Sadiq Khan and London Assembly in cross-party call on Grant Shapps to let capital retain road tax

Sadiq Khan and London Assembly in cross-party call on Grant Shapps to let capital retain road tax

Sadiq Khan and the leaders of all five political groups on the London Assembly have urged transport secretary Grant Shapps to allow Transport for London to retain Vehicle Excise Duty (VED) raised in the capital for its own use in order to stabilise its finances.

In a letter to Shapps, delivered as TfL and Department for Transport (DfT) officials negotiate a long-term financial settlement for the capital’s transport authority, the six signatories say that approximately £500 million of VED is collected from owners of vehicles in London each year, yet “London has not received any of these funds”, which have all been spent on roads in other parts of the country while expenditure on those in the capital is paid for from other sources of TfL income.

They highlight “extensive cross-party support for London retaining its share of VED revenue” going back years with the backing of all three London Mayors so far, included Boris Johnson, who is now Prime Minister.

“The impact of the pandemic on TfL makes this matter extremely urgent,” the letter says, stressing  the dramatic effect of the pandemic on fares revenue, which TfL has become increasingly dependent on in recent years as government grant has been reduced and ended as part of an agreement reached between Johnson and the then Chancellor George Osborne. The deal also allowed the Greater London Authority to retain a larger proportion of Business Rates raised in the capital, but the sums allocated to TfL have only partially compensated for the loss of grant.

Mayor Khan and the group leaders say “it is not fair to expect Londoners to effectively pay twice for the maintenance of our roads” particularly given the large contribution to government coffers made from all taxes raised in London and spent elsewhere in the UK. The capital’s “tax surplus” in 2019 – the amount raised in London but not spent here – was a massive £38.8 billion, which is more than the additional spending on the NHS the government committed to last year.

The cross-party initiative follows Khan accepting a challenge to instigate it made by Conservative Group transport spokesman Keith Prince at last month’s Mayor’s Question Time. Prince strongly prefers the VED option for raising £500 million to TfL’s alternative suggestion to the DfT of a Boundary Charge, which would see most vehicles registered outside London charged £3.50 to enter Greater London. He fears this would have a detrimental impact on businesses in suburban towns. Khan also expressed a preference for VED being devolved.

Prince’s fellow Conservative AM and Tory mayoral candidate Shaun Bailey has been falsely claiming that Khan is going ahead with introducing a Boundary Charge of £5.50, which he has misleadingly termed an “Outer London Tax”, and said he would scrap it if elected Mayor on 6 May. TfL’s financial sustainability plan, submitted to the government on 11 January and published on its website, says any Boundary Charge would not come into effect until October 2023. Bailey is trailing Khan in the race for City Hall by 21 points, according the most recent opinion poll.

Shapps has publicly rejected the Boundary Charge option and also appeared to dismiss VED devolution in the Commons, raising concerns about alternative sources of revenue he might force on TfL.

London Mayors have broad powers through TfL to implement road user charging schemes “across all or some parts of London” under provisions of the GLA Act (1999) in order to put his transport strategy into effect. The London-wide anti-pollution Low Emission Zone, which came into operation in 2008, was introduced under those powers and relates to all heavy diesel vehicles entering Greater London.

However, the Act also give the transport secretary “a limited power” to direct the Mayor to change his transport strategy if he considers it “inconsistent with national policies relating to transport” and any inconsistency to be “detrimental to any area outside Greater London”.

The full list of signatories of the letter to Shapps is Sadiq Khan and group leaders Susan Hall (Conservative), Len Duvall (Labour), Caroline Russell (Green), Caroline Pidgeon (Liberal Democrats) and Peter Whittle (Brexit Alliance).

Photograph by Omar Jan. has been providing in-depth coverage of the UK capital’s politics, development and culture since February 2017It depends greatly on donations from readers. Give £5 a month or £50 a year and you will receive the On London Extra Thursday email, which rounds up London news, views and information from a wide range of sources, plus special offers and free access to events. Click here to donate directly or contact for bank account details. Thank you.

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