Mayor: Ministers must 'play fair' by London in drive to fund capital's transport in the longer term

• London should be allowed to keep £500m Vehicle Excise Duty (VED) raised each year in the city
• If government refuses to let London keep VED, other ways of raising this money will be needed after Covid-19 decimated TfL fares income

The Mayor of London, Sadiq Khan, has today urged ministers to 'play fair' by London in the future funding of the capital's transport network after the Covid-19 pandemic saw Transport for London's fares income collapse.

He called on the government to allow the capital to keep the £500 million raised annually from vehicle excise duty charged to London-based drivers.

Despite this money being collected from drivers who live in London, ministers spend the huge sum almost exclusively outside the capital, with TfL left to fund maintenance of major roads in Greater London from its fare-dominated income.

Sadiq has warned that unless London is allowed to keep the £500 million a year Londoners pay in VED, other ways of raising this money will be needed to help overcome TfL’s unprecedented financial challenges and achieve the aims of the Mayor's Transport Strategy.

TfL officials have been asked to investigate the feasibility of a new Greater London Boundary Charge for non-residents which would apply only to vehicles registered outside London which are driven into the capital.

A small charge of this nature could have significant benefits in terms of managing congestion, reducing emissions and encouraging more use of sustainable modes of transport. Income from the charge would also be reinvested in the capital’s transport network.

The Mayor has broad powers to introduce road user charging schemes to facilitate the achievement of the Mayor’s Transport Strategy. TfL’s feasibility study will need to establish whether such a scheme would be effective in delivering key existing policy objectives at the same time as providing essential income for London’s transport network.

Every weekday 1.3 million vehicle trips are made from outside London into the capital. Around one million of these trips are into outer London alone and the majority of these journeys are made by vehicles registered to addresses outside of the Greater London boundary, highlighting that drivers from outside London greatly benefit from using the capital’s roads without contributing to their upkeep.

Since March, traffic levels have returned more quickly to outer London than central London, with levels of traffic in outer London now at around 90 per cent of pre-COVID levels.

Initial estimates suggest a scheme like the Greater London Boundary Charge for non-residents - if levied at £3.50 a day and applying only to non-Londoners - could reduce the total number of weekday car trips across the GLA boundary by 10 – 15 per cent and raise around £500 million a year. The worst polluters could be charged more to encourage those who do need to drive to do so in the cleanest vehicles, resulting in further air quality benefits.

A thorough public consultation process would be required before any charge could be introduced, in addition to economic, environmental and equality impact assessments. An amendment to the Mayor’s Transport Strategy could also be required, subject to consultation. Development of the scheme, consultation and implementation would take at least two years – meaning that any new charge would not be levied until after the capital’s recovery from the pandemic.

The Mayor’s move to begin examining the feasibility of a new charge comes as an independent review of TfL’s long-term future funding and financing options is published.

It found that this type of road-user charging could have benefits for Londoners – for example, reducing weekday traffic and emissions – and raise significant funds. Commissioned by the Mayor and the TfL Board in July, the review was carried out by an independent panel with significant experience of public policy and Government reviews.

The Mayor of London, Sadiq Khan said: ‘Ministers have failed to play fair by Londoners when it comes to financing our world-renowned transport system. It is high time they did so.

"Londoners pay £500m worth of Vehicle Excise Duty every year, which is then spent on maintaining roads outside the capital. It is not fair on London that our drivers should subsidise the rest of the country’s roads and get nothing in return. The Government must allow London to retain its share of VED and to support the capital’s transport system properly as in other world cities. It’s not just transport – Ministers continuously hand out pots of money in a whole range of different areas that Londoners cannot access, which is hugely unjust.”

"If Ministers aren’t prepared to play fair, then we will need to consider other options to address this unfairness, such as asking people who live outside London and make journeys into Greater London by car to pay a modest charge, which would be reinvested in London’s transport network. As the independent review shows, we can’t go on expecting public transport fare-payers to subsidise the costs of road maintenance."

ENDS

NOTES TO EDITORS

• London is far more reliant on fares revenues for day-to-day transport operations than most other global cities after the removal of TfL’s government grant – worth £700m a year – was agreed by Boris Johnson in 2015 during his Mayoralty. Before Covid-19, 72 per cent of TfL’s income came from fares income. Maintenance of the TfL Road Network (‘red routes’) is funded from TfL income.

