Congestion Charge – income £930 million, surplus £14 million

Another thing that stood out from the TfL numbers I found yesterday was how badly the finances of the Congestion Charge are going. I say stood out. I mean I spotted them because I was looking for them. They were actually buried on page 99. See below, click to enlarge.

Note 26

TfL have restated them without saying so. In last year’s numbers they included £1.1 million of Capital financing charges and had done for the previous 3 years. This year they have mysteriously disappeared. They have also laid them out differently to make the surplus look bigger. The Mayor talks about a £120 million surplus but he can only make this ludicrous claim by ignoring indirect costs such as advertising (although how indirect can an £8.7 million campaign on the Western extension be?). The Audit Commission makes him bring indirect costs into the picture which bring his headline surplus down from £122 million to £89 million.

Bizzarely the income is down £1.7 million. You may remember that in 2005/6 30% of income came from fines. I can only think that due to the ability to pay next day and people’s changing behaviour this fines income has dropped away. Obviously it is a good thing if fewer people are picking up penalties.

As you might expect from out of control TfL costs are up. Up £16.6 million or 8.5%. The net effect of less income and more cost is that the surplus from this scheme is down a massive £18.3 million.

Few people paying their £8 a day realise that practically none of this cash is serving any good purpose. I have just updated the cummulative cash flow that I did for ConservativeHome to mark the fourth anniversary of the Congestion Charge. Previously I had used estimates for 2006/7. Now I can use TfL’s actual numbers. Income: £930 million. Cumulative surplus after over 4 years of operation: £14 million. See below, click to enlarge.

CC Cumulative Cash Flow

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19 Responses to Congestion Charge – income £930 million, surplus £14 million

  1. MikeA says:

    Great analysis, and fabulous ammunition for Boris

    This means that around 65% of total revenues have been paid to Capita in operating expenses? Who negotiated this contract.
    I assume the capital expenditure is for the traffic cameras and other infrastructure. Is this publicly owned, or an asset of Capita as well? Do you know how much of the CapEx went to Capita?

    What’s most concerning is that the admin expenses (Toll facilities i.e. Capita) appear to be increasing. Why? From 56% of revenue in 04/05 to 57% on 05/06 to 62% in 06/07. I negotiate service contracts as part of my job and we always negotiate a declining price over the life of the contact as the service provide should become more efficient and share that efficiency save. Clearly not in the case of this contract!

    The whole congestion charging scheme appears to be nothing less than a scheme to transfer wealth from the hard pressed motorist in London, into the pockets of the directors and shareholders of Capita. More trebles all round chaps !

  2. Eric Leach says:

    As I understand it, the Congestion Zone scheme was devised and installed in order to reduce traffic congestion. I realise that you undertook an analysis of the finances of Congestion Zones, but surely there must be a cost for reducing congestion, if in fact traffic congestion has been reduced. Your analysis seems to suggest that you view the Congetion Charge as a revenue scheme and not a means to bring about a reduction in traffic congestion.

    Crikey, it’s like suggesting that the Council’s Parking Services exists in order to generate a revenue scheme rather than as a means to reduce traffic congestion, to improve road safety and to ensure compliance with the law.

  3. Phil says:

    Eric,

    Do you think that the average Joe paying £8 to go into town imagines that £7.88 gets wasted on set up and running costs and only 12p is available for public transport improvements?

    I would not have a beef if say the net income from the charge was £2 when it was £5 and maybe £5 now that it is £8. I would think great reduced congestion and income to help pay for public transport improvements as the Mayor tries to suggest (by ignoring indirect costs, ignoring capital costs and ignoring the poor performance in the first two financial years of the scheme)

    Don’t forget that some people have talked about using congestion charging as an alternative to direct taxation. Not if all the income is squandered in costs.

  4. Eric Leach says:

    Phil,

    Interesting response.

    However I don’t think that your average Joe thinks at all about how the £8 Congestion Charge he pays is spent, or in fact how his tube, rail and bus fares are spent.

    Green taxes will come in and I don’t think we’ve seen anything yet in that domain.

    TfL’s money squandering is indeed scandalous and I’ve publicised your headline salaries’ analysis on WEN’s web site.

