A Victoria line train. Photo: Wikicommons
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Lessons transit authorities shouldn't be learning from TfL

Like "fare hikes are a good thing". 

On Monday, the US website CityLab ran an interview with Shashi Verma, director of customer experience at Transport for London, under the headline “5 Lessons US Transit Systems Should Learn from London”. The gist of the piece was that running the transport system like a for-profit private company was the best best thing to happen to Londoners since Boris Bikes or sliced bread, and those in the US should be green with envy.

Tonight at 8pm, London Underground power workers from three different unions are due to stage an eight-day walkout in protest against working conditions and pensions plans. While this doesn’t necessarily contradict everything Verma said, it does at least highlight the downside of a (his words) “relentless push” to increase revenue and lower operating costs.

There are aspects of TfL’s £50m restructuring plan, announced last November, that impress: 24-hour weekend services and the possibility of unmanned trains are the biggies. But Verma’s attempt to portray the closure of ticket offices as a positive, rather than something that’s caused widespread protest from staff and passengers alike, is little more than spin.

What’s even odder is his success in re-framing constant inflation-busting fare rises as A Good Thing. The CityLab piece names “Make fare increases routine” as an apt lesson for US Transit authorities, explaining:

There are loud objections over there just as there are here, but the critical difference is that TfL has set an expectation in the minds of travellers, not to mention politicians, that fares must rise on an annual basis.”

Londoners may be rather less convinced that this is a lesson worth exporting. This graph pits consumer price inflation against the percentage year-on-year rise of the price of a single cash ticket (that is, those not paid for via the Oyster automated ticketing system) within zones 1-4. (We know most commuters don't pay cash fares, but due to the Oyster's short history they're the most easily comparable figures.) 

 

Two big rises – of a pound each, in 2007 and 2011 – account for most of the overall increase. If you stack those percentage rises on top of each other, the concession to a minimal, inflation-level rise for this year doesn’t look so impressive. The CityLab piece applauds London's gradual fare increases, as opposed to US Transit Authorities' tactic of holding off until fares take a big jump, but this graph shows that this isn't always the case. We’ve gone from £3 for a single in zones 1-4 in 2004 to £5.70 in 2014. And, last week, the National Union for Rail, Maritime and Transport Workers (RMT) claimed that fares will rise another 24 per cent by the end of the decade; that’s over a third faster than the expected rise in earnings.

Don’t get us wrong – some of TfL’s flashy improvements, such as those fancy screens on bus stops or contactless paymens, are great. And it would be handy to get the tube home after a messy night out in Camden.

But the story’s just a little bit more complicated than Shashi Verma would like to make out. Contrary to what he might like American transport bosses to think, Londoners are not exactly delighted with the tube, either. 

This is a preview of our new sister publication, CityMetric. We'll be launching its website soon - in the meantime, you can follow it on Twitter and Facebook.

Barbara Speed is comment editor at the i, and was technology and digital culture writer at the New Statesman, and a staff writer at CityMetric.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.