• This over-reliance on fares dates back to 2015, when the then Mayor agreed with the Government that the operating grant to TfL, which covered running costs without a sufficient income stream such as road maintenance, would be phased out, with the last year of the grant being 2017/18 (when it was £228m compared to £835m in 2014/15).

• TfL fares income fell by around 90 per cent earlier this year as a result of the pandemic, and tube passenger numbers were down 90-95 per cent - the lowest in 100 years.

• In October, the Mayor agreed an emergency funding deal with Government that makes around £1.8 billion of Government grant and borrowing available for the next six months. The Mayor fought off the worst conditions the Government tried to impose which would have had a negative impact on Londoners, including extending the £15 Congestion Charging Zone to the North and South Circular, and removing concessions for older and younger Londoners. As part of the deal TfL is required to deliver savings of £160m to plug the gap in funding it needs to run the transport network.

• Approximately £6bn is raised from Vehicle Excise Duty (VED) annually in the UK, including around £500m from Londoners. This VED revenue is hypothecated to roads spending. While London may be able to access a small proportion of this to spend on major roads in London through the major Roads Network (MRN) fund, this investment would be very small compared to the amount raised from Londoners paying VED and to date London has not received any of these funds, with the Government clear it wants to prioritise public expenditure in the rest of the country over London.

• In addition, TfL is ineligible to apply for many national schemes that would pay for transport and roads. These include the Transforming Cities Fund established in autumn 2017 to enable greater investment in sustainable transport; the Pothole Action fund; the Local Pinch Point Fund; and the Local Highways Maintenance Challenge Fund.

• There has been extensive cross-party support for London retaining its share of VED revenue, with the London Assembly passing a motion earlier this year urging the Secretary of State to revisit the decision taken to remove this funding from London: https://www.london.gov.uk/about-us/londonassembly/meetings/mgAi.aspx?ID=32059
  
  
• There is already good camera coverage on the strategic road network entering London for enforcement of the Low Emission Zone (LEZ) – a scheme which has been in operation since 2008.
  
  
• Charging schemes to enter a city are used internationally to manage traffic and help pay for transport services. Oslo introduced a scheme in 1990 and there are three charging rings within the city. At the outermost ring drivers are only charged on their way into the city. At the two inner rings drivers are charged each time they drive into one of the areas. In Singapore the charge has been a major component of traffic management since 1975 which over time has moved from a paper-based license to a dynamic charging system.
  
  
• In 2019/20 it cost c£750m more to run London’s buses than was raised by bus fares.

• From 25 October 2021, the existing central London Ultra Low Emission Zone (ULEZ) will expand to create a single larger zone bounded by the North Circular Road (A406) and South Circular Road (A205). The North and South Circular Roads themselves are not included in the zone. The ULEZ will continue to operate 24 hours a day, 7 days a week, including weekends (except Christmas day), with a £12.50 daily charge for vehicles that do not meet the required emissions standards.

• Four out of five cars already meet the ULEZ emissions standards, and the Mayor has launched a car and motorcycle scrappage scheme to help low income and disabled Londoners scrap older, more polluting cars and motorcycles in favour of cleaner vehicles and greener forms of transport to help clean the city's toxic air. Scrappage grants for minibuses and heavy vehicles have also paid out tens of millions of pounds to small businesses and charities to upgrade their vehicles.

• Earlier this year, the Mayor and TfL Board commissioned an independent review to examine potential options for long-term financial stability and firmer foundations into the future. The review was carried out by a panel with significant experience of public policy and Government reviews. The final report outlines options for TfL's long-term future funding and financing models that would enable TfL to deliver the right services for London, invest in new and existing infrastructure and continue to contribute to London's development and sustainability.

• The independent review the panel was completely independent from both TfL and the Greater London Authority (GLA), and panel members were not paid a fee. The Panel members were:

• TC Chew, Global Rail Business leader at Arup, Chartered Engineer and a Fellow of the Royal Academy of Engineering;
• Stephen Glaister CBE, Emeritus Professor of Transport and Infrastructure at Imperial College London, a member of the Board of TfL 2000 to 2008 and member of the 2019 Oakervee Review of HS2;
• Bridget Rosewell CBE, Chair of Atom Bank and of the M6 Toll company and a Commissioner for the National Infrastructure Commission;
• Sir Jonathan Taylor, Vice President of the European Investment Bank from 2013 until 2019.

• The independent review can be read here: https://tfl.gov.uk/corporate/publications-and-reports/independent-review