Wednesday 25 May 2011

For whom the bridge tolls (2)

To try and round off yesterday's debate, I just don't understand how people can try and justify bridge tolls (whether privately or publicly owned) by saying things like this:

"Bridges tend to be fairly isolated (1), except in cities like London, because, I suppose, of the cost of building them. The point is, no-one is preventing anyone from building a bridge a hundred yards away, it's not a state-protected monopoly. (2)

The fact that, in more than 200 years, no-one has thought it worthwhile to do so rather suggests that there is no economic point. (3) Bathampton Bridge is a private toll bridge with free competition not far downstream, but is still fairly busy, because using it means you don't have to fight your way through the middle of Bath." (4)


1) Bridges are clearly not isolated by Bayard's own admisson (see his example of the Bathampton Bridge, 4).

2) In the instant case "A stretch of river bank [is] included in the price", so the chances are you can't.

3) That isn't at all proven. The original bridge required an Act of Parliament; a new one would require lots of planning consents and would also required new stretches of road to be built to divert the traffic (which presumably the owner of the new one would have to pay for, which the owner of the old one doesn't).

4) Clearly, it's not quite in competition; we are comparing slow toll-free route with quicker toll route. What happens if the Bathampton Bridge were toll-free and the one in the middle of town is a toll-bridge?
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Let's not confuse 'cost' and 'value'. Clearly, if people want to travel from Hereford to Hey-on-Wye, they are happy to pay the 80p toll; and if they want to get from one side of Bath to another quickly, they are happy to pay a toll. This toll is a reflection of the value to the car driver of the time he saves by using that route rather than an alternative toll-free route. But what the heck does that have to do with the costs?

As a thought experiment, imagine that the Whitney-on-Wye bridge belonged to the local council (or The Highways Agency or whomever), as do all the other 23 miles of road between H and HOW except for one short stretch of a few hundred yards, where the owner of the land wangled his way out of a compulsory purchase order and privately owns that stretch, and let's assume this is dry, solid land where building and maintaining the road is dirt cheap.

So, would car drivers be prepared to pay 80p to drive that short stretch of privatised road? Of course they would; the value to them of getting from H to HOW (or back again) along that route is exactly the same whichever stretch happens to be privately owned. We could divide up the 23 miles of road into a hundred short stretches and sell off each one to a private toll collector, if (let's assume) the total value of being able to drive that route by car is (say) GBP 10, then each toll collector can charge each car driver 10p.

Furthermore, the local council is delivering customers to the bridge owner; it is maintaining all the other 23 miles of road free of charge (to the bridge owner), and all he has to do is collect his 80p monopoly rent.
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As far as I am aware, the government collects three times as much in VAT and duty on fuel as it spends on road maintenance, so financing roads is a doddle; or if you are a purist, if a particular roads or bridge is a good investment (and most but not all of them are) the cost can be funded out of LVT on the additional rental value of the sites which benefit; there is no need for LVT on roads themselves as VAT and duty on fuel is more-or-less LVT on roads anyway.

7 comments:

Curmudgeon said...

In fact I'm sure I've read that the government collects about five times more in VAT and duty on fuel than it spends on ALL TRANSPORT, including capital expenditure.

Mark Wadsworth said...

C, total taxes on cars (fuel duty, VAT, benefit in kind, insurance premium tax, road tax, parking tickets, yadda yadda) = over £50 billion*, total spend on roads (as far as I am aware) £10 billion.

* So that's a tax of £50 billion a year on vehicles worth £250 billion in total. That does compare rather markedly with Council Tax of £20 billion a year on homes worth £4,000 billion in total.

DBC Reed said...

A fairly beneficent toll is the London Congestion Charge,emanating from the same Georgist-minded people like Dave Wetzel who created the near-mythical (although it actually happened)Fares fair scheme which subsidised tranport out of the rates.Do you know how much London fares could be reduced by cross sunbsidies from Congestion Charge receipts?

Bayard said...

Mark, to reply to your points:

1. I said "except in cities.." Bath is a city.
2. Well, of course you'd have to buy some river bank. Who says you can't do that? The unwillingness of a riparian landowner to sell does not constitute a "state-protected monopoly".
3. I was not aware that you needed an Act of Parliament to build a bridge over a river. I suspect the original bridge only required one because of its tax-free status. As far as new roads are concerned, we are only talking about 100 yards of B road on one bank as the A438 runs right next to the other bank. Planning considerations are irrelevant, they didn't exist until recently and as I pointed out, no-one has thought it worthwhile to build in the last 200 years.

By your argument, every landowner (including householders) is a monopolist in that they can charge the general public to come onto or cross their land. How is that different from charging for any other service? How is building a bridge and charging for it different from, say, building a bowling alley, a cinema or a car park?

Mark Wadsworth said...

DBC, see subsequent post.

B, "The unwillingness of a riparian landowner to sell does not constitute a "state-protected monopoly"."

Yes it does.

"By your argument, every landowner (including householders) is a monopolist in that they can charge the general public to come onto or cross their land."

Correct.

"How is that different from charging for any other service? How is building a bridge and charging for it different from, say, building a bowling alley, a cinema or a car park?"

It is not difficult to distinguish between the income (or value) generated by building and running a physical bridge, bowling alley, cinema or car park and the rents you can collect by 'owning' the land underneath the bridge, cinema etc.

Car parks are probably the best example as the cost of the tarmac is minimal - 90% of your income depends on WHERE the car park is and not what quality tarmac you use.

Bayard said...

"B, "The unwillingness of a riparian landowner to sell does not constitute a "state-protected monopoly"."

Yes it does."

Not in the sense I meant it, it doesn't. only in the sense that all landowning is a state-protected monopoly.

"It is not difficult to distinguish between the income (or value) generated by building and running a physical bridge, bowling alley, cinema or car park and the rents you can collect by 'owning' the land underneath the bridge, cinema etc."

Well, no, the income you can generate from owning a narrow strip of river bed without a bridge over it is precisely nil in the absence of commercial traffic on the river, in which case it's the complete opposite of the car park (where you don't even need tarmac).

Mark Wadsworth said...

B: "the income you can generate from owning a narrow strip of river bed without a bridge over it is precisely nil in the absence of commercial traffic on the river,"

That depends entirely on where that strip is. A strip of the Thames in central London is worth millions (you can run a cafe or something), a strip of river with fishing rights near a town is also worth a lot, a strip of river in a flood zone in the middle of Louisiana nowhere near a town is presumably worth nothing.

As to the bridge in question, the income is whatever it is, we know the maintenance costs*, return on capital on the stones and planks, that's a fairly known figure, and then there is the additional return because it is wherever it is and how many other bridges there are in that area. The additional return is monopoly land rent.

* Would it be fair to make the bridge owner pay something towards the upkeep of all the roads which bring traffic in his direction for free? If they did, his income would soon be wiped out.