The economics of enforcement

John Siraut provides an economist’s perspective on encouraging compliance with parking and road traffic regulations

Economics and enforcement, what on earth do they have in common? If we ran the world smoothly there would be no need for conferences like the Enforcement Summit or magazines like Parking Review because everybody behaved themselves. But sadly, people do not follow the rules. Therefore, we have people who enforce those rules and who make a living from doing so. Economics can help improve the level of enforcement, or rather the level of obeying the rules.

Let’s start off with why do we need enforcement? The answer is simple: people break rules. There are a number of reasons for this. They include people:

• not knowing the rule exists
• not understanding the rule
• not accepting the rule
• not understanding likelihood of being caught
• not fearing the penalty if caught
• weighing up the benefits breaking the rule.

The first two have nothing to do with economics. They are really about sorting out the signs and lines, which would address the people who do not know about a rule in the first place. The next main reason why we often do not follow rules is we don’t accept them. We have seen a lot of backlash recently about the introduction of 20mph zones and Low Traffic Neighbourhoods (LTNs). In the London borough where I live people who have rejected the idea of having LTNs have gone out and vandalised the signs.

Even if you do accept the need for rules, you will be going through some rational decisions when complying. What is the likelihood of actually being caught breaking those rules? Is there no chance being caught? You may feel that breaking a rule is not actually having any impact on anybody. And, if you do get caught, what are the penalties for being caught? The key thing from an economics point of view is the weighing up of costs and benefits. If you get caught, you have to pay a charge or some sort of penalty. But what if the benefits of breaking the rule are actually greater than the cost incurred by breaching it?

Remembering the Wild West

Now for a history lesson. Back in the 1960s. The world of motoring was the real Wild West. Speeding limits were basically driven by the fact your car might fall apart if you went too fast rather than anybody actually enforcing any rules. People went out drink-driving with impunity. And you could park anywhere you wanted. As we moved forward, things started to improve. But even in the 1980s you could park almost anywhere with impunity.

The number of traffic wardens that police authorities were allowed to employ was dictated by the Home Secretary sitting in his office in Whitehall (and it was a ‘he’ in those days). Back in the early 1980s, the Metropolitan Police was limited to having 1,200 traffic wardens. The cost of just paying their wages was actually greater than the revenue brought in by the fixed penalty notices that they issued.

It is thus understandable why the police were not interested in enforcing parking. They lost money doing it. It may have been an exaggeration, but when the local authorities were lobbying government to decriminalise parking enforcement, for example in Kensington & Chelsea, they argued that only 1% of illegally parked cars were actually ever given a fixed penalty notice. So, you had a situation where even when you did have enforcement, the chances of you being caught were extremely limited. Why would drivers obey rules when nobody was enforcing them?

Carry on a few years and we saw the decriminalisation of parking enforcement which led to a whole new industry and sector being developed, an incredibly successful sector in the sense of how it radically improved the chances of people being caught if they were to break the law. While it started off with parking enforcement, the sector’s canvas has expanded to encompass enforcement of speed limits and the violation of bus lanes, yellow box junctions and banned turns.

There was a newspaper article a number of years ago in which a journalist investigated how efficient parking enforcement was. They parked a number of cars around London in different boroughs to see how long they would take before they got a penalty charge (PCN) put on them. The longest time it took for a vehicle that had been illegally parked to be issued a PCN was about 10 minutes.

The newspaper had given us as a great example of local authorities screwing the motorists and extracting large amounts of money. The flipside, of course, was that the headlines showed the huge efficiency improvements that were being driven by the private sector working in conjunction with the public sector to actually enforce the rules and keep traffic moving on the network. Now we had a situation where the chance of being caught had changed dramatically.

A price worth paying

We know price changes people’s behaviour. Remember the days when you used to get free plastic carrier bags given to you at supermarkets? Then the Republic of Ireland became the first country to introduce a very small charge – 10 cents if you wanted a single use plastic bag. Usage of carrier bags fell from around 300 bags per person per year down to just over 10. A very small charge had dramatically changed people’s behaviour. So surely, a very small charge will change people’s behaviours in terms of enforcement of traffic regulations. Well, you’d think so.

How do we explain the fact that in 2020 to 2021, which was when we were in the middle of the pandemic, when there were lockdowns with people being told to work from home if possible, we still managed to issue 11 million PCNs in England alone? Six million of those PCNs were for parking. One and a half million PCNs were issued to people who forgot to pay the Dartford in the Thames, a charge of about £2.50.

What is going on here? Why aren’t people changing their behaviours? In London, we see on average around 5 to 6 million PCNs issued per year. There was a dip in about 2008, but that was more to do with the situation in the economy rather than people changing their behaviours.

Let’s consider speeding. Many people do not like 20mph zones. Not only do they not like them, they don’t follow their rules. Over 80% of motorists exceed 20mph speed limits across all vehicle types. Around 20% exceeded by more than 10mph. Things get slightly better when you look at 30mph speed limit. Slightly better. But when you look at motorways, you get an interesting picture. Some 50% of car drivers and light goods vehicle (LGV) drivers exceed the motorway speed limit. But virtually no heavy goods vehicle (HGV) drivers do, for the obvious reason of speed limiters in their cabs. They actually cannot break the speed limit.

