The impact of the pandemic on TFL (Transport for London)

Since TFL was established in 2000, it has been supported by a combination of fare income, bank loans, government grants and sponsorship revenue.

Unfortunately, it has suffered a heavy financial hit from the pandemic, as have local authorities whose revenue from parking and fines has plummeted. Because of the sharp fall in tourism and the high proportion of commuters continuing to work from home, its revenue has fallen dramatically – prompting the Mayor of London Sadiq Khan to request a new bailout package to help it stay afloat for the next 18 months.

Fares are increasing – but this is after a fare freeze

Back in May, it was confirmed that TFL fares would rise, following a £1.6 billion cash grant and £505 million in loans to help cover the loss of revenue during the first lockdown that began in March. Many fares had previously been frozen in January 2020 – including the majority of pay as you go single fares. However, in late 2019 TFL hinted that fares may rise in 2021 as part of its 5-year investment plan.

‘Unfair’ for non-Londoners to finance TFL, Transport Secretary says

Grant Shapps, the Transport Secretary, said the government’s position was that it was ‘unfair’ for the rest of the country to carry the financial burden of propping up TFL, hence the decision to increase fares with inflation.

A war of words between The Mayor of London and the Prime Minister

Earlier in October, the Prime Minister accused TFL of being ‘effectively bankrupted’ before Covid-19 – a claim that the Mayor of London has flatly denied. Indeed, Mr Khan pointed out that he had cut TFL’s operations deficit by 71% compared to when Mr Johnson was Mayor of London in 2016. However, 12 months before the pandemic began, TFL’s nominal debt was £11.175 billion – more than two billion higher than a month before Mr Johnson left office – suggesting TFL’s financial struggles cannot just be attributed to the pandemic.

But now it appears fares will increase beyond inflation

In October, Sadiq Khan said that the Government wanted to raise fares beyond the rate of inflation – the standard RPI (Retail Price Index) – and remove free travel rights for under-18s.

And now the Government wants the London Congestion Charge zone to be expanded

Boris Johnson recently rejected Sadiq Khan’s plea for the new bailout for TFL unless the mayor agreed to expanding the congestion charge zone (in addition to increasing fares and taxes). 

Mr Khan argued that these conditions would ‘hit Londoners with a triple whammy of higher costs’ when many are already suffering hardship during this pandemic. Expanding the congestion charge zone, he says, would ‘punish Londoners for doing the right thing’ by finding alternatives to public transport – such as cycling and walking – during the pandemic.

Logistics UK chief executive David Wells echoed the Mayor’s sentiment, warning that the expansion would be ‘a significant blow’ to the logistics sector, which is struggling financially and operationally because of the pandemic.

This follows a significant rise in the Congestion Charge earlier this year 

The daily Congestion Charge had already risen from £11.50 to £15 in June – following a temporary suspension of the scheme during the first lockdown . At the time, the Mayor was discouraging public transport use and recommending walking, cycling or staying at home – but not cars. 

So the question is – will the congestion charge zone be expanded?

Sadiq Khan has confirmed that there are no plans to do this. 

Many MPs are also opposed to the idea. For example, Wes Streeting, the Labour M.P. for east London’s Ilford North constituency, argued that expanding the zone now could be ‘a death knell for jobs and business’ and ‘cripple’ many families in London who are struggling financially.

However, not everyone agrees

Some argue that an expansion is needed to reduce congestion further. Sam Bowman, Director of Competition Policy at the ICLE global research centre, recently said on Twitter that ‘the congestion charge extension can’t come soon enough’.

He points to the fact the average road speed in central London is just 7.4 miles per hour, despite the congestion charge speeding up traffic by 21%. He argues that expanding the congestion charge zone to the North and South Circular roads – equivalent to next year’s ULEZ zone – would help to reduce congestion and speed up journey times. ‘Bus would become faster and more reliable too’, he adds.

Bowman says this would spell the end of what he calls ‘road socialism’, by creating a new price system.

Fast facts: Congestion Charge

  1. When was the current scheme introduced? 

Back in 2003, then Mayor of London Ken Livingstone introduced the congestion charge to try and reduce the number of private vehicles on central London roads each day.

  1. How much revenue has it raised?

From 2003 to 2017, the Congestion Charge generated £1.7 billion in revenue – which TFL says was reinvested into London’s transport infrastructure.

  1. Has it reduced congestion?

Soon after its launch, data appeared to show that the scheme was having the intended impact. The Centre for Public Impact website revealed that the number of passengers entering the zone by bus increased by more than a third (37%) in the first year of the charge (Feb 2003 – Feb 2004), and the capital generated a net income of £122 million by 2005-2006.             

  1. What do the public think of the Congestion Charge?

The scheme has faced strong criticism from many motorists, politicians and thought leaders in the car sector. However, public acceptance of the charge has improved over time, particularly in light of a growing body of research highlighting the adverse health impacts of pollution.

So what would happen if TFL couldn’t raise enough money from the Congestion Charge and fares?

If TFL couldn’t balance its books, it could declare itself insolvent via a Section 114 order – which would mean no new expenditure is permitted.

It would have no option but to drastically reduce its services across the capital. This would have many serious implications:

So wouldn’t expanding the Congestion Charge be the answer to TFl’s funding crisis?

Not necessarily. Besides the financial impact on Londoners who are reliant on cars, expanding the Congestion Charge purely to generate revenue could hurt public confidence in the policy as well.

Former Arup chief economist Alexander Jan argues that the fee shouldn’t be described as a ‘congestion charge’ if it is only to raise revenue. Other critics of the scheme say that the charge is regressive, as the poorer Londoners pay proportionately more compared to the rich.

Nevertheless, London needs radical solutions to tackling its poor air quality – which represents a serious threat to public health.

With almost six million car journeys made in London each day (in pre-pandemic times!), the capital is still one of the most polluted cities in Europe. This problem is not just limited to the densely built, highly urbanised areas like the West End and the City either; all boroughs of London are impacted by pollution – much of which can be attributed to congestion. 

All Londoners want to live in a safer, cleaner city – and recent surveys have shown that the overwhelming majority endorse tougher measures to deliver this through reducing congestion and improving air quality.

TFl aims to reduce the number of high-emitting vehicles on London’s road by expanding the ULEZ (Ultra Low Emissions Zone) in October 2021 – which will cover a much larger area than the current ULEZ. We’ll discuss this in more detail in our next blog.

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