Rocky road to a smoother journey

Londoners want better-quality and cheaper public transport. With limited cash and powers, will the m

For the first mayor of London to make a success of transport policy will take strong nerve, independence from central government and sufficiently innovative leadership to satisfy the electorate's ambitious expectations by overcoming limited powers and shortages of cash.

Air pollution and health head the list of concerns in polls of the London electorate. In interviews for the Report on Congestion Charges in London, published last month, 89 per cent said there was "too much traffic" in London, and half of these thought "air pollution" was a problem caused by traffic. After "slow car journey times", this was by far the most commonly identified problem. In a MORI poll in November 1998, Londoners said that the mayor's top priorities for promoting their health should be "improving air quality" and "reducing traffic".

These attitudes will cause problems for the mayor. The levels of most air pollutants emitted by traffic are already falling in London as a result of cleaner fuels and modern vehicle technology. Many of the links between traffic-generated air pollution and damage to health are uncertain. And there is a limit to how far the mayor could reduce traffic. For instance, congestion-charging would have a worthwhile impact in the centre, but little effect on London as a whole. One pollutant that certainly does damage health is small particulates produced by some diesel engines. There is scope here to achieve much better enforcement of the existing regulations, but only with significant new resources.

When asked about solutions to the level of traffic, Londoners most want better-quality (78 per cent) and cheaper (72 per cent) public transport. The perception that cheap public transport is highly desirable will create a funding problem for the mayor. When the Greater London Council reduced average bus fares by 18 per cent in 1983, passenger journeys increased by less than 10 per cent and revenues fell by 10 per cent. Tube fares were reduced by 28 per cent and revenues fell by 18 per cent. To reduce fares, the mayor will have to find cash to pay for the subsidy.

There may be two reasons for taking the plunge anyway, but only for bus fares. First, recent research confirms that lower bus fares produce benefits beyond the cost of the extra subsidy. Second, this measure is the one that is most likely to help poor people. The popular view is that all cheaper fares help the poor. But in general the poor either do not pay fares (if they're senior citizens), or they do not travel much. Tube and rail are used far more by the rich. Besides, on the Underground, any benefits from a reduction in fares would be out-weighed by making crowding even worse. Without a big expansion of capacity on the tube, there may be a (politically disastrous) case for increasing fares.

Even though many commuters will expect fare cuts on overground services, the mayor is unlikely to make it happen: the necessary powers reside with the central government-controlled Strategic Rail Authority (SRA).

In principle, congestion-charging offers a resolution for many transport policy conflicts. It offers a viable way of reducing traffic a little, creating the space for bus priorities and for schemes to improve quality for pedestrians. Crucially, it is about the only source of cash that the mayor could spend at his/her own discretion (as long as it is on transport-related areas). It would transform the range of options. There may be an electoral majority in support of it, providing the revenue is ploughed back into transport improvements in London.

However, there is a big difference between talk of general principles before the election and the implementation of precise proposals after it. If a scheme is introduced, it will, at first, probably only relate to the centre of London. Net revenues will be limited, and there will be implementation costs. The technology has yet to be selected; design, procurement and installation could take several years, so the system may not be up and running until the autumn of 2003, near the end of the first four-year term. There will be strong opposition from aggrieved individuals and commercial interests. Many groups will lobby hard for exemption.

To avoid the risk of successful judicial review, the mayor will have to have made a clear commitment to congestion-charging before the election and held a proper consultation on the scheme after the election. The plan will have to be demonstrably consistent with the overall transport strategy, which means the mayor will have to have one.

If the mayor is determined to press ahead with congestion-charging, there will be two more hurdles, which can be summed up in one word: capital. It will be essential to demonstrate to Londoners, well ahead of the new scheme starting, that extra public transport capacity is in place to cope with the knock-on effects; but the reality is that any substantial improvements require capital. And second, to procure and operate the charging equipment is a costly business, also needing capital. In the latter case, a private finance initiative-type deal might be struck, but the former is far more of a problem.

