Pricing and Congestion: Economic Principles Relevant to Pricing Roads

Abstract

The road network is a costly and increasingly scarce resource. For the UK the Department of Transport (1989a) calculates that total road expenditures (capital and current) or ‘road costs’ averaged £4.34 billion per year at 1989/90 prices for the period 1987/8-1989/90. Public expenditure on roads has been fairly stable recently, increasing by about 6 per cent in real terms between 1982/3 and 1988/9, but with no strong trend (Department of Transport, 1989b, Tables 1.18, 1.22, 1.23). From the 24.6 million vehicles registered, road taxes of £12.7 billion were collected (including the £1.4 billion car tax), or 2.9 times the Department’s figures for ‘road costs.’ In 1987 15.1 per cent of consumers’ expenditure was on transport and vehicles, and 11.3 percent was on motor vehicles alone. Clearly, road transport is of major economic significance. Car ownership per 1,000 population in the UK appears to be catching up on the rates in the larger European countries and is now about 83 percent of French and Italian levels and 73 percent of West German levels. Over the decade 1979-89, the number of private cars increased from 14.3 to 18.5 million, or by 29 percent. From 1978-1988, the number of total vehicle-km driven rose from 256 to 363 billion or by 42 percent. As the length of the road network increased rather less, the average daily traffic on each km of road rose by 34 percent over the same decade on all roads and by 52 percent on motorways. Traffic on major roads in built-up areas (i.e. those with a speed limit of 40 mph or less) increased by 13 percent (Department of Transport, 1989b, Tables 2.1, 2.3).

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