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Changes to travel trends threaten up to £2bn gap in Transport for London’s finances
14 January 2021
London First & Arup outline options to secure the long-term future of transport and keep the capital competitive, including further devolution, smart road pricing and fares reform
Transport for London (TfL), the body responsible for running the capital’s transport network, faces a funding blackhole of between £500m and £2bn per year as passenger numbers have plunged on the tube and bus network as a result of the pandemic. That’s according to a major new report, Transport in London, by the business campaign group London First and professional services consultancy Arup.
The report looks at what London needs from its transport network in the future and possible funding models once the Government’s short-term support runs out.
It highlights that before the pandemic, TfL’s primary source of revenue was passenger fares. This was because when TfL and the Mayoralty was created 20 years ago, responsibility for running services was devolved but the powers to fund those services from a broad range of sources was not – leaving London, in comparison with other world cities, over-reliant on fares. This model was showing signs of strain before the pandemic, but the 65% reduction in tube demand and 44% reduction in bus demand between March and November 2020 has hit TfL’s finances hard.
While London will need to rely on many of its current funding levers, including fares and business rates retention, the long-term solution must involve a mix of London keeping more of the tax revenues raised in the city; greater devolution of resources and powers to City Hall; and innovative solutions to get ahead of broader trends in transport use.
The report puts forward four possible solutions that should be considered to secure the long-term financial sustainability of transport in London. These include:
Replacing Vehicle Excise Duty with a new model for accessing London’s road network, paid to London Government, to ensure that those who drive into the capital pay their fair share for the maintenance of London’s roads;
Introducing smart road pricing, replacing the current congestion and low emissions zones with a more flexible system, reflecting, for example, the type of vehicle, distance driven, and time of day;
Harmonising the existing fare structure, integrating the flat-fare bus and zone rail system into a single, less complex network-wide approach, alongside reforms to the bus network and;
Increasing new travel choices, enabling TfL to be a commissioning and licensing authority for choices such as cycle hire schemes, with new operators able to enter the market.
Commenting, Jasmine Whitbread, Chief Executive of London First, said:
“The world of travel is not going back to how it was before the pandemic, and with more working for home on the cards, it is clear that the old model of relying on fares to fund the capital’s transport network is dead.
“Without action TfL could face a £2bn blackhole in funding. While in the short-term the Government must continue to provide the cash to keep London’s public transport moving, perpetual negotiations and quick fix deals are no way to run the capital’s transport network.
“A new long-term sustainable funding deal must take into account what a 21st century global capital needs and that must include considering bolder solutions including new road pricing mechanisms and reforming fares.”
Richard de Cani, Global Planning Leader at Arup, said:
“Successful global cities rely on well run public transport networks that deliver the quality of life and urban experience that enables them to stand out. Increasingly, this includes commitments towards de-carbonisation and net zero and a willingness to embrace new technologies.
“The pandemic has changed how people travel in London, some of this will be temporary but some will be permanent, and for London to recover quickly from the pandemic, it needs to embrace this change and reimagine its future.
“The creation of TfL and the expansion and evolution of the transport network in London has played a major role in London’s economic success. However, the way in which people use our transport network has and will continue to evolve with the introduction of new technologies such as electric vehicles, shared and autonomous mobility and new micro mobility services.
“Embracing new ideas – from smart road pricing to overhauling the fare system – will secure TfL’s long-term future, while helping it deliver a service that meets the needs of our diverse city. By doing this, it will also provide a blueprint for how transport networks respond to future challenges across the UK and beyond.”
The four building blocks of a potential new model for transport in London in more detail. Cumulatively, these four interventions as a package could plug the entire funding gap, as well as delivering a range of other economic, environmental, and societal benefits for London’s residents, visitors and businesses:
A London Vehicle Ownership Duty, replacing Vehicle Excise Duty. As we move towards the government’s commitment to ban the sale of petrol and diesel cars by 2030, the need for a new way to tax road vehicles becomes apparent. Replacing VED for all vehicles registered in London would allow the level of tax to be set by the Mayor, incentivise faster change to vehicles with less environmental impact, and could be applied across the full spectrum of road users.
Smart road pricing, a proposed evolution of the current Congestion Charge, ULEZ, and tolling systems (like DART) into an integrated, transparent, distance-variable charging scheme, with rates dependent on the type of vehicle, time of day, and length of journey. This would mitigate a ‘car-led’ recovery and encourage people to use public transport, enable vehicles to be charged based on the impact they create (pollution, congestion, road maintenance).
An Integrated Fare System. The existing split fare structure, with buses significantly cheaper than rail and tube services, has led to duplication of routes as bus routes run in parallel with tube lines to maintain capacity and a lower cost service. This would mean harmonising the fare system, offsetting any increase in cost by providing concessionary fares for those in need, and could allow a reduction in the duplication of services, a better experience for passengers.
Rethinking TfL as a fully integrated London Mobility Service would provide seamless and affordable journeys across modes. New mobility providers – like dockless bikes, and e‑scooters – should not be seen as a threat to public transport but an important part of the mix. An integrated service with a single source of information and a single payment structure would be a passenger-focused evolution of TfL’s licensing and enforcement roles.
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