Here’s why London’s new mayor should scrap the £100m free travel bung for older workers

Bloody freeloaders. Image: Getty.

There’s been a growing discussion nationally about how fairly spending cuts have been shared between age groups. Policies such as the state pension triple lock, or the protection of winter fuel allowance and other perks for pensioners, are often attacked as unfair at a time when other spending is being significantly reduced.

But in London there is a far more obviously unjust policy that benefits one well off age group at everyone else’s expense. The possibility of scrapping it should be near the top of the new mayor’s in-tray.

A bung worth thousands

I’m referring to the “60+ pass” – or “60+ London Oyster photocard scheme”, to give it its full name – which allows a lucky minority to travel for free. The name, however, is a bit misleading. For those above the female state pension age (roughly 63 at present, rising to 65 by 2018 and 66 by 2020), there is the separate old age Freedom Pass. This – like the free bus pass elsewhere in the UK, and rightly or wrongly – lets pensioners travel for free. In other words, this is really a “60-63” pass, rising to a “60-66” pass by 2020.

The 60+ pass was introduced in 2012-13 after the female State Pension Age, and therefore the Freedom Pass eligibility age, started rising. And while the Freedom Pass is part of a national policy (funded in London by borough councils), the 60+ pass was created by Boris Johnson and is funded from TfL’s budget. (Scotland and Wales have similar schemes for those between 60 and the female State Pension Age.)

Applicants do need to pay a £20 fee to cover administrative costs – but that is a tiny price to pay to be able to “travel free on bus, Tube, tram, DLR, London Overground, TfL Rail and most National Rail services in London”. An annual travelcard for just zones 1-2 would cost most people £1,296; free travel throughout London would cost £4,012 (more, if you couldn’t afford a whole year upfront). And couples may benefit twice over, of course.

The cost to TfL is soaring

A Freedom of Information request I put in to TfL reveals just how much this policy costs them. This year the cost is expected to be £56m. Compared to national budgets that’s not a huge sum, but it is over 1 per cent of TfL’s fare income and compares to the London Fire Brigade’s budget of £425m a year.

And the cost is growing rapidly. In its first full year, 2013-14, it cost £22m; two years later that had doubled to £44m. By 2019-20 – ahead of the next London election – it will have risen to around £100m, as the female State Pension Age keeps going up.

It goes to commuters not retirees

High costs might be justified if they achieve a worthy goal such as redistributing to a vulnerable group. But a look at relevant data suggests that this is really not the case.

First up, I’ve looked at the employment rate of this group: are they mostly retirees we need to help out of the house to socialise and access public services? No: they’re commuters.

Some 85 per cent of men eligible for the 60+ pass are in work, as are 70 per cent of eligible women. Sure, that’s lower than the proportions of younger people in work, but the big drop off in employment rates in London clearly comes later than people’s early 60s.

It may actually increase inequality

To judge whether the recipients are really rich or poor, we need to look beyond employment to their earnings, housing and other wealth; their partner’s income; and what family they have to support.

The measure below is the best measure of living standards, and looks at the typical incomes after housing costs of four age groups. It shows that the 60+ pass age group is in fact typically richer than other age groups.

What’s more, although not shown here, even poorer households (the bottom 40 per cent) in that age range are richer than their younger equivalents. So, if the intention of the policy is to help people on low or middle incomes, it is hopelessly ill-targeted.

 

More analysis is needed, and it’s difficult with the survey data available to look at such a small (and shifting) age group in only one region of the country. But this quick analysis should dispel any myth that those eligible for the 60+ pass are a particularly needy group.

More likely than not, this is a scheme that increases inequality by having a poorer majority pay more to subsidise households richer than them.


Time to scrap the 60+ pass, one way or another

The 60+ pass is a genuinely awful policy. Sadiq Khan should scrap it and use the growing sum of money to help fund his fare freeze for everyone – a promise estimated by him to cost £450mn over four years (though others have suggested higher figures).

Or it could be used to help the many families who really are in poverty in the capital. The London Fairness Commission suggested this spending on rich, elderly Londoners be redirected to improving the skills of poor, young Londoners.

Not encouragingly, Sadiq’s manifesto committed him to “guarantee” the 60+ pass. But one option might be to start increasing the eligibility age beyond 60 – phasing out the pass while protecting those who are already receive it.

But, if not, we need more scrutiny and popular recognition of the inequity of this policy – particularly as working at 60 in London becomes ever more normal – to slowly turn the debate before the next election in four years’ time.

Adam Corlett is an economic analyst at a think tank.

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There isn’t a single national housing market – so we need multiple models of local regeneration, too

Rochdale. Image: Getty.

This week’s budget comes ten years after the 2007 financial crisis. The trigger for that crisis was a loss in confidence in mortgages for homes, with banks suddenly recognising the vulnerability of loans on their books.

