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Almost 100 councils lost money on parking in 2007/08 totalling nearly £80m John Siraut
Across both on and off-street parking, total net revenues after capital costs across all English local authorities is slightly under £370m, but just ten local authorities account for nearly £150m of that. In fact, almost 100 local authorities lost money on parking in 2007/08 totalling nearly £80m between them. Of those, around 60 lost £16m on day-to-day operations, that is, excluding capital investments (Tables 1 and 2). Many authorities see parking more as a service than a business, providing free or low cost on and off-street parking, so they generate insufficient income to cover costs. In some authorities park & ride operations provide out of town parking, which once expensive bus contracts are factored in are heavily subsidised to encourage use.
The top ten earners
On-street parking generates almost £700m across England, but ten councils (all but one of them in London) account for almost half of that (Table 3). Central London, with its huge pressures on parking spaces, can extract high levels of revenue.
Council South Bedfordshire Broxtowe Wellingborough Fenland Knowsley South Gloucestershire UA Surrey Essex Norfolk Lambeth
Operating loss (£’000) -277 -287 -307 -317 -320 -341 -776 -1,015 -2,314 -5,817
Illustration: Nicky Phillips
Council Westminster Camden Kensington & Chelsea Islington Lambeth Wandsworth Hammersmith & Fulham Hackney Brighton & Hove UA Ealing
Gross revenue (£’000) 84,639 44,562 39,464 31,406 29,274 26,395 21,789 17,329 15,711 13,763
Table 3: Top ten gross revenue earners from on-street parking
Table 1: The ten biggest loss makers on operating costs before capital items are included
Outside London, the ten highest earning councils raised only £70m between them (Table 4), less than Westminster on its own. It is also notable that relatively small authorities such as Brighton & Hove and Milton Keynes raise more money than major cities such as Leeds and Manchester. Milton Keynes is fairly exceptional, with some 20,000 parking spaces, mostly charged, surrounding each block within the town centre, commercial and station areas. Brighton & Hove, meanwhile, is similar to many London boroughs in that demand for car parking spaces way exceeds supply.
The ‘cash cow’ myth
Very few councils generate big revenues out of parking while almost 100 are making a loss, John Siraut reveals
LOCAL AUTHORITIES have relatively few sources of revenue that they control. One is parking. For some years there has been a common perception that parking is an enormous cash cow for local authorities. But my own research of onstreet and off-street revenues shows that this is not the case for most councils. At first glance, it does indeed seem that huge sums are pouring into council coffers. Analysis of the 2007/08 financial returns to central government for all of England’s local authorities shows that parking generated £1.3bn. However, behind that headline-grabbing figure, the story is far more complex. Local authorities raise broadly an equal amount from on and off-street parking, but at an individual council level their importance is vastly different.
Council Surrey Coventry Rutland UA Sefton Norfolk Peterborough UA South Lakeland Newcastle upon Tyne Lambeth Tower Hamlets
Net operating loss (£’000) -2,012 -2,072 -2,164 -2,208 -2,630 -3,127 -5,586 -6,032 -8,797 -24,099
Table 2: The ten biggest loss makers including capital expenditure
Council Brighton & Hove UA Birmingham Milton Keynes UA Manchester Leeds Kent Liverpool Essex Bristol UA Newcastle upon Tyne
Gross revenue (£’000) 15,711 9,637 8,650 8,204 7,213 5,721 4,353 4,220 3,801 3,765
Table 4: Top ten (non-London authorities) gross revenue earners from on-street parking
So, car parking revenues are an important source of income for only a handful of authorities. For many authorities car parking is a drain on resources. However, it rarely makes sense to subsidise car parking. Research shows that parking charges play a limited role in people’s shopping and visiting decisions. Rather it is the range and quality of the retail or leisure available that is most important. Improving the quality of the retail offer and public realm will provide far better returns than spending money on subsidising car parking.
However, on-street parking is clearly not the money-spinner it may seem as local authorities spend over £450m enforcing regulations and payments. Net revenues in 2007/08, excluding capital costs, were £230m across all local authorities, with just six (Brighton & Hove, Hammersmith & Fulham, Wandsworth, Camden, Kensington & Chelsea and Westminster) accounting for half that amount.
