Charles Wright: Government and Mayor have common interest in making peace over TfL finances

Mayor Khan signed in for his second term with a big pledge to create a “fairer, more equal, more prosperous city for all” – and perhaps an equally significant pledge to “build bridges” between City Hall and central government.

It was a change in rhetoric that Khan had been signalling in the run up to the election, in contrast to the past 12 months or more, which have seen continual jousting with Whitehall, particularly over the beleaguered Transport for London, twice forced to go cap in hand to government after Covid caused fare revenue to collapse in March last year. 

Now, with the £10 billion organisation’s current bailout due to expire in just a week’s time and its bank balance again heading towards zero, there’s an early test for the bridge-building rhetoric, on both sides.

Last year’s negotiations over government help saw the Prime Minister contentiously accusing Khan of bankrupting TfL even before the pandemic, and bailout cash coming with strings attached including enforced fare increases, congestion charge hikes and other conditions effectively putting TfL under Whitehall control. 

Transport Secretary Grant Shapps nevertheless promised that a further deal would be forthcoming after the elections. “By this point, non-essential retail and other parts of the economy should be open and transport demand on the network will be considered when formulating a future settlement,” he said.

London Underground ridership is now at 45 per cent of May 2019 levels and bus ridership is back to 60 per cent. Tube usage has risen by some 10 per cent since non-essential shops and outdoor hospitality re-opened a month ago, meaning revenue is rising as well.

But with TfL dependent on fares for 72 per cent of its income, significant budget gaps remain. It is still uncertain how many office workers will resume the daily commute and how many domestic tourists will be enticed to the capital and making use of public transport by Khan’s newly-launched “Let’s Do London” campaign. 

Pre-election, TfL submitted proposals for balancing TfL’s books by 2023 by either by retaining the £500 million Vehicle Excise Duty (VED) Londoners pay to the exchequer every year – only a very small proportion of which is spent on London’s roads – or by introducing a new Greater London Boundary Charge on non-Londoners driving into the capital which, at £3.50 a day for most vehicles, is estimated would raise the same amount.   

But the government has already ruled out VED retention, and the election campaign suggested that the boundary charge – never Khan’s favoured option and publicly rejected by Shapps – would be a hard sell in the outer boroughs particularly.

Extending the Congestion Charge to the whole of Greater London, an idea floated by the government itself last year, is also unpopular. A poll last month showed 62 per cent of Londoners opposed. Yet, with TfL facing yet another cliff-edge, something needs to be done. There’s pressure on all sides – on the government as well as on Khan –  to reach a settlement which will see the transport system firing on all cylinders, supporting London and the wider UK economy.

Experts and politicians. including both the Green and Liberal Democrat mayoral candidates, increasingly see a road user charging system that is more sophisticated and fairer than the current flat rate congestion charge, as the way forward. “A pay-by-the-mile scheme, which reflected congestion, pollution and the availability of public transport alternatives,” could raise substantial sums, according to Richard Brown of Centre for London.

A report from the Centre in 2019 estimated that an average charge of five pence a mile for cars and light vehicles, rising to 50 pence a mile for HGVs, could raise as much as £1.5 billion a year. The scheme would also “make policy sense,” says Brown, at a time when government is grappling with tough zero carbon climate change targets, which depend on reducing mileage as well as switching to electric vehicles, but also threaten the £30 billion tax revenue currently generated from car use. 

“It creates incentives for lower carbon transport options rather than using public transport revenues to cross-subsidise highways maintenance, as is currently the case,” Brown said.

Khan, always a safety-first politician, has previously soft-pedalled on the idea. But with transport minister Baroness Vere warning in March that the mayor could be facing “difficult decisions” on TfL capital expenditure and service levels, perhaps now is the time for the second-term Mayor – and the government – to get down to some serious bridge-building around road-user charges, in their common interests.

A TfL spokesperson said: “We continue discussions with the government on our need for further financial support during 2021 and a long-term capital funding deal. This is vital for us to support a strong and robust recovery from the pandemic and to provide confidence to our UK-wide supply chain.”

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