Phil Taylor: Why is London's public transport so broken?

Phil Taylor is an Ealing councillor and runs one of ConservativeHome's favourite blogs.

At the end of July Transport for London's (TfL’s) Annual Report and Accounts was published without fanfare on the their website.  TfL was formed, along with the GLA and the London Mayor, by the 1999 GLA Act and is in charge of all public transport in London except for mainline rail services.  In July 2003 London Underground, the Tube, became a part of TfL.  TfL's 2003 figures were restated to include the Tube so we now have 5 years worth of comparable figures to pore over, an audit trail that makes it increasingly hard for the Mayor to hide the bodies.  In this article I try to unearth them. 

Subsidy

The complaints about London's public transport are many and loud.  It is way too expensive, the Tube is overcrowded and dilapidated, buses are vandalised with drivers who often don't drive well and are unable to control the behaviour of hordes of young people travelling for free and adults who refuse to pay.  At the same time the system is massively subsidised.  The scale of this subsidy is quite shocking.  In the last five years London's public transport system has swallowed £12 billion of external support.   

The amount of subsidy that TfL has spent over the last five years is simply awesome.  The main source of this funding is the Treasury, which provide both revenue and capital grants.  There are some other minor sources of grants plus a small contribution from the GLA precept although the Mayor has been giving TfL less and less cash each year.  It is only £12 million per annum now.  The idea that chancellor Alistair Darling is going to keep sending this wave of money to London in the face of a tight Comprehensive Spending Review in 2008 is a little unlikely so a crunch will come unless Darling decides that London's votes are worth the price. 

The Mayor does not talk much about this subsidy but then he almost never talks about the cost of anything unless he is forced to.  He talks about his historic 5 year funding deal with the Government and the extra buses he has bought and Tube renovation projects.  But the idea that this subsidy is funding capital spending is largely a myth.  Pretty much £8 billion of the £12 billion of subsidies have gone in supporting the running costs of TfL leaving only a third of the cash available for capital projects. 

Costs too high, income too low

[Note in the table above a proportion of staff costs and supplies and services are attributable to capital spending so that part is not charged against revenue and hence the reason why the costs don’t add up to the total of expenditure charged to revenue.] 

TfL has a structural deficit.  For four years running TfL has wasted £1.6 billion each year in subsidising its continuing operations. Although the Mayor has made us all pay much more for our travel over the last four years with revenue up 53% across the organisation most of this progress has been squandered in rising costs, up 46%.  It is particularly noteworthy that staff costs have risen 52% in four years and much of this increase has been driven by an explosion of highly paid managers.  450 earned over £50,000 in 2004 a number that more than trebled to 1,411 in 2007. 

With the buses the Mayor claims a success.  More people use the buses. Yes, he is right, bus ridership is up 23% in the four years.  Great. Only costs leapt by 64%.  So in spite of ramping up bus fares horribly the Mayor has seen cost per journey increase faster than revenue per journey leading to increasing subsidy.  The bottom line with the buses is that TfL have a consistent record of losing 30p or more for every bus journey.  Just to be clear an operating loss of 30p per bus journey and the capital costs of the system have to be paid for on top of that.

What is quite glaring is that way too many people are not paying the stated fares, the headline cash fare is £2 - probably as many as half of all journeys do not generate a fare.  It is easy to see the way out of this pickle.  It is quite obvious from the numbers.  In addition to controlling bus costs TfL needs to make sure that it collects £1 every time someone gets on to a bus.  Doh!   

The Tube is looking a little healthier with cost per journey actually falling in the last 3 years.  Could it be that the PPPs that the Mayor rails against have actually delivered cost control in the area of operating costs even if the capital programmes have gone off track?  In 2006/7 it still cost TfL 55p every time someone jumped on a Tube so there is still massive scope to improve here.  Just to be clear again an operating loss of 55p per Tube journey and the capital costs of the system have to be paid for on top of that.   

Again it is clear that way too many people are not paying the stated fares, the headline cash fare is £4 on the Tube – how many of these journeys do not generate a fare?  Again all TfL have to do is actually collect £2.10 every time someone gets on a Tube and it would make an operating profit. 