In the last ten years, the UK’s cities and regions have followed very different paths. This week’s focus on housing affordability is welcome, but it will be a challenge for any chancellor in the coming decade to use national policy to help towns up and down the country. Local housing markets differ drastically. The new crop of city-region mayors are recognising this, as rents in parts of south Greater Manchester are on average double the rents in parts of the north of the city-region.

When it comes to buying a home, politicians are increasingly articulate about the consequences of inequity in our housing system. But we must recognise that, for 9m citizens who live in social rented homes, the prospects of improvements to properties, common areas and grounds are usually tied to wider projects to create new housing within existing estates – sometimes involving complete demolition and rebuilding.

While the Conservative governments of the 1980s shrank the scale of direct investment in building homes for social rent, the Labour governments from the late 1990s used a sustained period of growth in property prices to champion a new model: affordable housing was to be paid for by policies which required contributions to go to housing associations. Effectively, the funding for new affordable housing and refurbished social homes was part of the profit from market housing built next door, on the same turf; a large programme of government investment also brought millions of social rented homes up to a decent standard.

This cross-subsidy model was always flawed. Most fundamentally, it relies on rising property prices – which it is neither desirable nor realistic to expect. Building more social homes became dependent on ratcheting up prices and securing more private profit. In London, we are starting to see that model come apart at the seams.

The inevitable result has been that with long social housing waiting lists and rocketing market prices, new developments have too often ended up as segregated local communities, home to both the richest and the poorest. They may live side by side, but as the RSA concluded earlier this year, investment in the social infrastructure and community development to help neighbours integrate has too often been lacking. Several regeneration schemes that soldiered on through the downturn did so by building more private homes and fewer social rented homes than existed before, or by taking advantage of more generous legal definitions of what counts as ‘affordable housing’ – or both.

A rough guide to how house prices have changed since 2007: each hexagon is a constituency. You can explore the full version at ODI Leeds.

In most of England’s cities, the story does not appear to be heading for the dramatic crescendo high court showdowns that now haunt both developers and communities in the capital. In fact, for most social housing estates in most places outside London, national government should recognise that the whole story looks very different. As austerity measures have tightened budgets for providers of social housing, budgets to refurbish ageing homes are under pressure to do more with less. With an uncertain outlook for property prices, as well as ample brownfield and greenfield housing sites, estates in many northern towns are not a priority for private investors in property development.

In many towns and cities – across the North and the Midlands – the challenges of a poor quality built environment, a poor choice of homes in the local are, and entrenched deprivation remain serious. The recent reclassification of housing associations into the private sector doesn’t make investing in repairs and renewal more profitable. The bespoke ‘housing deals’ announced show that the government is willing to invest directly – but there is anxiety that devolution to combined authorities simply creates another organisation that needs to prioritise building new homes over the renewal of existing neighbourhoods.


In Rochdale, the RSA is working with local mutual housing society RBH to plan for physical, social and economic regeneration at the same time. Importantly, we are making the case – with input from the community of residents themselves – that significant investment in improving employment for residents might itself save the public purse enough money to pay for itself in the long-run.

Lots of services are already effective at helping people find work and start a job. But for those for whom job searching feels out of reach, we are learning from Rochdale Borough Council’s pioneering work that the journey to work can only come from trusting, personal relationships. We hear time and again about the demoralising effect of benefits sanctions and penalties. We are considering an alternative provision of welfare payments, as are other authorities in the UK. Importantly, residents are identifying clearly the particular new challenges created by new forms of modern employment and the type of work available locally: this is a town where JD Sports is hiring 1000 additional workers to fulfil Black Friday orders at its warehouse.

In neighbourhoods like Rochdale’s town centre, both national government and the new devolved city-region administration are considering an approach to neighbourhood change that works for both people and place together. Redevelopment of the built environment is recognised as just one aspect of improving people’s quality of life. Residents themselves will tell you quality jobs and community facilities are their priority. But without a wider range of housing choices and neighbourhood investment locally, success in supporting residents to achieve rising incomes will mean many residents are likely to leave places like Rochdale town centre altogether.

Meaningful change happen won’t happen without patience and trust: between agencies in the public sector, between tenants and landlords, and between citizens and the leaders of cities. This applies as much to our planning system as it does to our complex skills and employment system.

Trust builds slowly and erodes quickly. As with our other projects at the RSA, we are convinced that listening and engaging citizens will improve policy-making. Most of those involved in regeneration know this better than anyone. But at the national level we need to recognise that, just as the labour market and the housing market vary dramatically from place to place, there isn’t a single national story which represents how communities feel about local regeneration.

Jonathan Schifferes is interim Director, Public Services and Communities, at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA).