London needs to have the powers to control its own destiny – and transport
It is no longer headline news that Transport for London is facing a financial crisis. Last week the mayor of London revealed the network needed £1.7bn over the next 18 months simply to balance its books, and at least £1.3bn every year to make essential upgrades on the Tubes, trains and buses.
This summer, Tfl celebrated its 21st birthday. It has now reached adulthood and can finally drink alcohol in the US.
At the helm of the transport system is a first-class commissioner Andy Byford who can certainly bring an American flair to the service thanks to his track record of transforming public transport in Toronto and New York, as well as advising on infrastructure in Boston and Washington DC. Civil servants and bureacrats rarely get celebrity status, but in New York Byford was nicknamed “Train Daddy”. While the term might have unsavoury connotations for UK readers, it reflects his level of popularity in the US. But he leads an organisation with a long-term problem.
The budget of Transport for London is around £10bn, a hefty sum. Of that, just under half is generated from fares, a third comes from grants from central and local government (especially business rates retention), and the rest comes from capital reserves, borrowing and income from the congestion charge, commercial property and similar sources.
There are two important points here. First of all, fares are less than half of TfL’s income. In other words, the money which flows directly from the use of its services does not make up the largest part of its income.
The second is that a major portion of the budget, around 33 per cent, comes from grants from other bodies; this essentially means indirect taxation of one form or another.
TfL is, in a sense, a dependency, neither paying its way from direct income nor generating its own revenues to make good the shortfall.
Sadiq Khan’s warnings have been stark. Last week this newspaper reported the danger of “managed decline” and a return to the 1970s if additional funding was not found. Tube services would be cut by nine per cent and bus services by a crippling 18 per cent. The problems are exacerbated by TfL’s circumstances. While fares are less than half of its income, it is much more reliant on them than other comparable networks; and it is also legally required to balance its books, which presents the stark choice of finding more money or cutting services.
This cannot go on.
We talk of London as a world city, the greatest place to live and do business in the world, yet our infrastructure is limping from crisis to crisis like an irresponsible bachelor behind on his club fees. It’s time to stop drip-feeding to avoid collapse, and instead rethink the way we pay for our transport network.
The obvious solution, which has significant support from all shades of the political spectrum, is fiscal devolution to match the dispersal of power from the centre.
There are various ways this could be done. Restrictions on borrowing for capital investment could be relaxed, to allow the Greater London Authority to make judicious use of markets awash with cash and keen for responsible, sustainable ways to invest that money.
There is a range of taxes which could be devolved, instead of collected by Whitehall and counted out grudgingly to a supplicant GLA. Stamp duty is one often identified, but business rates need to be reformed too, and there are options around corporation tax and payroll levies too.
London needs a responsible government. It needs to be administered by institutions with the power to spend money on appropriate projects but also the accountability of generating that money through taxation.
We must break the Treasury stranglehold on public finance for the capital and create a holistic system which is transparent and responsive. The Devil is in the detail, but the path to salvation seems only to lead in one direction.