You’re already paying a congestion tax — a bad one

Hear about the free-market policy that the Institute of Public Affairs didn’t like? Congestion pricing. It’s a terrible idea, an IPA “research fellow” argues today for News Corp, portraying it as “elite class … agenda of centralisation and densification”.

A congestion price, this week urged by the Grattan Institute and immediately rejected by the NSW and Victorian governments, “hits the least wealthy hardest”, according to the IPA. As a result, “the suburban working-class would be forced either to pay extra to get to work or to cram themselves into unreliable, already full trains.”

Well, the unreliable bit is certainly true in Sydney, where each day commuters wait to learn which minor problem will bring the entire network to a halt — something for which no one, anywhere, ever seems to be held accountable.

And it’s true that, like any price, higher-income earners have greater capacity to pay under a congestion pricing scheme. Charging for access to road infrastructure will indeed deter people who, because they can’t afford it or because they don’t want to pay it, will avoid driving into areas covered by the scheme, switching to other modes, delaying their travel or going elsewhere. Others with greater need or higher incomes will pay the charge and access roads with fewer vehicles on them, reducing commuting times and pollution and the economic losses currently associated with being stuck in traffic.

As the IPA fellow admits, people already pay a lot of money to register their vehicle, insure it and run it on fuel that comes with a de facto congestion charge — fuel excise. So we already have a regressive tax system in place for motor vehicles. The money raised by a congestion pricing scheme could be used to reduce rego costs for low income earners. Or fund a public transport system that doesn’t grind to a halt because someone sneezes.

But rego and excise aren’t the only tax that motorists pay. The dirty secret of opponents of congestion pricing schemes like the Victorian and NSW governments is that every urban motorist already pays a congestion tax, in the form of their time. Every second you spend stuck in your car, queued up along with thousands of other motorists, is a second you could have spent doing something better — like being at work, or being with your family or friends, doing what you’d prefer to be doing. Instead, you spend it crawling along and cursing the idiot in front of you.

This is what the Soviets did. They didn’t have effective price signals for consumer items like basic groceries, so they didn’t produce enough of them. Soviet people had to queue for everything, devoting large slabs of their lives to waiting in line for low-priced consumer staples. And that’s how we regulate access to most of our road space at the moment, by queueing, because we don’t have price signals — or the signals we do have, rego and excise, don’t work. Instead of allowing a free market price signal to determine access to the product, the IPA — and governments — prefer the Soviet solution, queueing. And they get away with it because motorists don’t see it as a tax, and don’t understand that a congestion charge would replace it with be a far more efficient and productive form of tax than making everyone queue.

No one pretends that the IPA actually has any economic credibility anymore, given it is funded by and advocates for a clutch of special interests, but it is amusing to see the author criticise congestion pricing as a “rationalist scheme”. Once upon a time, the IPA was proud to defend “rationalist schemes”. And it worshipped arch-rationalists — rationalists like Milton Friedman. Search the IPA site and you’ll see thousands of words devoted to the genius of Milton Friedman. On the economist’s death in 2006, Tim “Freedom Boy” Wilson wrote a glowing obituary for the man he called “one of the foremost advocates of freedom”.

Alas, it turns out, Friedman was a member of that “elite class” that advocated for congestion pricing. In fact he was pretty much the first to suggest the idea. Back in the days before e-tags, he proposed a Geiger counter on every car and roads painted with radioactive lines to provide the basis for the charging mechanism. Sigh. Out-of-touch elites, huh?