93c Venner Road, Sydenham, London SE26 5HU. 0208 659 7713 E-Mail A_Baron@ABaron.Demon.Co.UK October 3, 2000 Dear Mr Livingstone, I am writing to you in connection with the funding of the London Underground and public transport in London in general. You have made the funding of the Underground a priority, and rightly so, your suggestion being that low interest bonds should be issued to the public. In this connection I enclose a page from a book I came across recently while researching an entirely different matter. This book points out that public debt in then Palestine was liquidated by the redemption of stock which was bought up specifically for that purpose. Your method of funding the Underground is clearly superior to the initiatives of private finance, the main benefactors of which are always financiers. There is though a method of funding it which you and everybody else seems not so much to have overlooked but never to have considered, that is to abolish fares in London altogether and to put the entire transport system or at least the Underground and buses on the rates. There would of course be many objections to this, the principal one being that it would send rates in London through the roof, but would it? My contention is that a) although a totally subsidised transport system would increase residential and business rates significantly, the overwhelming majority of, and possibly all, ratepayers, would more than recoup such additional outlay through the elimination of fares; employers in particular could be given special tax concessions or the London weighting allowance could be amended to account for this. b) to subsidise the transport system completely would result in massive savings all round by the elimination of revenue collection and all the expensive trappings thereof. Let me deal with these in order. In the first place all public transport systems are subsidised, the only question is by how much. A system which receives hundreds of millions of pounds of subsidy a year as transport in London, does obviously recoup only a percentage of its revenue through fares. Let us say that the average 9-5 commuter spends thirty pounds per week on fares, which is around fifteen hundred pounds a year or an incredible twelve and a half per cent of the average wage. Putting all fares on the rates would mean that commuters could take home thirty pounds a week less without being any worse off. In practice this could be recouped through a special tax allowance or some such mechanism. Pensioners and other travel concessions would cost nothing. Currently, pensioners, who have free travel passes for use on buses, are issued with these passes, and the cost of them is then recouped from the local authority by the operator. Obviously some sort of internal accounting is necessary when it comes to running government and local government departments, but this sort of accounting is sheer lunacy. Another point you might like to ponder Mr Livingstone, as someone who is often satirised for his concern over minority rights, is that pensioners are a minority and in many ways an oppressed one. A lot of older people, trapped in their own homes, literally sit and vegetate, waiting to die. Making transport totally free would encourage them to lead active lives, which would in all probability be reflected in reduced National Health costs over a period. The second point is that with an entirely free transport system the cost of actually running the system would be greatly reduced. On July 25, a BBC news report said that the new Gestapo type approach to travel which involves plain clothes ticket snoops following people to their places of work has been such a great success that Connex Trains are to recruit a further one hundred such spies. Yes, one hundred. Every year there are literally hundreds of thousands of prosecutions and on the spot fines levied on "fare cheats". Prosecutions cost money and take up valuable court time, including police time, which could be used for more productive means, like processing people accused of serious criminal offences. Every station on the Underground and on the main line network has a ticket office and staff or at the very least ticket dispensing machinery, which is expensive to run. I dread to think how much the automatic gates at Underground and main line stations cost to operate. With a totally subsidised transport system all these will be unnecessary and the surplus labour could be directed into more fruitful avenues. The cost of operating and policing a ticketing system is astronomical. I realise that many objections would be raised to the above proposals, but most such objections are "moral" rather than economic, the idea being that people should pay for a service because it is morally reprehensible that they should travel or get anything for free. Of course, running a transport system on the rates means that it is not free but that ratepayers and/or taxpayers pay for it. But they are paying for it in large part already with the added disadvantage that the method of payment is both extremely complex and inefficient. In general if something is to be subsidised it should be subsidised completely and given away "for free". A good example is the Internet; many Internet Service Providers offer a totally free service for subscribers. And although there are commercial websites - usually sex-oriented or related to financial services - the amount of material available on the Internet/Web totally free is staggering, including government and local government publications, photographs, artwork, encyclopaedias, and so on. One further point you might like to consider re the above transport proposals is the impact on the motorist. With a totally subsidised transport system, the volume of traffic on the roads is sure to come down considerably. People would think twice before driving, and some people would dispense with their cars completely. This would lead to further economies, and would undoubtedly clean up the air in London considerably. Who knows, it might even save lives? You are probably just about old enough to remember the "pea soupers" that London used to be renowned for. The pollution problem isn't that bad nowadays but it could certainly be further improved by reducing the volume of traffic on the roads, and nothing would do this more efficiently than a totally subsidised transport system. The following figures are extracted from "London Regional Transport Accounts" for the 15 months ended March 31, 1985 and "The London Regional Transport Annual Report" for 1994-5. The 1985 figures were as follows: income including grants: total 1,102 million which was made up of i) traffic and other income 735 million ii) grants and benefits 367 million total grants were 27% of total expenditure for the period staff: buses 26,700 Underground 22,300 central services: 4,900 bus engineering: 1,900 investment including Docklands Railway: 240 million 1994-5 figures were as follows: in 1994-5 London Regional Transport sold its ten remaining bus operations which now run under contract. London Underground had 17,505 staff, around four and a half thousand less than in 1985. the grant from the Department of Transport was 686 million total sales were 1,012 milion traffic revenue was 947 million; other revenue was 65 million; total: 1,012 million average number of employees for buses were 638 for LT Buses; 1,049 for other operations operating costs were 960 million a lot of money was allocated here for investment, principally new lines, which were then under construction. bus sales revenue was 240.7 million grants received were 686.3 million from the government made up of i) 273.4 million for core business ii) 412.9 million for new lines fares collected and other external revenues: 991.6 million total sales revenue 1,155.2 million including 22.5 million from advertising; 31.5 million from rents free travel for the elderly and disabled came to 92.4 million. Working on the basis of the 1994-5 figures, the 947 million traffic revenue and assuming the population of Greater London to be around 6 million, that makes a total subsidy of 947 million divided by 6 million = 157.83 pounds per annum or 3.03 per week per person (every single person including the infirm and babies). For a single person household this means that the additional subsidy necessary to give free transport on the Underground and buses works out to 3.03 per week. Even if you were to double that for mainline local commuter services that would still be only a shade over 6 pounds per week. A travel card costs 4.10 from Zone 4. And as I said, in real terms the cost would fall dramatically as ticket machines, inspectors and all the trappings of revenue generation and "protection" fell. Although a lot of work would have to be done on the logistics of this, a free public transport service is certainly feesible. On New Year's Eve a brewery generally sponsors all underground and bus travel after midnight, so if it can be done one night a year... Yours sincerely, A Baron
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