The role of hypothecation in financing transit: lessons from the UK

Two hypothecated charges to fund local public transport have recently passed onto the statute books in the UK. The first is road user charging, with the London and Durham the first to be implemented and the second is a workplace parking levy. The use of such local hypothecated (or ‘earmarked’) mechanisms is not new. Indeed a variety of such charges, local taxes and levies have been in use for decades to fund public transport and (less frequently) as a tool for transport demand management in the USA, Germany, Austria, Portugal, Scandinavia, India and Singapore. In the general debate around the two new hypothecated charges in the UK, this international experience has been largely neglected. The aim of this paper is to detail a related and equally neglected area namely the local hypothecation of charges to fund public transport improvements within Britain. Under existing legislation it has been possible for some local authorities to dedicate revenue streams from sources such as parking charges and planning gain to develop and improve public transport services. There is also significant experience of dedicated revenue streams in the private sector, for example at airports. The paper details examples of the British experience of hypothecation and will consider their lessons for the new and more radical measures that are now being considered.