As part of the price for the cooperation of the Green Party in the Scottish parliament, the Scottish Government has agreed to give local authorities the power to introduce a levy on workplace car parks. “Plans to give powers to councils to introduce a workplace parking levy, as already allowed in England, will come forward via an agreed Green Party amendment to the Transport (Scotland) Bill. ” This is intended to reduce the numbers of people who travel to work by car. It’s been tested in Nottingham, where it’s been claimed to reduce congestion and raise revenue.
Both of those claims may be true, but it’s still a rotten idea. It falls into the same category as a raft of proposals, and sometimes actual policies, which try to regulate behaviour by using price as the main lever. Policies of this type have often been favored by market economists, because the most basic economics courses tell us that the way to reduce demand is to raise the price until the market is cleared. There have been loads of suggestions about policies where the same principle could be applied: they include congestion charges, road pricing, charges for GPs, water metering, and charges for rubbish collection by weight. (Often they go hand in hand with some kind of gee-whiz technology that just happens to be sold by the companies that are pressing for the policy, but that’s not the main issue here.)
The key objections to rationing by price are threefold. First, the demand for any activity depends on the resources that people have, and the people whose behaviour are most likely to be affected are those on the lowest incomes. Almost by definition, people on lower income have to be more sensitive to marginal cost than people on higher incomes can be – and the introduction of a flat-rate levy takes far more from the incomes of lower paid workers than it does for higher paid workers. It’s important to consider for any policy what the distributive implications are. Second, it’s essential to understand what the effect on behaviour might be, and changing the price of an activity is a blunt instrument. Some substitutions may be desirable – such as cycling to work instead – but it can lead to people substituting different, less desirable behaviours instead – for example, parking on residential streets instead, driving more and longer while looking for parking places, absenteeism or resignation. Third, it may conflict with other policies – recruiting specialist staff such as nurses and teachers, encouraging people to take up work at a distance, getting people to take longer hours by flexible employment practices.
I’ve argued before on this blog that there is a wide range of rationing measures, and rationing by price is markedly inferior to some of the alternatives. None of that means that rationing by price is never appropriate – there may be exceptions (reducing the demand for cigarettes by price could be one) – but it does mean that it’s hard to justify, and there are usually better ways to achieve the ends. Before penalising people for turning up to work, try some of the alternatives: encouraging collective transport such as employer-funded buses; provide rail season tickets and bus passes; tilt the balance towards remote working; tie site development planning to transport provision. It’s odd to see the Green Party advocating a set of market-driven measures that would sit more comfortably with the Institute for Economic Affairs than they do with the people-centred economic policies that the Greens claim to support.