Imperial College London 1 Centre for Transport Studies LSE London Conference Transport Stephen Glaister Professor of Transport and Infrastructure Imperial College London 26 October 2005

Source: TfL Business Plan October 2005

Imperial College London 4 Centre for Transport Studies The problem There is an acute shortage of peak capacity and poor reliability on Rail Underground Roads (especially suburbs) Nb: in London 54% of mechanised trips are by car Population and demand are growing Almost all the plans are directed towards repair and maintenance of existing systems

Imperial College London 5 Centre for Transport Studies The commuter railway London is the core of the national railway Funds are very short for the railway: Network Rail’s debt is £16 billion and rising They have to deliver 30% efficiency saving Very little money is budgeted for enhancements The Mayor/Transport for London would like to become responsible for more of the London network (Railways Act 2005) But only if sufficient grant comes with it!

Imperial College London 6 Centre for Transport Studies Bus and Underground (Transport for London) Government made a helpful settlement 2005/6 to 2009/10 Including agreement to £3 billion of Prudential Borrowing - a much better way than the PPP!

Imperial College London 7 Centre for Transport Studies TfL Business Plan 2006/7 – 2009/10 (published today). Operating Plan

Imperial College London 8 Centre for Transport Studies TfL Business Plan 2006/7 – 2009/10. Capital Plan

Imperial College London 9 Centre for Transport Studies TfL Business Plan TfL can make ends meet until 2009/10 But note: A substantial increase in fares A pathetic contribution from local domestic tax payers Increased grant consumed by £420 m pa increase in LUL PPP/PFI charges £600m pa new borrowing By 2009/10 £239 pa debt service charges

Imperial College London 10 Centre for Transport Studies But what happens after the Plan? The Business Plan is “Prudent” But beyond the Plan, compared with current year: We will lose £600m pa borrowing We will have to service £3 bn of new debt Bus excess waiting time will have deteriorated from 1.2 to 1.3 mins. (more crowding) Underground excess waiting time will improve from 3.25 to 3.21 mins. Road congestion index will have deteriorated from 102 to108 Plan does little for road conditions in suburbs

Imperial College London 11 Centre for Transport Studies There is little provision for building schemes for new capacity e.g. New road capacity No West London Tram No Crossrail (£15 billion?) The easiest way to obtain significant new rail capacity Nb:TfL fares cannot be raised much further to fund Crossrail TfL has no capacity to take on more debt to fund Crossrail Central govt. unlikely to make several £ bn of new borrowing?

Imperial College London 12 Centre for Transport Studies Government grant is the biggest single item of revenue And almost all expenditure at the margin is central govt. controlled This situation leaves central govt. in full control of all major decisions: things happen if and only if govt. approves

Imperial College London 13 Centre for Transport Studies Could London fund its own infrastructure? Yes. Easily E. g. London Gross Value Added is £160 bn pa 1% of this could service £16 bn to £24 bn of capital over 30 years (equivalent to raising London VAT from 17.5% to 20%) BUT it will only happen if the governance of London changes We must establish an explicit link between improvements local electorate want AND how much extra tax they are willing to pay Otherwise, we are in trouble!

Imperial College London 14 Centre for Transport Studies Congestion Charging Glaister and Graham: congestion & environmental charges Gross revenues in year 2010 conditions London £5 bn pa UK £19 bn pa But this is gross of all capital and operating costs If costs can be kept reasonable (as they must be) London congestion charging would service substantial capital debt: Conservatively 0.5 x 5 = £2.5 bn pa to service £25 bn to £40 bn This must be pursued actively!

Imperial College London 15 Centre for Transport Studies There must be NEW, local taxation In most other major cities in the world a crucial element of success is local taxation New York has over 20 local taxes French cities have local employment tax Canadian (and US) cities have local road fuel taxes In London we only have the Congestion Charge

Imperial College London 16 Centre for Transport Studies Conclusion London’s infrastructure problems are likely to continue so long as we rely so heavily on grant from Central Government. London-wide road charging would help But essential is to give new powers to London Government to levy taxes on the local economy to be held accountable for their size and how the money is spent So far devolution to the GLA has been successful if weak Proper devolution of fiscal power is a necessary next step – and a much bigger one.