A little Congested

A recent report by the Campaign for Better Transport has released its findings for the M6 Toll. Click here for the article in BBC News.

The M6 Toll is a 27-mile privately-financed motorway that runs around the north west of Birmingham, between junctions 3a and 12 of the M6. It opened in December 2003 and was intended to relieve congestion on the busiest section of the M6 by providing an alternative route.

For those unfamiliar with toll pricing, here is a little review.
What price to charge for the toll may have been decided by considering a number of factors:

•The cost of building the road
•The expected usage of the road and therefore the time taken to 'break even'
•The cost of maintaining the road
•The price elasticity of demand for road use
•The cross price elasticity of demand for other roads

The report however, finds that the UK’s only private motorway toll has not significantly cut congestion. The owners (Midland Expressway) are losing close to £26million a year since the toll opened. In order for the toll to work, enough people have to be persuaded to use the new motorway even though by doing so they will incur some private cost. Charge too high a price and people will avoid using the road, too low a price may not generate enough revenue to make a profit.

The main reason for the lost revenue to Midland Expressway is that again, tolls only work if there is an incentive for people to pay them. If the marginal benefit to me (in terms of travel time, reduced discomfort and so on), is worth the £5 per car to use the M6 then I will gladly be willing to pay.
In truth, the journey times on the M6 are only slightly better than before the toll opened. As a driver, this does not equate MB=MC and there is no value to me in paying to use the toll road. Added to which, the toll for users has risen well above inflation each year.

We think Midland Expressways may need to go back to their economics 101.

For more information on the M6 Toll click here for their website.