Alexander Jan: TfL’s Halloween Agreement with the government looks like a victory for the Mayor

At a quarter to midnight on Halloween, in true Brexit brinkmanship style, the government did a last-minute deal with City Hall. After weeks of what might have been seen by many as political mischief making, Number 10 effectively caved in. 

Following a collapse in Transport For London’s farebox revenue caused by the coronavirus crisis, Sadiq Khan, was looking for an 18 month, £5.7 billion transport settlement. In the end he was able to secure up to £1.8 billion for a third of that time. And it could be more. Any Crossrail-related assistance will be extra. The Mayor was looking for £750 million to complete the much delayed, over budget scheme that Whitehall is also on the hook for, as Crossrail was jointly supervised by the Department for Transport and TfL until full governance of the programme was transferred to the latter last month. Whitehall’s track record on delivering large scale complex infrastructure projects is hardly world-beating. 

The new funding deal also includes a commitment by both parties to get TfL’s financial position back to being sustainable by April 2023 “as soon as possible”. That suggests a longer-term deal is now on the cards – something else Khan was after.

In a previous piece for On London I noted that if the Mayor’s £5.7 billion ask for 18 months meant an immediate requirement of £3.8 billion for a year and the government offered £1 billion in grant, that would have left him needing to find £2.8 billion to cover twelve months. 

Some radical ideas were being waved around by Number 10 to help close this gap. They included a hike in London fares, a jump in Council Tax-related contributions (paid by nearly all London households) and, perhaps most controversially, an extension (or more likely an additional) zone of the £15 congestion charge to the limits of the North and South Circular roads. Under what should undoubtedly be known henceforth as the Halloween Agreement, all of these have now been watered down, kicked into the long-grass or abandoned.

Taking them in turn, next year’s fare increases are effectively limited to an RPI plus 1% increase in January 2021 – some 2.6% in total. Whilst it will hardly be popular, this is very much in line with the sorts of increases that took place before the Mayor introduced a four-year freeze of TfL fares and one that, if re-elected, he was in any event planning to end next year, except for buses. This is a world away from a 20% plus increase that would have been required to raise, say, a quarter of the £2.8 billion sought by City Hall. By any measure, a dramatic increase in fares when demand is anaemic (it is about to collapse again with the second lockdown) would have been a spectacular financial and economic own goal all round.

In relation to the Council Tax change, an upping of the precept by 150% would have raised just under £1.5 billion, or just over half the sought-after amount. The increase looks as if it will now be limited to the cost of paying for concessions for some groups (Londoners under-18 and those aged 60-65) that are not routinely offered elsewhere in England. These travel benefits were introduced by the previous mayors, Messrs Livingstone and Johnson respectively. If we estimate the costs at £75 million-£100 million, that would add about 7.5%-10% to Council Tax bills – a significant increase, but much smaller than what might have otherwise been anticipated. Such a change would be subject to approval by the House of Commons.

The biggest climbdown was in relation to an extension of the congestion charge to match the expanded Ultra Low Emission Zone (ULEZ), scheduled to kick in next October. While many commentators are not against the concept of some sort of road pricing system that is fair, equitable and actually does something for motorists (as well as the environment and other road users), a flat fee of £15 a day geared to raise revenue risked causing real hardship.

Excluding the planned ULEZ expansion, some 300,000 Greater London residents who drive to work would have faced additional bills of around £2,800 each a year, costing them more than £800 million per annum. Of these, some 167,000 Londoners who experience the highest levels of deprivation would have been hit with a regressive £460 million. A further 111,000 motorists who drive into Greater London from outside the capital would have had to potentially stump up £300 million between them. At a time when the pandemic is causing household incomes to fall, the effect could have meant that in total, as many as 20,000 households would have had to give up their cars.

One would like to think that – just possibly – sensible civil servants in DfT and Treasury (of which there are still many) were allowed to give advice about how these ideas might actually have played out for what politicians call “hard-working families.” They, along with TfL and City Hall, should be credited with saving ordinary people from the worst excesses of such poorly thought-through policies.

Sadly, the same cannot be said for a bad-tempered piece about the deal transport secretary Grant Shapps penned for the Evening Standard. He suggested that the good people of Exeter and Barnsley “fund benefits to Londoners.” This is financially and economically illiterate. In the last financial year, Londoners contributed just over £39 billion more in taxes than was spent in the capital. Or, to put is another way, more than double the £350 million a week that was plastered on the side of another Halloween style trick – the Brexit battle bus.

Alexander Jan is chair of the Midtown business improvement district and former chief economist at Arup. Follow Alex on Twitter.

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