FactCheck: Can Ken Livingstone deliver a ‘fare deal’ for London?
The claim
“We will carry out this ‘Fare Deal’ without cutting future investment or hitting services, which are funded by a separate budget.”
Ken Livingstone, pledge to cut public transport fares for Londoners if elected in May, December 2011
The background
Ken Livingstone has been pedalling fast in the mayoral race, overtaking Boris Johnson to claim a 2 per cent lead in the polls.
Although the swing sees the return of 100,000 Labour voters to Mr Livingstone’s camp, the president of YouGov, Peter Kellner, said it has nothing to do with enthusiasm for Labour.
It’s Mr Livingstone’s promise to cut fares on buses and tubes that has lured people back (though it doesn’t help that the “Boris effect” on the Labour vote is waning – YouGov’s poll found that he is “seen as increasingly out of touch”).
But is Mr Livingstone’s proposal to cut fares without hitting services just the ticket? Factcheck investigates.
What’s the fare deal?
Mr Livingstone proposes to cut tube fares by 7 per cent and bus fares by 11 per cent in October 2012. After that he says he’ll freeze fares completely in 2013 and impose no above-inflation rises thereafter. Mr Johnson meanwhile is committed to hiking fares by 2 per cent above inflation each year.
How does he plan to do it?
“Soaring fares are not necessary,” Mr Livingstone claims. He argues that Transport for London (TfL) has a £729m surplus in its operating budget, which is “growing every year” and could absorb fare cuts.
Slashing fares won’t mean there will be less money to invest with or to maintain services, he argues, because that money comes from the capital budget, which is “entirely separate”.
A spokesman for Mr Livingstone told FactCheck: “Ken is committed to a fares cut because many Londoners are struggling with the rising cost of living. The mayor should be doing everything he can to make life easier for them.”
It’s worth remembering that Mr Livingstone admitted in his own autobiography that he has broken election promises on fares twice. Why? Because he’d rather hike fares than cut investment.
Is he right about the surplus?
TfL’s Chief Finance Officer Stephen Critchley told us there was no operating surplus.
The £729 figure from the 2010/11 accounts is the difference between the operating margin (the difference between operating income, mainly fares revenue, and operating expenditure) that was originally budgeted and the actual outturn for the year.
The reason for the big difference was that TfL had to change its plans to cope with the grant reduction of £108m and prepare for the impact of the October 2010 Spending Review, which reduced the grant by £2.2bn over 4 years. This underspend – which did result from higher operating income and lower operating expenditure than budgeted – was used to offset the loss of £2.2bn funding in an effort to balance the business plan.
Mr Livingstone’s camp however has accused Boris Johnson, as chairman of TfL, of “cooking the books” and hiding this surplus.
Former TfL board member Stephen Glaister, professor of transport and infrastructure at Imperial College, said: “If they (Mr Livingstone’s claims) had any substance they’d be saying TfL is incompetent and profligate in holding money.”
TfL pointed out that its accounts are independently audited by KPMG.
But there is a bit of money sloshing around, isn’t there?
TfL has to cut £2.2bn by 2014/15, which in real terms represents a 21 per cent cut in its central government grant.
Despite having its budget cut, TfL still expects to have a surplus of £40m in 2014/15 because this year’s fare income was ahead of predictions (due to inflation) and spending was slightly below.
Professor Tony Travers, director of the LSE London research centre at the London School of Economics, told FactCheck: “There is no separate budget (for capital spending). A pound can only be used once – rather like a householder given £1,000 – you could blow it on a series of marvellous meals out or you could put it int your mortgage – but you can’t use it again.
“At that level, Ken could say he can cut fares – technically you could ring-fence that and use it for fares - as “extra” money you could argue there’s no less money for investment.”
Any Mayor can cuts fares; but Prof Travers said that put simply, if a pound dropped out of the sky into TfL’s lap, and the Mayor decides to spend it on plugging the hole left by cutting fares, it would hit TfL’s investment projects.
London’s transport system “patently and permanently needs investment. Every additional penny of resources is needed for new signals, track and improved stations,” he said.
When Mr Livingstone left office in 2008, there was well over £1bn in the bank, reserved for investment projects, Prof Travers pointed out.
TfL told us that the £40m surplus projected for 2014/15 would be “ploughed back into investment projects”.
So what about this ‘separate budget’?
TfL insists that the operating budget and the capital budget do not run on an “entirely separate” basis as Mr Livingstone claims.
This can been in TfL’s accounts. TfL’s capital plan clearly states: “Funded by: Operating surplus/(deficit)”.
