The proposed investment of £2.8bn in Manchester, includes a conjestion charge. This has the dual purposes of.
1) Providing a “stick” incentive of getting people to use public transport instead of cars.
2) Raising sufficient revenue to pay off £1.2bn of loans.
The projected costs are £318m capital investment, with expected annual revenues of £174m and operating costs of £31m
I have attempted to put this into a calculation.
Other snippets of data are
2. The average cost in 2013 would be £3.60 (£3 at 2006 prices)
From this I have put together the following estimate.
Manchester Congestion Charge | ||||||
Manic Beancounter’s Estimate based on £174m revenue | ||||||
Data | Basis | Comment on Calculation | ||||
Revenue From Tolls | ||||||
C1 | Average Charge per day | £3.60 | This is £3 per day at 2006 prices | |||
C2 | Average per annum per person | £680.40 | ||||
Based on No of days Commuting | 189 | Allows for 15 days sick or on business elsewhere, and 20% “foul weather” drivers using car 50% of the time | ||||
C3 | Number of commuting drivers | 810,000 | (equivalent to 54.5% of Gtr Manchester’s Working Age population) | |||
C4 | Drivers paying charge | 153,900 | 19.00% | % of total commuting drivers paying Toll | ||
C5 | Annual Toll Revenue in £m | £104.7 | ||||
Revenue From fines | ||||||
C6 | Non-payers per day | 6926 | 4.50% | Equivalent % of total paying drivers (based on London) | ||
C7 | Annual Fine Revenue | £69.3 | £40 | Average fine (compared to £80 in London) | ||
C8 | Total Revenue (Tolls & Fines) | £174.0 | C5 + C7 | |||
C9 | Operating Costs | -£31.0 | ||||
C11 | Capital Costs | -£37.9 | Repayment of borrowings of £318m out of £1200m | |||
C10 | Annual Surplus | £105.1 | 887 | Equivalent amount of borrowings in £m | ||
Further assumptions made are
C2. I have looked at the average driver, to allow for actual days travelled. That is some taking bank holidays and 25 days leave. With 260 weekdays in the year, that leaves around 225 working days. Then some people mix between commuting by car and other means (public transport, car share, cycle, walking). I have ignored the other road users for this calculation. Therefore 189 days at £3.60 give £680.40 average charge per annum
C3. The number of weekday peak-time drivers per day I calculate to be 810,000, or 54.5% or the working age population. The working age population I assume to be 60% of the population of Greater Manchester of 2,480,000. It is a rough and ready calculation, but
C4. As less than 20% will pay the charge, I take 19%, or 153,900
C5. The total revenue is 153,900 x £680.40 = £104.7m
C6. There will be some non-payers. I assume that the percentage will be the same as in London, that is equivalent to 4.5% of the payers. That is 6926 per day.
C7. The average fine, I estimate to be £40, compared with £80 in London. This seems a bit steep at 27 times the average charge, compared with 10 times in London. If it was actually that level, I am sure the non-payers would be less. However, if I don’t set it at this level, I will not get back to the £174m total revenue.
C11. The capital cost is a charge that I have included. It is interesting to note that the term of the loan is 10 to 12 years. I am sure that the life expectancy of the system will be only five to seven years. Therefore the capital cost should be around £70m. This would only leave the surplus to pay for other borrowings at £300m over 5 years, and not £887m over 10 to 12 years.
C12. We thus have an annual surplus of £105.1m, sufficient to pay off £887m of borrowings.
Issues.
1.The estimates made here are speculative. Although the proposals will be based on better data, I believe that the figures should be independently reviewed. There is a considerable risk that the revenues are over-estimated, and the operating costs under-estimated.
2. The life expectancy of the system should be stated. If electronic tagging of cars is to be introduced before 10 years of operation are complete, then the quantity of other investment will reduce dramtically. The general taxpayer will end up paying.
3. The numbers are after 15% to 20% reduction in drivers switch to public transport. That means the estimates project around one million weekday drivers when the charge is implemented. Is this based on a considerable growth from present day levels.
3. Finally, I would like to see the study that claims “JUST ten per cent of weekday motorists would pay a Greater Manchester congestion charge”, as reported in the Evening News on 11th August. I have had to stretch things a bit to get 19%.