn’t have to make a profit and according to NSW state rail’s drunken-kiwi-chief-accountant (among others) they would lose less if they abolished all of the ticketting infrastructure completely. Seems it would be better to do away with a layer of administration than add yet another one.

    ps anyone thinking of replying that charging even a subsidised fair stops people ‘wasting’ the resource has to spend a day joy-riding the sydney bus system and then see if this seems like a likely problem.

  6. Steve says:


    I would be very suprised if the ticketing system really cost more than it brought it.

    The issues with having free public transport is that it is a subsidy to the rich who live in suburbs well serviced by public transport (Nth Shore, Eastern Suburbs and Inner west) while the actual poor in the outer suburbs get less benefit. This is difficult to get around as good public transport makes areas more expensive and drives out the poor.

  7. james says:

    I did say he was drunk. I guess I’d be a little surprised if it was still true with the current ticket prices (since greiner = current !) but then again they’d probably be halving their regular employee count. In response to your other point:

    1/ We have progressive income tax and so public transport is already being subsidized by the rich. Making it ‘free’ really means that every time you get on the bus you are paying something commensurate with the income tax bracket you are in -> ie even more subsidized than at present where the poor are forced to pay the same usage fee as the rich.

    2/ the rich live in areas where public transport helps most – densely populated, close to the city (ie on the most popular/efficient routes )

    3/ there’s nothing stopping the service being expanded.

    4/ state transits own study shows that not having the delay (on busses) of the driver collectig the fare would significantly speed up the service. Imagine just hopping on the bus and sitting straight down – no grannies searching for change and counting out 1.80 in 10 cent pieces.

    5/ the poor would be less poor if we (australia) transported our people around more efficiently. There will be less jobs supporting the car industry but compared to the current situation where the cost of the cars and the fuel and the parts mostly come from overseas it seems to be a stretch to say we need the jobs in view of the potential savings to the economy. Motor mechanics can retrain, the rta can start a rock painting enterprise etc etc

  8. Steve says:

    1/ I disagree. If you are living in some suburb where you can’t get public transport then you are subsidising through your tax (however minimal) the relatively rich people who do. The advantage of a user pays system is that the people who are using the system actually pay for it. So the residents of Dubbo, don’t have to help bankers get to work in Sydney.

    2/ Yes I agree, which is why its a progressive effect. The rich can afford to pay for public transport.

    3/ Yes obviously it should be. If public transport coverage was good then we could subsidise it to a greater extent, but until there is good links going not just radially out of the city by around the city it seems unfair that the workers of Wetherill park who commute to seven hills should be subsidising the bankers of Bondi.

    4/ No doubt true, although there is a number other ways of being able to get around this. Being able to buy tickets at the main bus stops to just present etc would help this problem. also more automatic ticketing.

    5/ Better public transport is good. We agree. Subsidisies of course require government intervention in general, so even to private operators etc they have control over where people go.

    My over all opinion is that,
    1) we should subsidise public transport to some extent.
    2) It shouldn’t be free. I would suggest at least 50% of the cost should be paid perhaps more like 75%, otherwise it is too unfair for those who its just not a suitable or available method of transport. – I’m not sure what the current level is.

    On the other hand at least into the CBD public transport is fairly good. A congestion tax would encourage people to at least partly commute by public transport. As well as freeing up the city so those who actually have a need to drive there can do it more easily – not to mention the buses running more freely. The money can be put to various uses particularly subisdising public transport into the city.

  9. Sacha says:

    Pre-paid tickets must have sped up the time people take to get on the bus – in my experience only a small minority of people buy tickets on the bus.

  10. Sacha says:

    james said: “…Making it ‘free’ really means that every time you are getting on the bus you are paying something commensurate with the income tax bracket you are in…”

    Making it ‘free’ means that people who don’t use it are subsidising people who do use it.

  11. james says:

    Public transport is a good thing. I like the fact that people who don’t use it should pay for people who do. What else does subsidy mean ? I just don’t see it as “unfair” to provide an overall better transport solution to people where possible. Just because it doesn’t work so well in the some areas is not a reason against strongly encouraging it where it does. If you really want to make sure the rich don’t benefit then change the top tax bracket or introduce some tax to be levied on areas with high usage but don’t waste time and money with the ticket collection process. Also, why 75 % ?

