Monday, 3 January 2011

Councils to set parking fees (News report 3rd January 2011)

At last. Eric Pickles, the Local Government Secretary says “we’re getting out of the way and it’s up to councils to set the right parking policy for their area”. That includes setting competitive local charges.

Up until now Government made it “unlawful” to use charges to “raise revenue or as a local tax”. Why ?

The Local Government Association still says “Councils can’t use parking as a revenue raising exercise but they should have the freedom to set charges at a level which covers the cost of providing parking”. In other words they mustn’t make a profit. Why not ? Especially if it is ‘ploughed back’ as it must be. And more especially because taxpayers paid for the car park in the first place.

But the LGA view is wrong at a deeper level. The first thing to realise is that in order to meet their requirement it is necessary to pass acres of legislation, codes of practice and so on to define what is cost and when a price is a cost recovery and when revenue raising. I haven’t dared to bury myself in the mountains of stuff trying to do that. In practice there is no difference.

Then Profit and Loss requires a cost accounting system. This is something, and the Audit Commission supports me in this,  which hasn’t yet come into government consciousness and practice. How do they intend to set prices ? Do they have to account for direct costs, direct costs plus overhead apportionment, marginal costs, or contributions  ? In practice "actual" cost is meaningless. Cost can only be defined by the question needing answer.

But set to one side those questions of management tools and technique. There is one simply stated  marketing approach which fits the bill.  Charges should be  set to achieve if possible say a 5% under-occupancy of spaces at any one time. Higher charges will deter to the detriment of revenue and lower will lead to perpetually full occupancy which also frustrates and may even so yield  less revenue. Of course quiet and busy periods might be differentially priced to advantage.

And there’s more. Optimised revenue gives council management choices. Either to stabilise or reduce council tax, or put a surplus towards development, subject to pay-back calculations, of more spaces and in turn more revenue.

Is there now some small hope that government may at last be seeing the light and will allow new behaviours which will relieve the  burden on taxpayers’ shoulders which has been added to exponentially in the past for little discernable benefit to anyone except public employees, managers and councillors.

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