Britain's roads are congested because the cost of driving - based on items that vary with mileage (fuel and vehicle maintenance) - is too low to restrict traffic to the level needed for free flow. In economists' jargon, the price is below the market-clearing level, so resources are allocated by queuing.

Road pricing could raise the cost to the market-clearing level and eliminate congestion. To achieve this result, we need complex, time-specific and route-specific charging. Even if the government gets it right initially, frequent adjustments will be needed to reflect economic growth and changing land use. London's congestion charge was £5 a day in 2003; it rose to £8 in 2005 and may need to go up again to keep traffic speeds above pre-charge levels.