  12. Steve says:


    Its not just a question of people who don’t use it, its a question of people who can’t use it. A congestion tax in the city by the way would encourage people to use it where it does work well with out significantly impinging on those who can’t.

    75% has no strong justification but it makes it cheaper while mean people who benefit still have to chip in.

  13. james says:

    do you believe that people who don’t / can’t use public transport benefit from it being used by others ?

  14. Sacha says:

    James, I’m all in favour of public transport – I use it all the time and don’t have my own transport. The thing is to try and think clearly about the implications of what “free” public transport would mean. It may well be a great thing.

    The question is, would free public transport reduce congestion in the CBD? Maybe, but it seems like a pretty convoluted way to reduce congestion, as public transport, while often starting or ending in the CBD (eg many buses do this), also goes many other places. How would free (or cheaper) public transport reduce congestion?

    A congestion tax is direct and immediate, and directed at the area in question. I don’t know how it would actually be implemented as there are many routes into the CBD, nor am I sure if it would overall be a good thing, but it’s worked in other cities. The key thing is to get the incentives right.

  15. Sacha says:

    A congestion tax would introduce a price signal to drivers’ decisions as to the routes they take in/near the CBD, which is not in and of itself a negative thing.

  16. Rod Clarke says:

    I can think of heaps of ways to fix congestion in the city other than having another tax on working households.

    1) get rid of the PO wharfs down in Sussex St and stop 18 wheeled prime movers driving up and down the street 24hrs / 7 days – Move it to Newcastle and Wollongong.

    2) Introduce a “mini cab” system similar to london. I currently pay $15 approx after tax everyday to park in the city because, quite frankly an hour of my time is worth more than that, especially when the substitute is an uncomfortable hours on a cold / wet bus with no seat and all of the queing

    3) Piss the government off from the centre of sydney to a greenfield site like the North West Business park or Parramatta, These guys dont need to be in the centre of the city.

    The harbour and the Bluemountains are always going to cause natural (geographic) traffic snarls in sydney therefore a Spoke and Hub model might work where a traditional grid wont.

    So set up banking nodes, Law nodes, Government nodes, “University towns” i.e. while we are at it why not chuck Sydney and NSW unis out to a greenfield site in the burbs, and have more CBD unis for working students.

    4) similar to the first home buyers grant have a “”sea/ tree change”” voucher!

    If people over 50-60 sell their house close in to the CBD or in established areas like concord/the north shore then dont charge them stamp duty (heck even give them $10k piss off money). Stamp duty and all the attended fees which currently operate as a massive tax on mobility.

    4a) Also charge zero stamp duty for young workers on flats in the city or right near trainstations such as the Forum? at St Leonards.

    5) Have a private/public Mini-bus network to service in non peak times and Perhaps instead of free just have a $10weekly all you can use card across all public transport platforms.

    These are just rough Ideas off the top of my head but their has to be more solutions other than just another tax, which would just fall on households and would just create more “howards battlers”.

    Afterall in the last 10 years goverments could have borrowed at near zero real interest rates – does the “no debts” government as profit making business really make sense in these circumstances? do traditional NPV models with 5-10 year payoffs really apply to governments?

  17. Rod Clarke says:

    6) Fix the CBD Bus network

    Have the Busses terminus’s at special stations on the CBD fringe and use travelators similar to the domain car park tunnel to transport people to and from them into the centre.

    7) encourage wlefare reciepiants out of the city. give them a 20 buck extra bonus to move out of the centre and redevelop alot of that wasted space in rocks.

  18. james says:

    Sacha, free pub transort would definitely get more people on busses/trains. Although busses are slow/stop all the time it still represents 50 odd people in 3 car lengths and so I think it must reduce congestion. As you will have noticed on your bus route – there are still heaps of single drivers making their way into town.

    Rod, am making my way through your list although I can say that I am horrified by the suggestion to move Sydney Uni. Happy to move UNSW to Rooty Hill though.

  19. […] In the earlier post on congestion tax it was brought up why shouldn’t we just reduce congestion by making public transport free. While it has some appeal to me in that I would be able to travel free to work everyday, and it would no doubt reduce congestion. I don’t think this is a good idea for a few reasons, not least the cost on the residents of Wagga Wagga paying for the Sydney train service. […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: