The unsurprising impact of scrapping bridge tolls

From the BBC:

Journeys on the westbound carriageway on the Prince of Wales Bridge have increased by 16% in the year since the tolls were removed.

An average of more than 39,000 journeys are being made each day, up from less than 34,000 per day in 2018 when the £5.60 charge was still in place. Highways England said traffic rose by about 32% on the M48 Bridge, but exact figures were not available.

All those journeys mean more economic activity and so on. Tolls mean income for the bridge owner and and equal and opposite cost to motorists, so that is just a transfer of wealth and cancels out. Tolls also depress economic activity, so scrapping them is a clear win overall. Which is why I don't like tolls.

The bad news is, the value of that extra economic activity in south Wales and Bristol largely goes into higher land values, so the total rent collected i.e. land rent + tolls, stays the same.

This bit is interesting:

In the past two years the eastbound carriageway had seen a daily average of 3,000 more journeys than the westbound carriageway, where the tolls applied.

But after the removals of the tolls, the difference has fallen to about 1,000 journeys more eastbound per day since the tolls were removed, with an average of 40,364 trips from Wales to England in 2019.

How is this sustainable? To get from south Wales to Bristol, you have to take one of the two toll bridges, so the number of journeys each way should be the same.

One possible answer is that 1,000 people emigrate from Wales permanently each day, but that can't be right because Wales would be empty by now.

For Whom The Road Tolls

From The Metro:

A British businessman who has grown tired of council works closing off a road near his home has built his own detour, and is now charging motorists £2 each to use it.

Mike Watts, 62, was forced to drive around a section of the A431 between Bath and Bristol because a landslide had closed the road in February. Council works were due to carry on until the end of the year.

Not wanting to wait that long, Watts employed his own crew of road workers and built a 365m-long bypass in the field next to the closed-off section.

He spent £150,000 of his own money, so has now set up a toll booth and is charging cars £2 to drive along his road (and £1 for motorbikes). Regular users can bulk-buy 12 passes for £10.

Motorists can avoid the toll, of course, but it means having to make a ten-mile detour, so most are happy to pay the money.

Fair enough, people are happy to pay £2 to take the five-mile route (99% of which is on public road and 1% which is on his private road and pay £2 for the 1%) rather than the fifteen-mile route over free public roads.

But why does he get all £2 of it?

In theory, the council could demand a £2 toll for using the public stretch between the next junction and the private bit; maybe the saving is not worth £4 and so he and the council have each other over barrel, split the difference and get £1 each.

How do they work that out?

From the BBC:

Untaxed foreign cars 'cost millions'

The RAC says the government is missing out on millions of pounds of revenue every year because there are thousands of untaxed foreign cars on British roads.

About 60,000 foreign vehicles are registered with the Driver and Vehicle Licensing Agency every year. However, the RAC said an estimated 15,000 others are not, which it said amounts to about £3m per year in uncollected tax.

No, uncollected tax is simply not a cost. That's like counting all the goals which I have never scored in a Cup Final as a cost. The notional cost to the UK government is equal and opposite to the tax saving for Johnny Foreigner.

While it's very naughty of these people not to register their vehicles like everybody else, Vehicle Excise Duty is less than a tenth as much as duty and VAT on petrol/diesel, so they are not making much of a saving overall, and the tax they pay on petrol more than covers their share of the cost of road maintenance etc.

This logic does not apply to lorries which fill up on the other side of the Channel and then use British roads without refilling here, although I'm not sure why they would, AFAIAA, fuel prices are pretty much the same in the UK, Belgium and France.

They keep burbling on about some sort of Brit Disc for foreign lorries (which seems like a sensible idea to me), but it never gets off the ground. Maybe the EU doesn't like it or something.

"Osborne predicts boost from Humber Bridge lower tolls"

From the BBC:

The Chancellor believes the Yorkshire and Humber economy will receive a £250 million boost from an increased number of motorists using the Humber Bridge.(1)

Toll charges have been reduced from £3 to £1.50 each way for cars. Motorcycle tolls have now been scrapped.(2) The lower tolls come as a result of the government writing down almost half the £330 million debt still outstanding on the Humber Bridge.(3)

In an interview with BBC Look North, George Osborne said: "The evidence we have is that the cut in the tolls will boost the local economy by £250 million over the next generation.(4) It is really good for jobs, people will be able to find work on the other side of the estuary if they haven't got it now.(5)"

1) Wrong. Transport infrastructure is good for the economy (imagine that there were no roads of railways in the UK), full stop. The boost to the economy is because it is there, regardless of how it's paid for or who pays for it. The toll for the bridge is not a user charge in any real sense, it is rent pure and simple, so if you have a toll charge, all that happens is that the rental values of surrounding land are pushed down ever so slightly (having been pushed up by the bridge).

