The RAC Foundation has today published a report on the revenue generated by local authorities from car parking charges over the last year. The latest survey (which follows a similar survey published by the RAC in August 2013) states that in 2013/14 local authorities in England generated a combined 'profit' of £667 million from their parking operations (both on and off street), an increase of 12% compared to 2012/13. This, the report states, equates to a net surplus (after capital charges (interest and depreciation)) of £550 million. The top five local authorities with the largest surplus are London boroughs.

The report states that, while some of the increase in surplus is down to rising income, a decline in transport operating costs by local authorities is also a key factor. Whilst on-street income and the level of penalties has seemingly levelled off, it is reported that local authorities have reduced their running costs by 10% for on-street and 2% for off-street parking.

The Local Government Association's response to the report is available here.

Given the relevant legislative parameters, the reduction in transport operating costs and the way in which that surplus is utilised could represent an issue for local authorities.

Implications for local authorities 

Local authorities' statutory powers to impose car parking charges derive from the Road Traffic Regulation Act 1984 (RTRA 1984).

Under section 45 RTRA 1984, local authorities have the power to designate parking places on the highway, charge for use of them and issue parking permits for a charge. Under section 46 such charges are to be prescribed in the designation order or separate order made by the authority. Section 55 RTRA 1984 provides for the creation of a ring fenced account (the SPA) into which the monies raised under sections 45 and 46 must be placed and for dealing with any surplus funds which includes expenditure for other transport purposes. Section 122 imposes a general duty on local authorities exercising functions under RTRA 1984 to "secure the expeditious, convenient and safe movement of vehicular and other traffic (including pedestrians) and the provision of suitable and adequate parking on and off the highway…".

In 2013 a resident in the London Borough of Barnet applied for a judicial review of the Council's decision to increase the charges for residents' parking permits and visitor vouchers in Controlled Parking Zones (CPZs) in contravention of the Road Traffic Regulation Act 1984 (RTRA 1984) (R (Attfield) v London Borough of Barnet [2013] EWHC 2089 (Admin)). The court held that the Council's purpose in increasing the charges for resident parking permits and visitor vouchers was to generate additional income to meet projected expenditure for road maintenance and improvement, concessionary fares and other road-transport costs and reduce the need to raise income from other sources, such as fines, charges and council tax and that this was unlawful. There was no evidence that the increase was required to cover increased running costs of the parking scheme.

As a matter of general principle, a public body must exercise a statutory power for the purpose for which the power was conferred by Parliament and not for any unauthorised purpose. The RTRA 1984 is not a revenue-raising or taxing statute and did not authorise the Council to use its powers to charge local residents increased parking charges with the purpose of raising surplus revenue for other transport purposes funded by the General Fund. The Council's purpose in increasing the charges for resident parking permits and visitor vouchers was to create a surplus and was not therefore authorised under the 1984 Act and therefore its decision to do so was unlawful.

It is worth noting that in the Barnet case, the court did recognise that authorities have “a discretion to set charges to reflect its parking policies ... [and are] not restricted to levying a charge only to cover the base cost of running the scheme”. When setting charges it is acceptable to recognise and plan for dealing with any surplus; budgeting for a modest surplus does not render the scheme unlawful or evidence any unlawful revenue raising motive. Indeed the court recognised that “it may be prudent to budget for a surplus to allow for unforeseen expenses, shortfalls in other years and payment of capital charges/debts”.

In light of the reported 12% increase in general account surplus, local authorities should be mindful of the relevant statutory parameters and ensure that their car parking charges remain lawful.