What is the point of points?

We fine people for parking illegally or driving too fast, but in certain instances we also give people points on their driving licence. There are different behaviours between genders. It probably does not come as a surprise to discover that men are twice as likely to have points on their driving licence than women. It is probably not surprising either that the younger you are the more the likelihood is you have points on your licence. But remember, the points on your licence normally only stay there for three years, depending what you have been found guilty of.

In theory, when we get to 12 points we are banned from driving. But the reality is that 20% of drivers who have 12 points on their licence managed to persuade the magistrate’s courts not to ban them and they continue to drive. You have seen the newspaper stories about people are still driving around with 30 or 40 points on their licence. We try to change people’s behaviour by giving them points on their licence. But again, does it really change their behaviour?

Things comes back to costs and benefits. We issue fines to parents who take their children on holiday in school term times. If you were to take your family out and go on holiday one week outside the half-term period you could save yourself anything from £800 to £1,600. The fine for taking your children out of school is £60 per child per parent. So, if a family of two parents and two children who take their children out of school could potentially be fined £240, who would not make a rational decision and say: “I am going to save up to £1,600 on my holiday.” In this context, deciding to pay a £60 fine for taking their children out of school makes perfect common sense.

This is a classic situation where the benefit is far, far greater to you than the costs of fine. That is, if you actually get fined, as lots of local authorities will not bother.

A cost of doing business

It is very hard to find figures for costs and benefits of parking. So let’s go to New York, where figures suggest around a third to a half of all parking fines are issued to commercial vehicles. New York has a system called the Stipulated Fine Program. Businesses that sign up to the programme pay a discounted fine on the condition that they do not pursue an appeal.

New York has a quite a complicated system of fines that depend on the violation committed. For example, if you were to park outside a fire hydrant you will be fined $400. For this type of fine, 50% of the appeals are successful, so the Stipulated Fine system assumes that if you appealed half your fines would be set aside. Therefore the discount given will be 50% for that particular violation. Commercial fines in New York paid by the companies which are signed up to this programme came to over $180m in a year, with two companies paying the biggest share of that: FedEx paid $14.9m and UPS $33.9m.

The latter tellingly said: “UPS pays for parking tickets that result as a cost of doing business in order to support the flow of critical commerce.”

On the streets of London

Now for three stories about vans in London. Westminster City Hall is within a two minute walk of a Royal Mail sorting office. The loading restrictions come on there at 8am. Parking attendants will have a briefing session at Westminster City Hall, come out of the city hall at 8am and the first thing they do is to go around to the Royal Mail and issue a PCN on the waiting Royal Mail delivery vans. A journalist went out with the parking attendants for the day to see what they were doing.

The reporter noted one of the registration plates of the Royal Mail vehicle and put in an Freedom of Information (FOI) request to Westminster City Council to find out how many times this vehicle had received a PCN in the year. The vehicle had received 75 PCNs. This is a cost of doing business that was not changing behaviour. It is just issuing its penalty notices.

Another story from Westminster. There is currently a problem with ice cream vans that park on Westminster Bridge, which is a high security location with double red lines. This was regularly raised as a complaint because people queuing up to buy their ice creams were standing in what is actually a cycle lane. Transport for London comes along and tickets the ice cream vans every day. The Metropolitan Police said: “We are aware of this issue and the vehicles are issued with red route TfL fines. We are working on a longer term solution as this enforcement clearly does not deter them and we will provide you with an update when we can.”

The problem recurs because the profits made by the ice cream vans are far higher than the fines.

Now the third tale. Jacobs carried out a study for Westminster City Council on street markets a number of years ago. What we found from talking to the stallholders was they were quite prepared to see their vans ticketed every day for parking on the street market because they wanted the van close at hand in order to get to their stock. To hire a place in central London to keep their stock will be astronomic, so it was cheaper for the traders just to take accept the fact that they will probably get a fine. Or, if they were hanging around the van when the parking attendant comes, they probably would not get ticketed. Again, it was just a cost of doing business.

Conformity and compliance

How do we address this? To increase the chances of people being caught, we could follow an American example and introduce bounty hunters. In Austin, Texas, they are thinking about introducing a ‘bike lane bounty’ where people who spot a car using a cycle lane get a proportion of the fine that vehicle has to pay. It’s an interesting idea. Maybe we could introduce that in the UK and see what happens.

There are other ways that we can change people’s behaviours and economics. We talk a lot about behavioural economics, which is about the nudges we have to put in place to change people’s behaviours.

Time for another history lesson. Back in the 1970s drink-driving was all too common. People went out for a drink on a Friday night, had a few pints jumped in their cars and drove home and nobody thought anything about it. Lots of people did it. Then we had a massive campaign against drink-driving. There was lots of media coverage and the police went out and enforced the rules. It worked. We radically change behaviours so that it became completely unacceptable to drink-drive. Most people now would say they would not drink-drive. Indeed, they think it is completely wrong to do so.