2) I suppose there are some very, very marginal commuter journeys where the benefit of making the crossing is less than £3 but more than £1.50 which will now be viable which weren't viable before, giving a tiny additional boost, but this is barely measurable. That said, I don't agree with (public) tolls either as a way of raising income because the collection costs (i.e. you wasting a few minutes in the queue) are so high relative to the charge paid, so why not scrap them tolls completely, to maximise this marginal economic boost? (and privately collected tolls is rent-seeking of the highest ordure, of course).

3) Sunk costs, absolutely irrelevant in decision making terms.

4) How long is a 'generation'? I know that politicians spout meaningless crap, but that phrase is more meaningless than most.

5) Wot? All the unemployed north of the estuary will find jobs to the south, and vice versa?
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And if this weren't all stupid enough, let us not forget that three years ago, David Cameron's view on road tolls was quite the opposite:

The road tolls are among a range of new taxes David Cameron is being forced to consider as public borrowing is forecast to rise to more than £1trillion.

The Tory leader promised a “national endeavour” to pull the public finances out of the red as he admitted that he “cannot rule out any tax increases” if he wins the next general election... Proposals to introduce road tolls are likely to prove unpopular with motorists, who already pay one of the highest rates of fuel duty in the world at 54p per litre plus VAT.

Bridge-Owner-Ism

I outlined what Car-Owner-Ism would look like a while back. DNAse has now done the same for Bridge-Owner-Ism (Option C):
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Here are a few options for ways a government can handle the issue [of privately owned monopoly toll bridges]:

A. Allow more bridges to be built.

B. Tax and redistribute the monopoly element of the Bridge toll, allowing the bridge operator to cover their costs and make a reasonable profit.

C. Allow people to buy a stake in the Bridge operator. Thus putting more money into the operation, the monopoly situation means that the operator does not need to spend this money on investment or improving efficiency of the bridge it can all go to directly increasing the value of the company.

Stakeholders get a discount on the bridge toll dependent on how much equity they own. For stakeholders any rise in tolls is countered by the rising value of their equity. In lieu of B the government charges a modest stamp duty for each stake purchase. This is favourable since a cash for equity exchange is "real" whereas monopoly profits are "imputed".

Non-stakeholders are incentivised to buy in to get their discount on the toll. Exisiting stake holders benefit as the value of their stake is pushed up with the increasing demand for equity. Since everybody is apparently benefiting from this situation the government can relax lending constraints to allow people to borrow lots of money to buy the now expensive equity and further push up the value of the company.

Given the success of the situation, the increased revenue the government gets from each equity exchange need not be spent on infrastructure (such as bridges) it can be spent on creating public sector jobs ,preferably on the other side of the bridge.

Bayard added: Let us not forget that the prospect of making a profit on the original bridge in question was so poor that the government had to offer a tax waiver as an incentive to build it in the first place.

For Whom The Bridge Tolls (coda)

I used the example of a privately owned bridge to illustrate privatised tax collection a few weeks ago, and I left a comment in response to others as follows:

... the road from Hereford to Hay-on-Wye is a total of 23 miles, of which fifty yards is this confounded bridge... if it's acceptable for the bridge owner to charge 80p for the crossing, why not sell off the other 23 miles in half-mile chunks (worth £4 million each) and allow each new private owner to charge a toll of 80p?

In fact, why not split it into fifty yard chunks and allow each owner to charge a toll of 80p? The value to the driver of that distance has nothing to do with how expensive the road/bridge was to build and everything to do with the value to him of getting from A to B (and back again). Each bit of that road has the same "ransom value".

Happily, I stumbled across a real life example of such privatised tax collection in yesterday's Metro:

China: It seems that capitalism is really taking root in the communist country. Canny farmers have cut a track through their crops, so that drivers can pay them 20p to bypass a £1 toll road. "We make more money from out toll road than we ever did from farming," said one of the budding entrepreneurs in Liujiang. "Hundreds of cars come through every day."

Let's assume that the road is government owned, so the £1 is a tax. How is the 20p not also a tax, albeit a privately-collected one?

Question: How much would the farmers be able to charge if the government scrapped the toll on the official road?

Answer = nothing (unless the official toll-free road is hopelessly congested).

So this isn't really capitalism at all (creating, working, investing, etc) it's merely skimming off the location value of the field, which just happens to be located between two towns between which people need to commute (without these towns, there'd be no commuters and hence nobody to collect tolls from) and which just happens to be next to a toll road.

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.