As I have written elsewhere the Mayor has taken £930 million off Londoners for the Congestion Charge and spent all but £14 million of it on out of control set up and running costs. 

Culture of let them ride and waste

The big picture at TfL is that on the one hand too many people get to ride for free and on the other costs are out of control.  Put to one side older people and the disabled whose fares are paid for by ordinary council taxpayers via their local authorities who fund the Freedom Pass.  What about all the GLA, Metropolitan Police, TfL, London Underground and bus company employees and their partners who ride for free?  What about all the tailgating Tube riders and bendy bus back door riders?  You can see from TfL's own revenue per journey figures that the fare you pay is not paid by a good proportion of your fellow passengers.  The Mayor is happy to buy votes with these free rides and staff don't feel there is any relationship between their job security and actually collecting cash from passengers. 

You have got to wonder whether Darling will want to keep bailing TfL out.  It has comprehensively lost control of costs across its whole operation.  Although he might feel the need to support a Labour London Mayor it is hard to see how TfL can be reformed by just letting it burn £1.6 billion a year.  The Mayor is embarrassed by these numbers, which is why TfL let them slip out quietly during the summer holidays.  Three calls to the TfL press office have failed to get an answer as to why there is no press release to go with the glossy document.  That is simply because the document is embarrassing and it underlines the Mayor's unsuitability to run any enterprise let alone a £5 billion a year transport enterprise on which all Londoners depend. 

Note all figures in this article are taken from the last four TfL Annual Report and Statement of accounts here. 

Comments

[Cllr Adam Tugwell]

This makes alarming reading but doesn't really come as any great surprise.

[Sally Roberts]

I can see from these figures exactly why Ken chooses to keep "stumm" about the subsidy! Shocking... truly shocking! The Tube as those of us who have the misfortune to have to use it at peak times know only too well is in an appalling state with signal failures causing disruption pretty much every single day - sometimes more than once in one day - and problems on one line invariably have a "knock-on" effect on the whole network!
I prefer to take the bus - but I agree with the points that Phil makes about the low standard of driving that is often encountered and the many other problems which are causing serious demoralisation amongst bus drivers who then tend to take it out on their passengers!

[Mark Clarke]

This is an excellent analysis.

[b]

Excellent article. We need more of this kind of close analysis to expose labour's record.

[Ali Gledhill]

Improvements to London's transport services will always come at a cost, and the last eight years of progress has cost an extraordinary amount.

It is clear from this analysis that the fares structure needs to be altered, making some journeys more expensive and others less so. With a little bit of thought, Londoners could get a first-class service at a reasonable cost, with TfL running in the black.

[Michael McGowan]

Easy meat for Boris you would have thought. He should be making hay with these figures, especially in the South London boroughs where there is ano tube.

[Mr Angry]

This is good stuff, so now let's get it off CH and into The Standard, Metro etc etc and onto the London local TV and Radio news programmes.

[Chris Heathcote]

A very interesting piece of analysis, which I think would surprise most Londoners, who think the increased fares are paying for massive improvements, instead of that and large subsidies covering running costs. I would be interested to hear if Phil has any ideas on what solutions there might be to this...

[OneNationTory]

As with any set of figures, there's devil in the detail that one can't see here. But what's astonishing is that the cost per journey has risen, and by so much; with more journeys being undertaken, one would expect this figure to reduce as fixed costs are spread over a wider passenger base.

To put the numbers in some perspective, between Jan 03 and Jan 07, inflation (as measured by RPIx) rose by a cumulative 11%. So the increased cost per journey on the Tube of 9% looks not unreasonable. But the bus figure should be a cause for concern. What’s going on? Probably lots of routes being run for relatively few passengers. It would also be interesting to know the costs of operating bendy buses relative to other vehicles in the fleet (I’d bet they’re v. expensive to run and maintain).

[Phil Taylor]

Chris,

I think I stated the solution - collect the fares!

The service is given away free to approaching two million people. One million of those (the old and disabled) are paid for by council tax payers through the Freedom Pass the other million (young people and employees) get a free ride from the Mayor.

