Following on from my previous blog post about the financial crisis faced by Transport for London (TfL) and the Mayor (see link below) I have given some thought to how the problems might be resolved.
The solution from Sadiq Khan and London’s Transport Commissioner is to ask the Government for more money. Not just some millions of pounds in immediate bail-outs but billions in the next few years. There is no doubting the dire financial situation that TfL has got itself into partly because of the Covid epidemic which has reduced income substantially. But it was slow in responding to that and had not been managing its financial resources properly for years.
The big problem is that TfL has been run to pander to its political master whose key focus is to please the population of London so they can get re-elected when the time comes. But TfL is not just a useful transport service to serve the growing population of London but is in essence a business. It should be run like a business and if it is not it will continue to rack up losses and need repeated bail-outs.
The rot set in when the Mayor of London was given responsibility for TfL (and he chairs the Board of TfL), particularly when TfL took over responsibility for all underground, bus and main roads in the capital. From Ken Livingstone onwards, decisions have been made to please the electorate rather than ensure that TfL ran on a commercial basis. Ken expanded the bus network enormously which resulted in subsidies of over £1billion per year. Buses ran more frequently on routes that were often under-used but only now is the network being reduced.
Concessionary fares such as the Freedom Pass were expanded – again a very popular policy but one which imposed costs on the transport operators even if local councils covered some of the costs.
Ken installed a Congestion Charge system (in essence a tax) while promising it would solve traffic congestion which it never did and now we have the ULEZ tax which it was claimed would solve London’s air pollution problems, but which it has not – see Reference 2.
Sadiq Khan froze public transport fares for 5 years until March 2021. This no doubt helped him to get elected. But this was a political decision not a sensible financial one. He gambled on revenues from Crossrail filling the budget gap that was created but that project was over budget and severely delayed. When the Covid epidemic hit there was no margin of safety left to absorb the reduction in income that comes from bus and tube fares.
Instead of cutting services to meet the reduced demand level and hence save costs, services were maintained at a high level for political reasons and to avoid conflicts with trade unions. That’s not how any commercial business would have tackled the problem.
TfL is a commercial business where less than half its income comes from fares paid by willing customers. Much of it comes from grants and other subsidies, often indirectly from taxpayers. That is the core of the problem which no politician, whatever the hue of the Major of London, is going to tackle.
The solution to many of these problems is to remove TfL from elected political control and give it a clear mandate to be run solely on a commercial basis. A commission, independent from the Mayor of London, should be established with very specific terms of reference which should be binding on a new London Transport Commissioner. Such a commission should report to a Government minister but be independent in terms of policy making and executive decisions, i.e. the Government and any Mayor of London should only have a consultative role.
The remaining issue is whether roads and public transport should be combined under the same Transport Commissioner with roads being financed and maintained to some extent from public transport fares. Although the Mayor currently obtains some income from the Congestion and ULEZ charges, he argues that he should receive a share of national taxes used to finance road development and maintenance. That would only make sense if it was removed from political control in London.
But there is a built-in basis for irrational decisions if the London Transport Commissioner is responsible for multiple transport modes – underground, surface rail, London buses, taxis/PHVs and private vehicles (cars, LGVs and HGVs). Each of these should be made standalone businesses so that no one role subsidises the other. They should be made independent profit and cost centres. London Underground should not subsidise London Buses and vice versa. Road vehicles including buses should be covering the maintenance costs of the road network (including that for bridges, flyovers and tunnels) in London. If there is any surplus in any one sector it should be used to expand the relevant network and improve services, not be used to subsidise other loss-making activities.
The claim for a single transport body such as TfL was that it would enable the construction of an integrated transport system but apart from a common fare payment system there is little real integration.
The above is a manifesto to reform London transport so that it meets the needs of consumers of its services on a viable economic basis in the future. No other solution can do that.
There are of course other possible escapes from TfL’s financial problems. It has assets it could sell off. Perhaps someone would like to buy the London Underground? But that will never happen while it is subject to political interference. Or it could borrow more money but that would not solve the basic financial problem. When expenditure exceeds income in your household budget, the last thing you should do is to increase your mortgage or raise the limit on your credit cards.
As it stands, the Mayor’s only solution seems to be to ask his fairy godmother (the Government) to come up with oodles of more cash. The Government should ignore the Mayor’s wailing and threats and get down to imposing substantial reform along the lines I suggest.
Roger Lawson
Ref 1. Transport Crisis in London blog post: https://freedomfordrivers.blog/2021/11/19/transport-crisis-in-london/
Ref 2. ULEZ Had Minimal Impact blog post: https://freedomfordrivers.blog/2021/11/17/ulez-had-minimal-impact-on-air-pollution/
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