The British government's White Paper on Transport, released last week, marks a sharp break with the policy thinking of a generation. Traffic planning in British cities was built around the "Predict and Provide" principle - predict what the traffic volumes are going to be, and then provide for them as best you can.

The British government has decided that the strategy is doomed - you can never provide enough capacity, because it costs too much, and it causes environmental damage and health problems. The alternative is to manage demand, and to spend less on concrete and steel solutions. Britain is a small and overcrowded island, and its transport policy problems are accordingly more acute than ours.

But big city problems are the same all over Europe, and Dubliners are currently experiencing unprecedented delays and congestion. Other cities around the State have the same problems on a smaller scale. The major message in John Prescott's White Paper is that the UK government has abandoned the unwinnable battle to accommodate the ever-growing demand for car commuting. Behaviour will have to change instead.

The White Paper argues that the car commuter ought not to be accommodated, because the economic and social costs exceed what commuters are asked to pay. The cost of a peak-hour trip in an urban area, from the motorist's perspective, is just the cost of the fuel. From society's perspective this is not enough to cover the pollution, congestion, noise and general disruption. Excess demand for any commodity is normally seen as a trigger for an increased effort to supply. But this breaks down if the excess demand is being induced by prices which are too low. It may seem a little odd to talk about urban traffic in terms of costs versus prices, since individual car trips are not "priced" in the conventional way. All the motorist pays (to the Government) is the tax on fuel, and there is no explicit reckoning of the costs. But the costs are nonetheless real, and society pays for them one way or another.

If the costs exceed what is being paid, the Predict and Provide model is no longer adequate. Numerous studies internationally show that urban commuters tend to pay less than the true social costs, but the rural or inter-urban road-user may well be paying enough. So if rural roads are inadequate for the traffic volume, this can be a reliable signal to improve them. With urban roads, the signal is likely to be false. Unless prices are raised, new capacity will just fill up with the frustrated excess demand which the low prices have created.

There are two proposals in the White Paper which would serve to raise prices to the urban commuter-by-car. The first is that city councils would be able to charge for road use in city centres, as they currently do for on-street parking. The second would permit them to levy extra local taxes on off-street parking spaces at places of work.

In both cases it is envisaged that the city council would keep the money on condition that it was spent on public transport improvements. Opinion polls in Britain recently have shown, not surprisingly, that motorists are against paying extra charges if the money goes to the Treasury. But the public is more favourably disposed if the proceeds are earmarked for public transport. The other notable element in the White Paper is the emphasis on the potential of urban bus systems, long the poor relation when solutions are being sought to urban congestion.

Buses are more flexible than rail-based systems since they can go everywhere the roads go. They have market reach. But they suffer from road congestion, since they share road-space with the ever-increasing car volumes. The White Paper is not too keen on urban rail investments. It says: "We believe resources can be used more productively supporting packages of more modest measures which spread benefits more widely. Funding for major light rail schemes will, therefore, not be a priority".

The Financial Times interpreted the White Paper as heralding a "new golden era for the bus", with substantial investment in prospect for dedicated bus lanes and other bus priority measures. Urban transport is, quite accurately, regarded as a minefield for politicians, and we have seen in Dublin the acute difficulties in reaching political consensus on Luas.

The source of the difficulty is straightforward: no policy consisting solely of carrot (better public transport) can succeed without some stick (higher costs to car commuters). The reason is that we are starting from a position where prices are not aligned with costs. But there are no votes in telling people that they should pay more for the privilege of imposing unmeasured and dimly-perceived costs on other voters.

This UK White Paper is nonetheless a document with a simple lesson for policy-makers in Ireland. There comes a point where both stick and carrot must be deployed if policy is to be credible. The intensely political nature of the issue was illustrated during the House of Commons debate. Mr Matthew Taylor, the Liberal Democrats' voice on these matters, noted that the White Paper proposals would mean that members of parliament would have to pay a tax to the local authority for their (hitherto free) parking spaces underneath the Palace of Westminster, a suggestion greeted with puzzled silence, apparently. Surely the stick could not apply to busy, professional people commuting to work by car in the middle of a congested city?

Colm McCarthy is managing director of DKM Economic Consultants