UK: Motorists Foot the Bill for Inefficient London Mass Transit

by The Newspaper

Published: August 8th, 2009

uk motorists foot the bill for inefficient london mass transit

It 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.

2009 Annual Report and Statement of Accounts (Transport for London, 8/8/2009)

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Rpn453 on Aug 11, 2009
Vehicles create pollution because that’s what internal combustion engines do. You can’t pass a law that magically makes pollution disappear. Disappear? No. But emission laws have drastically reduced tailpipe emissions since the 60's, and we could do even more if necessary. The buses, trains, and large trucks here don't abide by anywhere near the same emission laws as my car! New York actually has the least subsidized mass transit system in the U.S. Passengers pay 68% of the cost there. Would a 50% increase in fares (with a corresponding decrease in taxes) really force users to turn to other transportation options? Maybe our perspectives are just too different. I'm in Saskatchewan, Canada, in a city of 225k, with the nearest larger city being 350 miles away, where smog is so negligible that it's legal to remove catalytic converters and is even encouraged by muffler shops when doing exhaust work to improve fuel economy and reduce the chance of future converter failures (and provide them with $30 of precious metals). I've never been stuck in a significant traffic jam and the buses drive around almost entirely empty most of the time. I don't know what it would take to convince me that subsidization of anything has a positive long-term effect. I think it promotes waste. I do believe in regulation where there's a clear problem, and I think we all have the same end goal of an efficient and hassle-free lifestyle. I certainly wouldn't be opposed to a big gas tax increase in order to create funding for better and more efficient roads, with the positive side effect of encouraging the use of more fuel efficient vehicles, less unnecessary driving, and even mass transit, provided that all the money actually goes toward the roads.

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Stuki on Aug 11, 2009

Pch101; at supply and demand equilibrium, the willingness of the marginal consumer to consume equals the price, as it equals the willingness of the marginal supplier to supply. So, miles demanded will equal miles supplied at this specific price. If willingness to pay exceeded this price, more miles would be demanded, until the two were again in equilibrium. If, instead, the price exceeded willingness to pay, people wouldn't pay it, forcing suppliers to cut prices until the two again met. So, at the margin, absent coercion, willingness of the marginal consumer to pay will equal price.

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