Human beings are quite conformist. If I stood up on a conference platform in boots, a kipper tie and flared trousers, you would think that was extremely odd. Just as we conform with things like fashion, we conform in our behaviours. If we think everybody else is doing something, then the chances are that we will do that as well. Studies about corruption indicate that, if a country is regarded as corrupt, more corrupt behaviours take place because it is seen as a way of behaving.

In Britain, while we have changed behaviour regarding drink-driving, we have failed miserably when it comes to speeding. Speeding is endemic. We have not changed people’s behaviours on speeding because we have not been able to persuade people that there is a downside to speeding for individuals.

We have the National Speed Awareness Course, which over a million people attend annually. The courses are offered to people where it is their first offence for speeding or jumping red lights. Yet, when we look at the likelihood of drivers re-offending based on whether or not they went on the course, there is actually very little difference between the two. The rate of reoffending is slightly lower if you have been on the course, but it still has not changed people’s behaviours enough in the same way we have done on drink driving. We still have a situation that, even where we have spent quite a lot of money and effort trying to re-educate people and explaining the downside of some of their behaviours, they still do not change what they do.

Fear of missing out

We do not like losing things. Take online booking sites that alert you that there are people looking at the same hotel or flight booking, or that you missed the boat on this one because it is fully booked. You are being warned you will miss out, so should act now to grab the opportunity. A lot of marketing and advertising is based on encouraging “loss aversion” – the premise is that people do not like losing out to other people who are getting some benefit.

A number of studies have looked at how this sort of loss aversion impacts  on people’s behaviours when it comes to things like parking. Take a campus university site where lots of people drive. There will be lots of issues with parking, so the authorities introduce parking fines where people are parking where they shouldn’t on grass and verges. But people just pay the fines. A bigger deterrent than a fine is being banned from coming into a car park for a period of time. To a driver the loss of parking is a greater loss than having to pay a fine.

So stopping people doing what they wanted to do is a big determinant. In South Korea, for example, once you collect a certain number of points on your driving licence it can either be suspended for a period of time, or it is revoked and you have to take your driving test again. Revoking the driving licence changed people’s behaviours more than just suspension, more than just points and more than just fines.

In Australia they have impounded vehicles to prevented drivers from using that vehicle. In the UK, clamping cars was actually a very effective method of changing people’s behaviour. If people could not jump in their car and drive away, that was a bigger deterrent than having yellow stickers placed on their car. But we have dropped the clamp because of a backlash against it.

Sign me up today

We also don’t like doing things if they are a hassle, so it is great if you have a situation where you can be automatically enrolled. Consider organ donation. This used to be matter where people had to sign a card that signalled they had opted into to the scheme. Take-up was low. Now that the UK has an opt out approach to organ donation 80%-90% of people are in the scheme. This trend is seen in European countries that also have opt out schemes. But in those that have retained an opt approach, even with lots of publicity trying to persuade people to sign up to it, very few people join – less than 30%.

Making the payment of motoring fees automatic reduces infringements. On our roads, we have schemes for the London Congestion Charge and Mersey Gateway so that you automatically pay charges, even if you rarely enter the scheme area. These are good ideas, but still opt-in schemes. Now, imagine a parking app which actually could detect that you are parked somewhere and automatically pay – no penalty charge notices!

There are other measures that can be put in place using technology. Something like a third to a half of all PCNs are issued to commercial vehicles deliveries.
Here is a serious point. We have corporate manslaughter laws in this country. The directors of logistics companies know their drivers are breaking the law and almost require their drivers to break the law when they are making these deliveries. If there was a fatal incident involving one of these illegally parked HGVs, the directors of those companies could be legally liable because they knew and turned a blind eye to what was going on. They knew their drivers were breaking the law and did nothing about it as it is a cost of doing business for them. If bad parking leads to a death or serious injury, they could then be liable.

There are solutions. Neil Herron, founder of Grid Smarter Cities, has devised the Kerb system which creates “virtual parking bays” along the kerbside which companies can book for designated time periods. Drivers arrive at designated time to unload and load. When the parking attendant comes along, they check that the vehicle has actually been booked on to a virtual loading bay. When you manage the traffic, you manage the safety implications.

The end of enforcement?

Maybe the future is about nudging people’s behaviours to making them think about the implications of speeding and breaking rules. Perhaps we should be stopping people from doing some things rather than just giving them a fine. Maybe we should be finding ways of using technology to do what they are meant to do, but do it in a safe way.

We are moving towards a world of automated vehicles that will obey every single traffic rule going. But even here things become interesting. If you are in an automated vehicle that did not follow the traffic rules, who will be liable? You, a passenger, have no control over that vehicle. So it would be the company that made the vehicle who would be liable and would face penalties, or even damages, for breaking the rules. We know that works because we saw it with the speeding on the motorway network – HGVs do not speed because they have speed limiters in them.

Eventually, we will end up in a future where the computer stops us breaking the rules. Potentially, the future will be one where no enforcement is required.

John Siraut is technical director, economics at Jacobs
www.jacobs.com