Unfortunately this helps to foster a culture of riding for free so young people keep getting on the bus without paying when they get beyond the concessionary age group and drivers are not prepared to confront them. In addition a hard core of riders just get on the bus without paying and tailgate through Tube barriers - I have had it happen to me too often.

This pay nothing culture will only get worse when the Mayor's Venezuelan deal kicks in and yet more free-riders join the system.

[The Monitor]

Excellent analysis. But it is only of use if it can generate Conservative votes, and thereby bring about a change to this "economics of the madhouse"

[Transport expert]

This article is moronic nonsense. Headline fares of £2 for buses and £4 are irrelevant. Most people use oyster cards and travelcards so the average revenue per journey is much less. Doh!

I hope that the Editor will have such articles reviewed by experts in future

[Transport expert]

I mistyped and omitted " "for the tube" after "£4" above.

Taylor comments "Pretty much £8 billion of the £12 billion of subsidies have gone in supporting the running costs of TfL leaving only a third of the cash available for capital projects." The annual subsidies will include payments to the PPP concessionaires (covering major upgrades to track and stations, i.e. capital investment, as well as maintenance).

Taylor also comments "The idea that chancellor Alistair Darling is going to keep sending this wave of money to London in the face of a tight Comprehensive Spending Review in 2008 is a little unlikely". That wave of money is a contractual obligation so it must continue unless there is a breach, e.g. the Tubelines concessionaire.

Tubelines found that the network, like Railtrack's, had been run down in the run up to privatisation. It is in a terrible state and more money will be required to bring it up to standard. It will be not as easy to reduce running costs as Taylor thinks, especially as the unions will be spoiling for a fight.

London needs a Conservative Mayoral candidate with political and practical transport experience to sort out TfL. Steve Norris would have been ideal as a former transport minister and experience in Tube maintenance. Sadly, it appears that we will be stuck with Boris "piccaninnies" Johnson. Passengers will pay a high price if we select and elect the buffoon.

[Greg Smith]

Very good article. I find it constantly baffling how Livingstone genuinely believes the tube and bus network in London are good. I don't use the tube or buses often, but when I do it reminds me why forking out £8 for the c-tax, £25 to park and burning 1/4 tank of fuel to go three miles in a traffic jam remains a preferable option.

[Phil Taylor]

Transport expert,

You almost have half a point.

Tube single cash fare £4, Oyster equivalent £1.50. Revenue per journey £1.55. The Tube does pretty well at making people pay. They also do half well at controlling costs thanks to the PPPs. But, they still lose £550 million per annum. Or 55p per journey.

Bus single cash fare £2, Oyster equivalent £1. The buses only collect 55p per journey so they are appalling at collecting fares. If everyone is on Oyster then there is a free rider for every fare payer. A 64% leap in costs in four years is mad. A subsidy of over £600 million is unsustainable. 30p per journey if you look at it that way.

The £8 billion of operating subsidy over five years represents a once in a lifetime investment from central government for London which the Mayor has let it slip through his fingers and you are calling me names.

[J H Holloway]

Superb. After the deconstruction of the c-charge farce, even better.

However, what we have here is classic old Labour tactics. Having 'delivered' far more buses - though at ridiculous cost - anybody who came along and tried to restructure the service so it had some chance of being viable long term, will be accused of 'Tory cuts'.

No wonder Livingstone refused to say 'I told you so' when the tube PPP crashed. He is absolutely at the mercy of the Treasury.

Incidentally, if you wondered why high-economy cars are going to be allowed in the C-charge zone, it's because Livingstone is personally very vunerable in this area.

I understand that the reason he spent £18k on a Toyota Prius in 2006 was so his partner Emma Beal could drive to work. If he didn't let all drivers of low-CO2 vehicles into the zone for free, he would be skewered in the upcoming election.

[Cary]

Well 'Transport expert', if you're such an expert how about you review the article and give us the benefit of your expertise. If the Oystercard is reducing the average revenue per journey, why do the figures show the opposite?

So far, you've just taken a bit of a swipe with no analysis - you don't have to be an expert to do that.

[Joe James Broughton]

"Transport expert" is correct on the fares - the fare per journey is much less with Oyster Cards, Travelcards, and Bus Passes. We should encourage all these cards where possible, including one day versions (long available) by having these high single journey fares, and need to get rid of cash on buses in outer London aswell.

