Londoners are likely to face a hike in council taxes and changes to fares to help TfL shrink the deficit in its income caused by the pandemic.
Although TfL is still in negotiations with the Department for Transport (DfT) over a funding settlement to keep London’s transport network running, it’s clear that the DfT wants TfL to make up more of the shortfall in its income by raising revenue from within London.
TfL is currently being required to put in place plans to raise future revenues by £500m-£1billion a year from 2023. That puts TfL in an unusual situation of not having the subsidy handed out to other cities, while also being expected to raise revenues during a revenue-killing pandemic.
The hike in council taxes, if it goes ahead is expected to raise approximately £172 million annually, and TfL is proposing other changes which will raise another £60-80 million per year. That’s somewhere in the region of £230-250 million a year raised, which is about half of the lower level set by the DfT, leaving a shortfall of at least £250 million still to be found.
There’s still a strong argument that Vehicle Excise Duty, which funds road maintenance across the UK, but not in London where TfL picks up the bill should be more evenly shared. It’s estimated that London loses out a substantial £500 million a year at the moment thanks to the way the Vehicle Excise Duty is managed.
London also contributes an average of £36 billion a year more in taxes to the government than is spent by the government in London, so it’s not as if funding London’s public transport would push London into a loss-making region for the UK government.
The Mayor of London has now announced that he plans to increase council tax in London by around £20 a year over the next three years. That’s subject to consultation. The council tax hike would also mean that Londoners would end up paying a larger contribution to their local public transport network through council tax than the average across the other metropolitan areas in England.
The 60+ Pass
There are also plans to raise the age of eligibility for free travel using the 60+ pass by 10 per cent each year over the next 12 years. That means Londoners who already have the 60+ travelpass won’t lose benefits, but everyone else will need to wait longer to qualify.
In 2010, the national government started to raise the age at which people qualified for free travel on public transport progressively to 66 years, and it was the current Prime Minister, then Mayor of London, Boris Johnson who introduced a 60+ pass for Londoners in 2012 so that 60-66 year olds would continue to receive free travel in London.
TfL picks up the bill for the 60+ pass while local councils pick up the bill for free travel for people aged 66+. Phasing out the 60+ pass introduced by Boris Johnson will save TfL around £100 million a year, but the full saving won’t kick in for a decade.
TfL will also be applying an all-day peak fare for London Underground journeys between Zone 1 and Heathrow on the Piccadilly Line, to reflect that demand to Heathrow does not conform to the usual peak periods, with the daily and weekly price caps limiting costs for airport workers.
The Mayor is also proposing that TfL withdraws from the Travelcard Agreement with the National Rail services.
Travelcards are a range of tickets that are valid for use on National Rail services in London, as well as TfL services. Travelcard users are now a minority, as passengers gain many of the same benefits from other ticket types due to the introduction of Contactless and Oyster Pay As You Go.
Moving Travelcard customers to PAYG and retiring all magnetic tickets will simplify retailing and reduce costs, mainly due to a reduction in commission payments. TfL also expects increased income due to increased trips as a result of the simplified ticketing.
Under an existing funding deal, fares on TfL managed services will need to rise by the Retail Price Index plus 1 per cent, which should equate to an average fare rise next year of 4.8 per cent. That doesn’t mean TfL gets nearly 5 per cent more cash in the bank though, as the fare rise reflects the rising cost of running the transport network, which is how inflation is calculated in the first place.
All measures announced will be subject to appropriate consultation, impact assessment and decision-making processes before they are implemented.