  5. Praguetory says:

    Profit is an accounting concept and can be manipulated. Follow the cash. A cumulative cash inflow of £14m after 5 years is disastrous.

  6. Tony F says:

    Are Capita also in the running to operate road pricing if the scheme goes national? If so do they make labour party donations?
    We have schemes whereby motoring is taxed already. Fuel tax punishes those who drive the least efficient vehicles and those who travel the furthest. Motoring taxes provide £42b a year of which a mere £6bn is spent on the roads.
    Most drivers dont derive any excitement or joy from sitting in traffic and will avoid it unless absolutely necessary.
    So who would gain from national road pricing – loks like private companies if London is anything to go by.

    As an aside why are we so convinced railways will provide an alternative to the over stretched road network – given it requires massive subsidies and is more expensive even to move cargo should we not be replacing trains with busses and lorries.

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  8. J H Holloway says:

    Amazing. I made a complaint last year to the Advertising Standards Authority about TfL ads claiming the profits from the c-charge had bought 300 new buses. It took 6 months for a judgment which was summarised thus: ‘because TfL was given the £300m start-up costs, the C-Charge was profitable from day one’.

    I also made a short film for the BBC opposing the C-Charge. As part of the deal, I met Derek Turner, technical boss for the C-Charge. He told me Ken had ignored his advice and insisted on a quick-fix system using numberplate cameras. He said it wouldn’t work properly and he resigned a few weeks after the charge was introduced.

    Numberplate cameras are not accurate enough to send out fines, so all the suspect vehicle pictures have to be viewed by a human. That’s mainly why the running costs are £120m+

    The reason he rushed in with the wrong system was that he wanted to get it active in his first term and sign a long contract with a big exit fee to prevent a subsequent mayor scrapping the system.

    Still, it will get worse. A bill is going through parliament called something like the Supplemental Tolls Bill. This will give TFL the power to toll main roads right out to the edge of Greater London as well as switching to a more efficient automatic ‘tag and beacon’ charging system.

    This won’t be mentioned until after the 2008 Mayorial election, should Livingstone win. I trust Boris’s lot are on the ball about this major upping of the stakes…

  9. john says:

    Unless my memory is wrong, capita was originally called sim systems (or similar) and was started in Bedford borough by the said council. It was bought out by management and never looked back !

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  11. passing transport anorak says:

    Have you taking into account lost parking revenue, Phil.

    http://www3.westminster.gov.uk/csu/Audit_and_%20Performance%20Committee/2007/24.09.07/Item%209%20-%20Car%20Park%20Options.doc

    says Westminster alone are 3 million a year down. That blows a pretty big hole in the numbers.

  12. passing transport anorak says:

    Just as a final (I promise!) point from me on this one- the original projection was to raise 200 million a *year*

    http://www.london.gov.uk/mayor/strategies/transport/pdf/highlights2.pdf

    page 15. He has fallen short by quite some way!

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  15. rayhaydock says:

    I have just copped for two fines on consecutive days, because i was unaware that the charge had to be paid up front.
    Where is it advertised for those who don’t live in london or have never driven there before.
    What a bloody scandal.

  16. mark wild says:

    Dear All I live in Manchester which is pushing a congestion charge through and yesterday I tried to cost the proposal which leaves a start up debt of about £2.00bn on year 2013 asking at a consultation simple costs like interest rate amounts admin expenses set up costs no answer just pure sales in favour hardly a consultation I still cant get answers which made me look at London I am truly shoched looking at abd and your blog and it explains the lack of costing info. This is Manchesters most desperate hour can you advise on how to try to stop this inevitable jobs for the ones in the know. regards mark wild

  17. Vic Lilley says:

    The figures above are at odds with the Impacts Monitoring Forth Annual Report June 2006 page 8, Scheme costs, benefits and revenues, which state ‘These revenues (£122M) have again largely been spent on improving bus services within London. Yet according to the the figures above there was no capital spending in 2005/6. The revenue figures do not tie up either.

    Vic Lilley

  18. Phil says:

    No Vic, these figures are all in sweet accord. The £122 million figure is the surplus before indirect costs are considered. The £89.1 million figure is the the rather smaller surplus once you take off indirect costs such as administration, etc. The £89.1 million figure is the figure the Audit Commission demand that they produce. The £122 million is a mere boast.

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