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

1. “Fewer than 20% of Greater Manchester’s weekday peak-time drivers would pay a charge. The average daily charge is estimated to be less than £3 (at 2007 prices).

“

2. The average cost in 2013 would be £3.60 (£3 at 2006 prices)

From this I have put together the following estimate.

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%.

During my Geography lessons when aged 13, we were introduced to metaphor of getting a donkey to move. These stubborn beasts are traditionally encouraged by dangling a carrot in front of its nose, and the use of a stick to beat it’s rear. The transport proposals for Manchester include a number of carrots (incentives) and sticks (disincentives or penalties) to get the subtantial behavioural change in transport use.

The Carrots.

1. A trebling of the tram network, along with increased trams on existing lines.
2. “We will have buses every 10 or 15 minutes on every estate in Greater Manchester. They will not be big buses but, perhaps, minibuses which would operate a feeder service to the main roads.”  Or, alternatively, more services, more frequently, on better buses.
3. More bus lanes, to speed up traffic flows.
4. More cycle ways, with bicycle friendly interchanges.
5. Bus interchanges
6. Yellow School Buses
7. More Trains.
8. Discounts for weekly and monthly tickets, and ease of purchase.

The Sticks

1. The Congestion Charge itself, of £1 to cross the outer ring anf £2 to cross the inner ring. This is only inbound in the morning peak times and outbound in the evening peak time.
2. The fines for none-payment of the charge. In London average £80. I would guess in Manchester it would be £30 for non-payment of a £1 toll and £60 for non-payment of the £2 toll. This would average £40 (as more outer-ring crossings). I further assume than the rate of non-payment will be the same as in London – equivalent to 4.5% of those paying.
3. The inconveinance of purchase. There is no mention how easy the pay the fee. Are you able to block pay a month in advance, or will it be just daily? Will the fee be refundable or transferable if not used? Will it be payable online, or just a limited number of outlets? Will there be an extra fee for paying by credit card? More generally, will the objective be to make payment as easy as possible or difficult?
4. Reducing access points to the charge areas. According to the Association of British Drivers, there will be just 14 access points (or corridors). In South Manchester, this is just A56 Chester Road, A5103 Princess Parkway and the A6. In the Wilbraham Road area, will such roads as Withington Road, Lloyd Street South, Yew Tree Road and most importantly A6010 Wilmslow Road, be blocked? I know that plans are not finalised at present, but it would be nice to know if this corridor system is part of the plans. One check, is to ask how many access points were included on the inner and outer rings in the estimated £313m cost to install the system.

Finding: The costs to society as a whole, are estimated at over 3 times the benefits.

The current proposals are just a list of proposals with no attempt to say if this is of net benefit to society as a whole. Using my costing experience, I have tried to detail these, with assumptions made. Some estimates will be wide of the mark, whilst other elements will be absent entirely. However,

1. This is the only publicly available attempt to evaluate if the initiative is of net benefit to society as a whole.
2. It provides a framework to compare and contrast various elements of the intiative.
3. When better estimates are available, then the estimates can be updated.

The Costs and Benefits

When I did my degree in Economics it was Cost-Benefit analysis. Furthermore, I spend more of my salaried beancounting time on costs rather than benefits. So the costs come first, despite current coventions.

Introduction

The Government through a new body called the Tif (Transport Innovation Fund), propose to spend £2.8bn on transport in Manchester.

There appear to be a lot of good ideas within it to reduce conjestion by encouraging travellers to move from their cars to public transport.

Since the luanch of the proposals in June, there has been a lot of debate in the press about the pros and cons of the scheme. However, there has been no independant assessment of the scheme in its entirety. Rather it is, mostly interested individuals who either cannot bear to have any disruption to their lives, or who have a dislike of people using their cars.

I endeavour to answer the question

‘Will the investment, partly paid for by a congestion charge, be of net benefit to society?’

My short answer is

‘No – not by a country mile’

The longer answer is that

–                           Motorists will not only suffer the conjestion charge, but through increased conjestion caused by bus lanes and blocking of roads at the charge boundaries.

–                           Those switching from cars to public transport will spend longer travelling on average, and may cost more.

–                           The time savings for public transport users will be small.

–                           The environmental impact will be small.

However, I need to make many estimates, based on limited knowledge and my own biases. This is why I state my assumptions. As more information is released, then I will update these projections.