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UK: London Transport System Built on Subsidy, Inefficiency

August 10, 2009

UK: London Transport System Built on Subsidy, Inefficiency
UK motorists pay a heavy price to subsidize mass transit in London.  

Mind the GapIt takes £2,239,300,000 (US $3,749,250,000) in subsidies to operate mass transit programs in the UK’s capital city, according to the Transport for London Annual Report and Statement of Accounts released this week. These subsidies come from a number of taxes imposed on motorists who in many cases do not use public transportation. London’s most burdensome levy on drivers, the congestion charge, is so inefficient that for every £10 taken from drivers, £6 is spent on the bureaucracy required to administer the charge.

It takes £1.8 billion (US $3 billion) to keep London buses running, but riders only pay £1.1 billion (US $1.8 billion) in fares, creating a 40 percent subsidy at the expense of motorists. The London Underground subway system is more efficient with £1.8 billion (US $3 billion) in fares collected to cover £2.4 billion (US $3.9 billion) in expenses, meaning riders only enjoy a 25 percent discount at the expense of drivers.

Rail for London is the most heavily subsidized operation with 44 percent of the £135 million (US $226 million) operational budget not covered by fares. The Docklands Light Railway requires a 25 percent subsidy to cover the £86 million (US $143 million) budget.

The £8 (US $13) congestion tax imposed on drivers entering the downtown area generates nearly one-tenth of Transport for London’s annual revenue. The £326 million (US $545 million) spent by drivers, however, is eclipsed by the £177 million (US $297 million) spent on operational overhead.

Former London Mayor Ken Livingstone introduced the congestion charge by promising massive reductions in pollution and congestion. Neither have materialized, according to data released by Transport for London last year. Current Mayor Boris Johnson takes a far more skeptical attitude toward the tax and has already canceled Livingstone’s proposal to impose an extra £25 (US $40) tax on certain disfavored sports and family cars.

Transport for London’s highest paid employee earns £570,000 (US $955,000) a year. Forty-nine employees make more than £150,000 (US $250,000) annually.

An excerpt from the annual report’s financial statement is available in a 280k PDF file at the source link below.

Source: PDF File 2009 Annual Report and Statement of Accounts (Transport for London, 8/8/2009)

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One Comment leave one →
  1. August 13, 2009 3:44 am

    What makes the inequity of the congestion charge even worse is that a large part of the revenue, almost £100 million is generated from fines from drivers who either don’t recognise they are in the zone or simply forget to pay.

    There are solutions such as ours at http://www.nocongestionchargefines.co.uk along with talk that the collection of congestion charge fines is to be automated later in the year. However, it seems that TFL rely on the penalties rather than the actual cost of driving in London

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