“They (the operating and capital budgets) are part of an overall budget, and lower fares revenues in the operating budget mean there will be less operating surplus available to fund capital expenditure that appears in the capital budget,” TfL’s CFO Stephen Critchley told us.
Prof Glaister told FactCheck: “They’re right about that. The simple point is that a pound spent on reducing fares is a pound not spent elsewhere. This isn’t magic money.”
TfL argues that if Mr Livingstone was to cut fares by 7 per cent, the move would reduce the income from fares by £1.12bn over this parliament. This money is already factored into the budget and if it disappeared it would have to be taken from somewhere else.
It would be up to the mayor what he where he would plug the gap, but TfL said it would most likely delay the upgrade of certain tube or bus lines.
TfL does hold money in reserve (it has £150m in reserve for emergencies and reserves of £2.2bn – half of which is set aside for the Crossrail project).
Prof Glaister added: “TfL holds reserves for all sorts of reasons - for big capital projects for example, like Crossrail. Or for unexpected events - such as the Hammersmith Flyover repairs. That’s unbudgeted for, I imagine.”
The verdict
Mr Livingstone is wrong to claim there’s a £729m surplus that’s sitting in the bank, and there is no ‘entirely separate’ budget for investment projects. If he cuts fares, TfL would expect to lose £1.12bn in income from fares – and that’s a hole he wouldn’t be able to plug without hitting the day-to-day funding for London’s transport or taking money from investment projects.
How Mr Livingstone would do that is up to him, but it could mean that tube and bus route upgrades are delayed, or TfL could be forced to shed some staff members.
Any mayoral candidate can raid the TfL’s coffers to cut fares. But cutting fares could mean cutting investment – which London’s transport system has been sorely starved of for decades. Investing money to bring it up to speed only began in earnest under the last Labour government.
And even now, Prof Travers said the system needs “billions and billions more money” to update it. “The underground still has bits of Bakelite signalling – stuff that would easily be more at home in a science museum,” he told us.
One way round it, would be to ask central government for more money, which Mr Livingstone did manage when Labour was in power. Prof Glaister said: “Ken in the past has had success blagging more money out of the government, but getting more from the current government looks entirely unlikely.”
By Emma Thelwell
Follow @FactCheck on Twitter
There are 51 comments on this post
In addition, according to a Fitch Ratings report (10 Mar 2011), the current business plan forecasts direct debt to increase by £1.8bn between FY12 and FY15, leading to total indebtedness of £6.6bn (excluding Tube Lines debt by 2016.
A company with £6.6 billion of debt isn’t exactly awash with spare cash sitting around just waiting to be given away in price cuts (not matter how much we would like them).
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Never mind the tube fares and infrastructure what about the rest of us?
The Yorkshire Post this week reported that ‘transport spending in London and the South East is £2,700 per person compared to £201 in Yorkshire.’
Add to that our unemployment rate is already above ten per cent.
Time for independence!
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How much extra tax is paid by the average Londoner and London firm relative to their counterparts elsewhere in the UK? I think you’d find that after this is taken into account, Londoners are the ones who’d want independence, as they pay a net subsidy to others, on top of higher costs of living, etc.! Though sympathetic to people living in and around Leeds – the traffic there is horrendous. Problem is that not enough people would be able to / would switch to public transport instead to make it worthwhile – don’t have the density of population.
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Dear Channel Four, you say ‘Mr Livingstone is wrong to claim there’s a £729m surplus’ but have you seen documents on Tfl’s website which show it had a £728mn operating surplus in the Financial Year just ended? Check (pg 19) on this document:
http://www.tfl.gov.uk/assets/downloads/corporate/Item05-Board-29-June-2011-financial-investment-reports.pdf
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Hi Emma from FactCheck here. We explain this further up but for more info, the way the TfL budget is submitted to the London Assembly meant this was reported as an underspend against its original budget.
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[...] there’s yet further independent backing for Boris’ position. Channel 4 FactCheck have adjudicated that Ken’s claim that he can cut fares by 7% without reducing investment or hitting services [...]
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[...] there’s yet further independent backing for Boris’ position. Channel 4 FactCheck have adjudicated that Ken’s claim that he can cut fares by 7% without reducing investment or hitting services [...]
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[...] well-known pillar of the Tory lie machine – Channel 4 News – has joined me in pronouncing as “fiction” Ken’s election claim that he can cut fares by 7 per cent without having to axe services or reduce [...]
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[...] well-known pillar of the Tory lie machine – Channel 4 News – has joined me in pronouncing as “fiction” Ken’s election claim that he can cut fares by 7 per cent without having to axe services or reduce [...]