Cark park revenues
Off-street parking brings in £640m for English local authorities but revenues are more widely spread across boroughs. The top ten earning councils generate £85m from off-street parking and, with the exception of Westminster, are a different set to the top on-street earners (Table 6).
There are major differences in the cost of revenue collection between boroughs. For those authorities collecting more than £1m from on-street parking the best ten in terms of the amount raised per £1 spent is very different from the top ten money generators (Table 5). Sheffield manages to raise nearly £6 for every £1 spent and the average across the best ten is £3.55. This compares to an average £1.70 raised for every £1 spent for the top ten money earners. If the latter were to manage the same cost to revenue ratios they would save £135m in collection/enforcement costs.
Council Sheffield Bath & North East Somerset UA Derby City UA Leeds Kingston upon Hull UA Milton Keynes UA Merton Newcastle upon Tyne Leicester City UA Harrow Average
Revenue raised per £1 spent 5.72 4.99 4.60 3.47 3.25 3.24 2.59 2.57 2.56 2.51 3.55
Council Westminster Birmingham Richmond upon Thames Guildford Bath & North East Somerset UA Newcastle upon Tyne Bournemouth UA Oxford Croydon York UA
Gross revenue (£’000) 18,432 9,514 8,108 7,860 7,717 6,980 6,866 6,713 6,612 6,529
Table 6: Top ten gross revenue earners from off-street parking
Off-street operating costs are around £360m across England meaning net revenues of around £290m. So, off-street generates more cash than on-street. But off-street parking requires far higher capital investment, roughly £110m compared to £40m for on-street parking. Again, there are wide discrepancies in collection charges. For those authorities taking over £2m in off-street revenues the average amount collected by the best ten performing authorities per £1 spent was nearly £3.90 (Table 7), compared to just £1.90 for the top ten money earners.
Table 5: Revenue raised per £1 spent — on-street parking
Local authorities’ different circumstances mean that collection costs are not fully comparable. For example, some London councils have large areas of residential parking, which need to be enforced but bring in less revenue. However, it still raises questions about the efficiency of parking policies and procedures in some boroughs. Previous research has shown a massive variance in the cost of residential permits, with costs varying by location, engine size and number of vehicles. If you consider the costs of implementation, IT systems to control permits, specialised stationery, systems administration and enforcement costs coupled with the political ramifications of high residential permit charges, it is easy to see why residential schemes can be expensive and only a proportion of this is recovered by permits and penalty charge notices (PCNs).
Council Brighton & Hove UA Liverpool Penwith Ealing Scarborough Worcester East Devon East Staffordshire Carrick Woking Average
Revenue raised per £1 spent 5.67 5.20 4.25 3.64 3.61 3.49 3.35 3.28 3.19 3.03 3.87
Table 7: Revenue raised per £1 spent — off-street parking
A time for new strategies?
Parking enforcement and charging is a political minefield for many authorities. However, it is clear that the large discrepancies between councils in collection and enforcement costs and the absolute losses made by some authorities suggests that many need to urgently revisit their parking policies, strategies and, most importantly, their pricing regimes. There are many circumstances where pricing strategy could be improved throughout an area. Parking stock may be under-used, with tariffs set too high, or revenues may be lost where charges could be made but parking is provided free. Modern equipment can help to differentiate customers. Westminster council has introduced Easyjet type pricing, and there is probably more councils can do in relation to yield management. There may also be ways for authorities to reduce costs. For instance, shared procurement can provide on-going benefits in terms of reduced operating costs. Some authorities are looking at shared services, which might provide greater operational cost savings. Also, new payment technology, such as mobile phone systems, could be used to avoid large capital outlays on upgrading pay & display stock. This would save on maintenance and cash collection costs and have significant benefits in terms of reduced vandalism and theft. There is obviously an element of cost for the mobile phone service, but provided this is passed on to the customer, rather than the council, there will be gains. It remains to be seen whether these systems can be applied everywhere, without repelling those customers not prepared to use a mobile phone as a means of payment. With the recession deepening, many councils will see parking revenue go down in 2008/09. Retail and commercial trips are likely to be undertaken less frequently and, in terms of charged parking, for shorter durations. Both will decrease the revenues from parking operations. So, parking authorities will have to embrace new policies and innovations or risk plummeting returns and even greater shortfalls. John Siraut is associate director, economics at consultant Colin Buchanan. All data is sourced from local authority annual returns to central government
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