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Revealed: the real cost of Ken's C-Charge
Keith Dovkants, Evening Standard30.04.08
When Ken Livingstone launched the congestion charge five years ago, Londoners were told it would raise £200 million a year in extra funds for the public transport network. It was a promise that helped win over the doubters and although the annual £200 million never materialised, Transport for London claims the charge has produced income for London.
Yet two analyses of the figures suggest that while drivers have been paying up in the belief that their money is going into improving the Tube and the buses, the tax Londoners pay for moving around their own city has funded little more than its own cost.
As London elects a Mayor this week voters are entitled to ask where the City Hall billions have gone. In the case of the congestion charge there is a suspicion that more than £1 billion raised so far has almost entirely been spent on the settingup cost and running the congestion zone.
Ken's flagship policy was introduced on 17 February 2003 on a promise that revenue from it would be poured into public transport. In the past five years, the charge has raised, in fees and fines, more than £1 billion. But the surplus, according to two interpretations of TfL's own figures, is less than £15 million - and could be as low as £10 million.
Despite these two analyses a spokesman for TfL insisted the congestion charge had indeed made money, around £382 million. It has been invested in the transport network, he said. Even this figure falls far short of the £200 million a year - £1 billion so far - the charge was supposed to earn.
An economist with a leading City bank analysed TfL's returns for the Standard. Speaking on condition of anonymity he said: "At the point when I looked at the figures, the total revenue was £930 million. When you deduct the capital and running costs, you are left, after five years, with £14 million. On 116 million transactions, that works out at 12p on each transaction (costing the motorist £5-£8).
"If Ken had asked people to throw 20p into a bucket every time they drove in central London, he would have made more money - and that includes the cost of collecting the buckets.
"It really is shocking. Anything that takes £1 billion out of Londoners' pockets and gives virtually nothing back is astonishing. Ken continues to hold up this policy, but the reality is that it's a white elephant. They've already shot it down in New York."
Phil Taylor, a Conservative councillor in Ealing, recently asked TfL for uptodate figures on the congestion charge. He said: " The charge has taken in £1.2 billion. It's all gone, apart from around £10 million. TfL says it makes £123 million a year but this doesn't count the indirect costs. And they don't count the capital costs, which are around £350 million. They are concealing the truth.
"It just doesn't make sense. These calculations are not just finger-in-the-wind stuff. They are based on official figures and they show that there has been no measurable surplus of any benefit."
There was controversy over the cost of running the charge almost from day one. Capita, the company that set up the system and operated it for the Mayor, was said to have been given a £250 million contract over five years, but the Mayor refused to reveal the details. Then it emerged an extra £31 million was paid to Capita in the first year, raising concerns that costs would reduce revenues promised by the Mayor. Last year Capita was paid £130 million, more than 60 per cent of the money taken in by the charge over the year.
If Ken wins tomorrow he has promised to introduce a new £25 charge for vehicles he has described as "gas guzzlers". The change would be accompanied by scrapping the charge for smaller cars. Although it is impossible to predict what effect this would have on C-charge revenues, the proposed policy has been widely criticised. Motoring groups say it will unfairly penalise families and environmental campaigners say it will defeat the purpose of the congestion charge by encouraging drivers to enter the zone in smaller cars. Contrary to Ken's claims, the charge has not been widely copied. Stockholm, Singapore and Milan are the only major cities to adopt it. New York recently rejected the idea.
Tony Travers, director of the Greater London Group at the London School of Economics, said: "In the short term, comparing all the costs including set-up costs with revenues, the congestion charge may not yet have produced a large sum. However, in the longer term this calculation will look better year by year." Money was at the heart of most of the arguments heard during the election campaign. The Evening Standard has looked back over the books to see how a budget currently running at £11.34 billion is being spent.
We know Ken's attitude to spending has incurred bills such as £12 million for a space satellite and £4,750 for having Konnie Huq lend a touch of glamour to an otherwise boring press conference, but what have Londoners received for their money?
Ken has said he will be judged on his transport policies and his campaign made much of his expansion of the bus network. But at what cost? More people than ever are using buses but the service is currently being subsidised at a rate of more than £600 million a year, up from £360 million in 2003.