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[...] has been proven to be completely unfunded, as confirmed by both Brian Paddick and Channel 4′s FactCheck. It’s a dead policy. The request by Ken to “debate it” is nothing but [...]
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[...] The former Mayor’s Fare Deal for London has come under scrutiny [Channel 4 Fact Check]. [...]
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TfL claim that a fares reduction of 7% would result in a loss of £1.17 billion in fares revenue.
They are ignoring the likely increase in public transport usage and the consequent traffic flow benefits.
In the 1980s Livingstone introduced the hugely popular GLC Fares Fare policy which involved a 32% reduction in LT fares. Passenger numbers increased and fare revenues were only slightly lower. Central London traffic flows improved as a result of thousands of car owners switching to public transport.
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Very poor work, the usual suspects – the gruesome two some of LT comment – dragged out to talk tripe.
Great how those who in the past have torn shreds out of LT because of their poor management of investment are now lining up to stuff even more money into the mouths of greedy contractors.
Economic basics are forgotten about, you lower prices and you increase usage while LT’s reserves are only mentioned in the passing.
The ConDemNation can take £729mill out of LT’s budget and nothing is said about it, and that means the budgets will be lower in the future.
£3bill over 4 years?
No ifs no buts just money out.
Red Ken wants to take out £300mill pa to lower fares and the sky is supposed to fall in, I think not.
7% reduction fares.
7% increase in usage.
Jobs a good ‘un.
How are usage figures for LT shaping up?
Consequently stop doing BJ’s propaganda for him or I will PK at the NYT that the US isn’t the only country where “fact checkers” haven’t gone all establishment with the right wing dog boilers.
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[...] The Channel 4 FactCheck blog have looked at this. They’ve quoted Stephen Glaister [a former TfL board member and professor of transport and [...]
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What most Londoners remember is Ken in the past making transport promises to get elected and then doing the complete opposite once in power.
So any fluff he claims now just gets disregarded.
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[...] a week after the Channel 4 FactCheck series adjudicated that Ken Livingstone’s pledge to cut fares is nothing other than an unfunded deceit, [...]
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[...] budget to pay for the fares cut which is separate from its “investment” budget (untrue – TfL says there is no separate budget and no surplus); [...]
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[...] remember that last week, FactCheck adjudicated that Ken Livingstone’s pledge to cut fares is nothing other than an unfunded deceit, given there [...]
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Ken Livingstone has had his time as mayor of London but has failed to make any good changes to the city of London, so Boris Johnson would make a much better mayor than Ken Livingstone.
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[...] Secretary, having backed the existing TfL budget. He also reminded us that Channel 4 FactCheck had concluded that there is no magic surplus in the TfL budget and that Ken’s plans would result in a [...]
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[...] been over this ground before, haven’t we? TfL says Livingstone’s proposed fares cut will cost it £1.12 billion in revenue over the four years of a mayoral term – and more neutral sources than this blog, [...]
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[...] been over this ground before, haven’t we? TfL says Livingstone’s proposed fares cut will cost it £1.12 billion in revenue over the four years of a mayoral term – and more neutral sources than this blog, [...]
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[...] writes: TfL says Livingstone’s proposed fares cut will cost it £1.12 billion in revenue over the four years of a mayoral [...]
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[...] budget, a claim which TfL staunchly refute. TfL’s chief finance officer Stephen Critchley told C4′s FactCheck blog:“The £729 figure from the 2010/11 accounts is the difference between the operating margin [...]
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[...] every other Tory question was flipped by Boris to attack Ken’s fare cut promise and a TfL-projected £1.12bn loss in fares revenue to 2015. A sensible question from Roger Evans about bus driving standards made [...]
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[...] of the year it was his Fare Deal which was comprehensively debunked by Channel 4’s independent Fact Check blog before January was out. This Thursday Livingstone proposed reinstating the £30 a week EMA for London’s teens. This [...]
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[...] 4 News’ respected, non-partisan Fact Check blog. After dismissing his claim that TfL fares can be cut without reducing investment and his supporters’ claim that service quality on the Tube is “plummeting,” Fact Check has [...]
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[...] claims – and awarded him a ‘Fiction’ status for all three of them. The first, if you remember, was ‘the biggie’ – Ken’s pledge to cut fares by 7%. They [...]
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[...] Your supporters sing about how you speak the truth, but don’t seem to mind how independent fact-checking organisations regularly describe your claims as “fiction”. [...]
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[...] of course there’s the ‘biggie’ – the 7% fares cut which has been repeatedly proven to be an unfunded and unaffordable [...]
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[...] TfL’s non-existant surplus in spite of this having been debunked by Channel 4’s independent Fact Check blog at the end of [...]
