23 October 2019

The case for a workplace parking levy is overwhelming


Car drivers often have a hard time of it. They have to pay numerous taxes when they buy their car, have it insured and fill it up with fuel. Nor for most people in the UK is it a luxury, but a necessity to get to and from work.

However, cars do impose heavy costs on society – what economists call ‘externalities’ – so it’s right to look at ways of paying for them.

That’s why the SNP’s proposals to introduce a workplace parking levy on drivers in Scottish cities makes a lot of sense. Though I was initially sceptical of such an idea, there is a very strong economic and social case for cities across the UK – and around the world – to introduce such a charge.

One of the main issues with driving a car is that it causes pollution, which is bad for both the environment and human health, as reports this week have underlined. A workplace parking levy would encourage people to switch to other forms of transport when they commute or to grab a lift from a colleague. This is not some theoretical effect either – it’s exactly what happened in Nottingham when it introduced a levy and the city now enjoys much cleaner air.

The other cost imposed on society by driving is congestion. Too many vehicles on the road leads to longer and more frustrating commutes. The result is stressed and tired workers and fewer people travelling further from home in search of work. This in turn has an impact on productivity, as businesses struggle to attract people with the skills they need. Again, the evidence from introducing a levy in Nottingham was that it reduced congestion in the city.

Less pollution and clearer roads are just some of the benefits of a workplace parking levy.

In Nottingham the money raised from the levy has been used to improve public transport, which particularly benefits people who cannot drive or afford to own a car. Good quality bus, train, and tram services are crucial to some of the most vulnerable people in society such as low earners, the elderly and people with disabilities. It would also be politically popular. Buses are sometimes dismissed by people in the SW1 bubble used to London’s myriad transport options, but as Emma Revell has argued on these pages, for people in towns and villages around the UK the bus is often the only way to get around. On a side note, ministers could do a lot worse than introduce the necessary infrastructure to safely lift the ban on e-scooters.

Then there is the extra space which cities will have with fewer cars around. We often think of congestion in terms of traffic but it should also be remembered that parked cars take up considerable space in our town centres, be it on the side of the street, in a company carpark, or in a multi-storey carpark, There’s all sorts of things cities could do with that freed up space, not least using it to build more housing, arguably the most pressing economic issue for this country.

Of course, it’s not just housing. These spaces could be converted into shops, bars, restaurants, or community centres – whatever the people who live there want.

There’s also a good localist case for a parking levy as it would raise more money for local government, effectively be broadening the tax base. It is worth remembering that many of the people paying the levy will not actually live in the same area as where they work. That means they are enjoying many of the benefits but without making a direct contribution for some of the services they enjoy. Introducing a levy would make it easier for local authorities to cut council tax – or at least resist the temptation to increase it.

Ultimately, schemes such as workplace parking levies could pave the way for car-free cities in the future. Towns and cities without cars but with world class public transport and plenty of open spaces would be a huge boost for both mental and physical health.

This is just one of the reforms we need to make our system of taxing motorists simpler and fairer. Another proposal gaining ground, and supported by the Institute for Fiscal Studies among others, is a system of road pricing, which would be an effective way of capturing the costs of congestion.

Given the social, environmental and economic costs of motoring, it’s high time we moved to more efficient, sensible form of taxing cars. The example of Nottingham shows that when properly implemented, a workplace parking levy is a good place to start.

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Ben Ramanauskas is a research economist at Oxford University