Bendy buses do encourage fraud in the suburban areas in particular. For short busy routes in the centre, particularly those serving mainline stations, most people are probably fairly honest as on Travelcards etc anyway. But I find it astounding that the 18 route is a Bendy Bus, which serves the entire length of the Harrow Road, and is an ideal candidate for youths helping themselves to the bus and on the rare occasion an inspector boards, they all just disappear through the other door.

[Transport expert]

Phil Taylor ignores the impact of the Travelcard. Oystercards are not available outside TfL's area. A large proportion of passengers live in the Home Counties and buy an annual season ticket covering rail, tube and bus. The marginal cost to those passengers of an additional tube or bus journey is zero.

If Mr Taylor wants to abolish the Travelcard, he should say so rather than use the weasel words of collecting the fares. That would be politically disastrous for any Conservative Mayoral candidate.

Due to the increase in the use of barriers at rail and tube stations over the last 10 years, revenue protection and fare income improved substantially. To attribute operating losses to not collecting fares is simply untrue.

Cary did not understand my point. Oystercard customers do not pay Taylor's headline fares of £2 for bus and £4 for the Tube.

Finally, the PPP payments will need to me made for many years to come. TfL will need subsidies to pay them unless substantial efficiency gains can be made. That means Driver Only Operation and culling head office staff.

Finally, I will address the myths on the frontpage. TfL does loses 30p every time someone takes a bus or 55p every time someone takes a Tube. It depends on whether on which fare the passenger pays.

In reality, the statements are economic nonsense. The services will run, and thereby incur a large fixed and operating cost, anyway. The additional costs of carrying extra passengers is very small. So if TfL can attract extra fare-paying passengers, especially during off-peak hours, it will increase revenue and reduce subsidies.

Mr Taylor accuses me of name calling. That is true, I am exposing his incompetent financial analysis that would shame a transport studies undergraduate.

[Transport expert]

I should point out that ALL Travelcard users, including those living in London and those with weekly or monthly tickets, have a marginal fare of zero.

Travelcard users are a very large proportion of passengers in the London and Home Counties areas. Their travel habits have a massive impact on average fares and Travelcard revenue allocation to TfL and the rail companies such as South West Trains.

To eliminate subsidies completely, the Travelcard, and its zero fare journeys, would need to abolished. Everyone would be required to buy an Oystercard instead. Fares would probably need to rise in real terms.

As a free market economist, I would support those policies in principle but recognise that it would be difficult for a Mayoral candidate to advocate them now.

[Nick]

While a good deconstruction of TfL's expenditure, Phil Taylor's article is missing a crucial factor.

What would a Conservative Mayor do to reduce the need to subsidise fares in London? The only suggestion made is that fare dodging should be reduced. Absolutely right but even if 100% of all passengers paid the full and/or correct fare for their bus journey, this would still leave as Mr Taylor admits a gap of some £600million to be covered.

Having identified the problem, what is the solution? Higher fares? Abolition of all free travel for under 18s and the over 60s? Change the employment contracts of transport workers and the police? For every problem a solution should be suggested.

As an aside can I help clarify a couple of the remarks that other commentators here have made - and no I don't work for the Mayor!

1/ Employees of the GLA receive NO free travel. Bus and Tube workers do, as do serving police officers.

2/ Mr Livingstone's partner does not drive in to work (nor for that matter does the Mayor use a private car on official business).

[Transport expert]

Nick is right.

I would abolish free travel for the under-18s and make them pay half the fare. It would also help address violence by feral youths on buses and trains.

Huge efficiency gains, such as those I identified earlier, would help reduce the operating deficit and the significant real fare increases that would be needed to get rid of it.

BTW, I don't work for the Mayor either.

[Phil Taylor]

Nick,

Thank you for your contribution.

I am not running for Mayor.

