In July 2004, Ken Livingstone, the Mayor of Greater London, had to decide whether or not to expand the system of congestion charging he had implemented 17 months earlier. Skeptics had predicted fierce popular opposition or chaos from the original scheme, which required that cars and trucks pay a charge of GBP5 (US$7.95) to enter an 8-square-mile area of Central London between the hours of 7:00 am and 6:30 pm, Monday through Friday. The critics were confounded, however, when the GBP5 charge resulted in a substantial reduction in Central London congestion and the payment and enforcement mechanisms proved to be remarkably convenient and fair. The Mayor's proposal to extend the GBP5 charge to a congested area immediately to the west seemed risky, however, since the technical and political problems of charging might grow disproportionately with the size of the charging zone.

This case is designed for courses in transportation policy or economics to stimulate a discussion of the rationale and limitations of using special road charges to control congestion externalities. The (A) case (1787.0) describes the experience with the original Central Area charging scheme and the proposal for the western extension. The (B) case (1788.0) is a technical note that explains the economics of congestion charges.  The (A) case can be used with or without the (B) case depending on the backgrounds of the students and the purposes of the instructor.