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[...] According to the Channel 4 FactCheck your policy on fares would have to be paid for from the capital account of TfL and therefore would [...]
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[...] That said so far the only propaganda I’ve received for the mayoral election is from red Ken, it has a banner heading: “Ken ‘I’ll cut fares or I’ll quit!’” Specifically he’ll cut fares by 7% by October, no promise to keep them low mind you. Though we should also remember that he previously said he’d not seek to serve more than one term, so one really shouldn’t pay too much attention to what he says. If you ignore his general truthfulness his track record on cutting fares even with the help of subsidy from Venezuela really isn’t good. [...]
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[...] reducing investment. Boris says it can’t be done, Brian Paddick says it can’t be done, Channel 4 FactCheck say it can’t be done, TfL say it can’t be done, Tony Travers (local government expert [...]
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[...] The Channel 4 FactCheck blog have looked at this. They’ve quoted Stephen Glaister [a former TfL board member and professor of transport and [...]
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[...] to Ken’s “fare deal” maths, which have attracted a succession of assessments. See here, here, here and here. All this serves to remind me of something Ken said to Martin at MayorWatch [...]
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[...] find the money to have a 7% fares cut, you are breathtakingly incompetent”. And he rejected a Channel 4 FactCheck analysis that there was no surplus that could be drawn upon to pay for the fares cut. A February 2012 [...]
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[...] find the money to have a 7% fares cut, you are breathtakingly incompetent”. And he rejected a Channel 4 FactCheck analysis that there was no surplus that could be drawn upon to pay for the fares cut. A February 2012 [...]
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[...] Independent factcheckers confirm Ken Livingstone’s plan will take more than £1 billion out of the transport budget. Channel 4 Factcheck states: ‘TfL argues that if Mr Livingstone was to cut fares by 7 per cent, the move would reduce the income from fares by £1.12bn over this parliament’ (Channel 4, Factcheck Blog, 24 January 2012, link). [...]
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[...] income from fares by £1.12bn over this parliament’ (Channel 4, Factcheck Blog, 24 January 2012, link). Gossip ToryCategory : CommentTags : angry confrontation, boris johnson, candidacy, channel 4, [...]
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[...] find the money to have a 7% fares cut, you are breathtakingly incompetent”. And he rejected a Channel 4 FactCheck analysis that there was no surplus that could be drawn upon to pay for the fares cut. A February 2012 [...]
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[...] is that it can’t be done. Ken knows it can’t be done and is therefore telling lies. According to Channel 4′s fact checker: “Mr Livingstone is wrong to claim there’s a £729m surplus that’s sitting [...]
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[...] find the money to have a 7% fares cut, you are breathtakingly incompetent”. And he rejected a Channel 4 FactCheck analysis that there was no surplus that could be drawn upon to pay for the fares cut. A February 2012 [...]
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[...] is quite simply a lie. Boris says it can’t be done, Brian Paddick says it can’t be done, Channel 4 FactCheck say it can’t be done, TfL say it can’t be done, Tony Travers (local government expert at [...]
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[...] Channel 4 FactCheck – “Mr Livingstone is wrong to claim there’s a £729m surplus, and there is no ‘entirely separate’ budget for investment projects. If he cuts fares, TfL would expect to lose £1.12bn in income – and that’s a hole he wouldn’t be able to plug without hitting the day-to-day funding for London’s transport or taking money from investment projects.” (2012) [...]
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[...] won’t pretend to have done the maths, but on at least some of the pledges, Channel 4′s Factcheck has suggested otherwise.Transport“If I have not delivered a 7% fares cut by 7 October [...]
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[...] Reality: Independent factcheckers confirm Ken Livingstone’s plan will take more than £1 billion out of the transport budget. Channel 4 Factcheck states: ‘TfL argues that if Mr Livingstone was to cut fares by 7 per cent, the move would reduce the income from fares by £1.12bn over this parliament’ Source [...]
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[...] the most? We’re expecting him to cite that fare cut pledge, that the media has been so heartlessly cynical about. Actually, though, he points to the housing crisis. “The average two bedroom private [...]
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[...] the most? We’re expecting him to cite that fare cut pledge, that the media has been so heartlessly cynical about. Actually, though, he points to the housing crisis. “The average two bedroom private [...]
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[...] Channel 4 News’ independent Fact Check blog described this claim as “fiction.” Fact Check quoted TfL’s chief financial officer, Stephen Critchley, who said: “Lower fares [...]
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[...] So, in a word, yes, Ken is a f***ing liar, as Channel 4 Factcheck found last time they looked into his plans for the transport budget. [...]
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