In theory, the mayor could borrow against the security of future congestion-charge revenues: £250m at annual interest rates of, say, 7.5 per cent over 30 years would support a bond issue of £3bn. But the government is steadfastly refusing to treat the Greater London Assembly differently from any other local authority, so its powers to borrow will be greatly constrained. In addition, the legislation only guarantees ring- fencing of congestion charge revenues for ten years after commencement of a scheme - which would severely limit the amount that the financial markets would be willing to lend.

As a policy tool, the other big idea in transport - the workplace-parking levy - is an unsatisfactory second best. It probably can't be enforced outside central London. It would be much simpler to place a levy on the Uniform Business Rate, which amounts to much the same thing (the GLA may acquire the ability to do this under local government finance legislation). The main thing going for it is that a limited scheme could be quickly implemented as part of a transitional arrangement.

Aside from the fares issue, bus service improvements are likely to be a centrepiece of the public's expectations and the mayor's strategy. Research confirms the benefits of increasing the volume of bus service and bus speeds, providing it is not at the expense of traffic speeds in general. A package including a 12 per cent cut in bus fares, bus priorities, 25 per cent more bus miles and congestion-charging could increase bus use by more than 35 per cent, and reduce average London-wide car use by 5 per cent. That would offer net economic benefits of £250m a year and spare cash for investment in the tube and elsewhere. The GLA will do well to resist the global tendency to spend billions on prestige rail schemes while failing to find the few millions that would produce much-improved bus services.

What of the matter that has created so much political heat so far - the financing of the renewal of the Underground? As mentioned above, finding capital to repair and renew infrastructure is a big problem, and there is a risk of over-optimism about how much the private sector might be prepared to fund. It will only participate if it gets an adequate financial return; and any return not covered by revenues must be paid for, sooner or later, by taxpayers. It is now emerging that the public- private partnership for renewing the Underground cannot be expected to be self-financing, even if optimistic passenger forecasts are fulfilled. How much subsidy will central government commit and how much will fall on the mayor's budget?

The PPP creates other difficulties. The mayor will get control of bus and tube fares straightaway, but control of the Underground does not transfer until the PPP deals are signed, which could drag on for months. The mayor will then have to manage these binding, long-term commercial contracts and negotiate changes to accommodate any new initiatives, such as running Underground services through the night. Worse still, because the government's PPP relates only to the existing system, any new lines and physical connections they may require will need both new funding and a renegotiation of existing PPP contracts to take account of their impact.

The mayor is likely to favour expansion of the London economy, which will involve further growth of passenger traffic on the Underground and railways. The public is clearly concerned about the level of crowding and will expect the mayor to do something about it. But the mayor will find it very hard to expand rail capacity: having to fund and finance the capital investment, having limited influence over the SRA and having to cope with the different bodies involved: Railtrack, the train operating companies, the Rail Regulator, the rail safety authorities, the Channel Tunnel rail link, the British Airports Authority and the London boroughs.

Relations with London boroughs will be an interesting challenge; there are significant opportunities for conflict. Transport for London (the central transport executive) will have responsibility for major roads, but the boroughs will keep the minor ones, which promises potential rows over speed limits, bus priorities and traffic-light phasing. Parking income for the boroughs may be affected, for which the mayor may need to compensate them, reducing the funds available elsewhere.

Finally, if the mayor and GLA are to act strategically, they should have a London-wide plan for capital expenditure, extending for, say, ten years, to allow a long-term view of the physical state of the assets, including relevant roads, rates of physical depreciation, costs of replacement and appropriate costs of capital. Remarkably, this has never been done, which goes a long way to explaining the mess that London's transport is in today. But such long-term strategic planning only makes sense in the context of a proper capital-financing regime. Which the mayor does not have.

Stephen Glaister is the professor of transport and infrastructure at Imperial College, London