If I was I would look most closely at TfL's cost base. It is not hard. Last year they admitted to £78 million of comms spending. They give £1.5 million to the Londoner. They subsidise the Mayor's self-promotion at party conferences. It cost £793K for TfL to advertise giving away 100,000 free Oyster cards. £3 million to advertise the Tour de France. £35 million to force the unwanted West London Tram down people's throats. All but £14 million of £930 million of CC income wasted in running and capital costs. 1,411 paid over £50K. Kiley's Monopoly money contract and Chelsea townhouse.

Once you have knocked off the easy stuff the hard grind of controlling subcontractors starts. Not easy but if your organisational culture is to let costs rise without complaint and to give the Mayor anything he wants then you are unlikely to give big contractors a hard time.

I may have got the free GLA passes thing wrong. Sorry. Have they changed their Ts&Cs, didn't they used to give these out? Don't AMs get them?

[Phil Taylor]

Transport expert,

You are still name calling which is a little disappointing.

You say I have ignored the Travelcard in my reckoning. Every Travelcard issued by a rail company results in a fee to TfL. Travelcards sold by TfL generate fees. These are apportioned to Tube and bus income and so are included. Travelcards and Oysters are all great and it is silly to suggest I want to abolish them. I want TfL to control its operating costs and pull in more revenue to cover them so that it can use central government funds to upgrade London's transport system. Instead the cash is just getting wasted in too high salaries, out of control contractors and Mayoral self-promotion.

For a self styled economist you need to understand that fixed costs are rarely fixed in the long run - otherwise TfL's bus costs wouldn't have mushroomed 64% in four years.

Your vituperation might be moderated if you identified yourself.

[Oberon Houston]

More BBC bias?

news.bbc.co.uk/1/hi/uk_politics/6947857.stm

[Transport expert]

Perhaps Mr Taylor can point out his comments on the Travelcard in his original analysis of average fares. He failed to address the issue or the points that I made in my comments.

From personal experience in the London passenger transport industry, I know more about Travelcard revenue apportionment than he ever will.

Mr Taylor wants to raise revenue. Fare evasion on the Tube has been tackled effectively by introducing barriers at more stations. If you want to increase revenue significantly, fares must rise substantially. Is that what he is advocating?

The removal of Routemasters, and their replacement by new or newer vehicles, has contributed to higher bus operating costs. The new buses are safer and more accessible for the elderly and disabled. Does Mr Taylor want to bring back the Routemaster?

Perhaps Mr Taylor can provide specific examples of contractors being "out of control". That is a very serious allegation.

[Phil Taylor]

Transport Expert,

Clearly you are not what you pretend.

Are you telling me that in TfL's audited accounts the statement of bus revenues does not include an apportionment for revenue from Travelcards?

Your attempts to undermine what is an entirely straightforward exposition of published and audited figures show you to be anything but a "transport expert".

If we want more investment in public transport we need to staunch TfL operating losses. The numbers show quite clearly that 2/3 of subsidy over the last five years has been diverted to the deficit and NOT spent on investment.

I advocate cutting TfL's cost base. Give me six months and a pencil and I could show you how.

It would help if the Mayor would stop giving bus fares away to get himself re-elected. In June it was the 10% cut, now it is 50% for those on income support. It may get the Mayor re-elected but it will mean a slower pace of investment. You can't spend money twice - even if you are a "transport expert".

If you are the Livingstone stooge I suspect you are you will no doubt try to get in another negative last word that does not address the facts (TfL's facts audited by the Audit Commission) I presented.

[Phil Taylor]

My statements about subsidy per journey on buses and tubes were validated by this answer to a question to the Mayor from Andrew Pelling AM.

TfL's Annual Report for 2006/07 shows Tube gross operating costs as £2,087.2m and gross revenue as £1,534.3m. There were 1,014m Tube passenger journeys. That gives an average cost per journey of 205.8p against fare revenue of 151.3p, with a difference of 54.5p.

For buses, gross operating costs were reported as £1643.4m and gross revenue £1026.8m, with 1,880m journeys. Hence the average cost per bus journey was 87.4p, with 54.6p raised from fares, leaving a difference of 32.8p.

[Comstock]

How silly an idea is a flat rate of £2 a tube journey, £1 a bus journey?

It would obviously hit people who are only going one or two stops on the tube, but encouraging people to walk short distances might help ease congestion on the centre of the tube network.