Sadiq Khan's promise to freeze London's fares will be the mayoral election's “first broken promise”

Sadiq Khan MP at a hustings last July. Image: Carl Court/Getty.

If there's one thing guaranteed to make London’s commuters froth from the mouth, it's news of an impending fare rise. The city’s annual fare announcement is met with gnashing of teeth and the ritual calculation of how much more that monthly travelcard will cost. “Why do they have to keep rising?” people wail.

And so, some politicians have been promising to freeze or even cut fares in their attempt to win the race to be mayor next year. Sadiq Khan, Labour's candidate, is pledging to freeze fares for the entire four years of his first term.

But here's the problem: anyone promising they won't raise fares without acknowledging an effect on services is either financially illiterate or being economical with the truth. It's a transparent attempt to grab votes. It’ll probably also be the election's first broken promise, with the get-out clause of “oops, we didn't realise how bad the previous administration had let things get” rearing its head come May 2016.

Crunching the numbers

So how much do fare rises actually bring in? For 2016, it's expected to be £43m after an increase of 1%; in 2015 it was expected to be £98m after a rise of 2.5%  (that’s because RPI, a measure of inflation, was higher last year).

These figures aren't one-offs; the money that fare rises bring in accumulates each year. Let's assume inflation stays low for the next few years, sticking with the £43m figure for simplicity, and see how that stacks up.

Here’s how much Sadiq Kahn’s fare freezing plan would cost Transport for London (TfL):

  • Year one loss: £43m
  • Year two loss: £43m  + £43m = £86m
  • Year three loss: £43m + £86m = £129m
  • Year four loss: £43m + £129m = £172m

Inflation, of course, doesn't stand still; costs increase and staff want pay rises, all while fare revenue is, in real terms, falling.

And it gets worse. The real killer is that the government has been cutting TfL's operating grant. from over £3bn in 2009 to £659m for this financial year. And by 2020, if the word coming from the Department for Transport is to be believed, there will be no general subsidy at all (expect to hear more at the autumn statement).


These days the operating grant is about 12 per cent of TfL's total income – it's done a good job of absorbing the cuts – but to shut off a major source of revenues in such an environment seems pretty foolish.

Labour isn't being drawn on how exactly it would freeze fares. Khan's campaign says it would be funded by “efficiency savings within TfL”. But TfL has already closed ticket offices and shed 750 staff in the latest round of an efficiency drive that's been attempting to find £5bn in savings since 2009. You can’t keep making efficiency savings forever.

Labour also points to over 400 TfL staff being paid over £100k a year. What they don't say is what they would do with those 400 staff. Make them all take a 5 per cent pay cut? That'd save about £2m. Sack some of them? There are probably a few lawyers who are surplus to requirements, and we could spend all day arguing whether someone whose job involves “minimis[ing] the group's tax liabilities” has any place in a public sector organisation.

But the top engineers and heads of each transport mode? Probably underpaid, frankly. And I expect TfL will hire more expensive commercial experts to maximise other revenue streams once government funding dries up, so this argument isn't going anywhere.

The bottom line

Money isn't magic. If fares are frozen – and a mayor could freeze, or cut them, if the political will was strong enough – the cash has to come from somewhere.

This is usually the point where someone mentions TfL's reserves, which is what a large part of the 2012 mayoral election revolved around. Labour said the reserves could be used to reduce fares; TfL said it was all earmarked for future upgrades and new infrastructure.

TfL's budgets are notoriously impenetrable but the general consensus these days is that yes, the reserves are needed elsewhere. There isn't a pot of leprechaun gold that can give everyone £5 a month off their travelcard. Sorry.

So if a mayor did freeze fares, something else would have to give. Either upgrade works would be postponed or cancelled, or new projects might not happen, or staff and/or services could be cut (cue strikes). Then again, maybe the public spaces around transport infrastructure could become more commercialised – or we could even end up paying more in council tax.

Londoners aren't stupid. Give them the options, and if they still decide they want cheaper travel at least they'll know the consequences.

Rachel Holdsworth is a senior editor at Londonist. She tweets as @rmholdsworth.

 
 
 
 

A growing number of voters will never own their own home. Why is the government ignoring them?

A lettings agent window. Image: Getty.

The dream of a property-owning democracy continues to define British housing policy. From Right-to-Buy to Help-to-Buy, policies are framed around the model of the ‘first-time buyer’ and her quest for property acquisition. The goal of Philip Hammond’s upcoming budget is hailed as a major “intervention” in the “broken” housing market – is to ensure that “the next generation will have the same opportunities as their parents to own a home.”

These policies are designed for an alternative reality. Over the last two decades, the dream of the property-owning democracy has come completely undone. While government schemes used to churn out more home owners, today it moves in reverse.

Generation Rent’s new report, “Life in the Rental Sector”, suggests that more Britons are living longer in the private rental sector. We predict the number of ‘silver renters’ – pensioners in the private rental sector – will rise to one million by 2035, a three-fold increase from today.

These renters have drifted way beyond the dream of home ownership: only 11 per cent of renters over 65 expect to own a home. Our survey results show that these renters are twice as likely than renters in their 20s to prefer affordable rental tenure over homeownership.

Lowering stamp duty or providing mortgage relief completely miss the point. These are renters – life-long renters – and they want rental relief: guaranteed tenancies, protection from eviction, rent inflation regulation.

The assumption of a British ‘obsession’ with homeownership – which has informed so much housing policy over the years – stands on flimsy ground. Most of the time, it is based on a single survey question: Would you like to rent a home or own a home? It’s a preposterous question, of course, because, well, who wouldn’t like to own a home at a time when the chief economist of the Bank of England has made the case for homes as a ‘better bet’ for retirement than pensions?


Here we arrive at the real toxicity of the property-owning dream. It promotes a vicious cycle: support for first-time buyers increases demand for home ownership, fresh demand raises house prices, house price inflation turns housing into a profitable investment, and investment incentives stoke preferences for home ownership all over again.

The cycle is now, finally, breaking. Not without pain, Britons are waking up to the madness of a housing policy organised around home ownership. And they are demanding reforms that respect renting as a life-time tenure.

At the 1946 Conservative Party conference, Anthony Eden extolled the virtues of a property-owning democracy as a defence against socialist appeal. “The ownership of property is not a crime or a sin,” he said, “but a reward, a right and responsibility that must be shared as equitable as possible among all our citizens.”

The Tories are now sleeping in the bed they have made. Left out to dry, renters are beginning to turn against the Conservative vision. The election numbers tell the story of this left-ward drift of the rental sector: 29 per cent of private renters voted Labour in 2010, 39 in 2015, and 54 in June.

Philip Hammond’s budget – which, despite its radicalism, continues to ignore the welfare of this rental population – is unlikely to reverse this trend. Generation Rent is no longer simply a class in itself — it is becoming a class for itself, as well.

We appear, then, on the verge of a paradigm shift in housing policy. As the demographics of the housing market change, so must its politics. Wednesday’s budget signals that even the Conservatives – the “party of homeownership” – recognise the need for change. But it only goes halfway.

The gains for any political party willing to truly seize the day – to ditch the property-owning dream once and for all, to champion a property-renting one instead – are there for the taking. 

David Adler is a research association at the campaign group Generation Rent.

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