It means every London household is paying more than £200 a year to keep the buses running. Many Londoners feel this is money very well spent but buses operate at less than 30 per cent capacity, while nearly 10 per cent of passengers on bendy buses get away with not paying, at an annual cost of £6 million.
Indeed, Ken has been selective in the big-money projects to which he chooses to draw attention. There was no mention, for example, of his expensive court cases funded by the taxpayer. As the Evening Standard disclosed last year, Ken had initiated 11 separate actions in the previous six years, losing all but one. The cost of these cases was around £130 million. Among other matters, Ken went to court to fight London boroughs, to wage a legal war against John Prescott and to try to force a private company to hand over a successful tram network. In the last case the judge dismissed the action as "absurd". Another brought by the Mayor was described by the judge as "totally without merit".
But these actions were not without cost. The most expensive was Ken's doomed fight against the Government's plans for the Tube to be subject to a PPP contract. The legal action itself cost £8 million and the bill was swollen by a further £120 million when the court case incurred a 14-month delay.
During the past eight years Ken has surrounded himself with a loyal band of courtiers, in the Mayor's Office, in the London Development Agency and at TfL. His court has grown almost by the day and all his key people are on sixfigure salaries. City Hall, including the Mayor's Office, has doubled in staff size since 2001, with around 700 workers fighting for space in a building originally designed for 450.
Costs rose from £39 million to around £150 million. This includes money for around 70 press officers for the Mayor, three times the number employed in Downing Street. TfL, the Mayor's subsidiary, currently employs 112 people on more than £100,000 a year. In the past five years TfL has recruited an extra 2,600 staff, giving them salary increases of a total 24 per cent, compared with 14 per cent on average for the rest of London.
But a glance at TfL's balance sheet over the past five years reveals a disturbing fact: the cost of running the organisation has been growing at a furious pace. TfL's operating loss went from £1.3 billion in 2003 to £1.98 billion last year, requiring an increase in taxpayer subsidy of more than 20 per cent, or £400 million, even when higher earnings from fares are accounted for.
City Hall, through the Greater London Authority and the Mayor's Office, has four major funding responsibilities, the police, the fire and emergency services, transport and development. The latter, through the LDA, has an annual budget of more than £400 million. Restrictions on how this money can be used are less clearly defined.
When the office of Mayor was introduced in 2000 and Ken won the election, in that year Londoners in an average Band D home were asked to contribute £122.98 to City Hall, in the form of a precept added to their council tax bill. Today this stands at £309.82.
Most of this money funds the police, the fire and emergency services and TfL. Around £30 a year from a Band D household goes to run City Hall itself. Londoners are paying £908 million through their council tax to the GLA budget. The rest comes from government grants, business rates, fares and other sources.
Reader views (26)
Here's a sample of the latest views published.
Yes Mark, but he would have to switch OFF at least half of the traffic lights as well!
(To be fair, the traffic was fluid 10 years ago before adding thousands of traffic lights [on roundabouts as well!] in order to have an excuse for the C-charge)
- Jason, London
Well said, Tommy of London; and how perceptive. One small mistake though: it looks like Ken Livingstone learned from Mugabe except (until now, I think) for the murders.
- Francois Duret, Alexandria VA USA
If you look at the figures, the lies and the cover ups there is only one conclusion to make - wholesale corruption!
Londoners are being taken for a ride and a lot of Ken's cronies are getting very very rich.
In England we seem to think that we are above the corruption of the likes of Robert Mugabe, but we are mistaken. Putting aside the violence in Zimbabwe, Mugabe could learn a great deal by studying Livingstone's methods of making tax revenues disappear into thin air - or rather into offshore bank accounts.
- Tommy, London
What Ken should have done is have a week off from the congestion charge. Just to remind London what it was like before. He'd have had a landslide vote when he reintroduced it a week later.
- Mark Andrich, London, UK
What a great analysis and poignant message. Unaccountable for spending, where are the checks and balances on Ken?! Is our purpose as Londoners to enrich Capita?!
I absolute love the 20p in bucket example. To me, that sounds like a better act of socialism then Ken Livingstone's convoluted brand.
It's unconscionable to let this farce continue.
- Ml, Westminster
Come on get off your bums, take a bus, a train, walk, ride a bike... That´s why you are so against the Congestion Charge. It has not meant more than peace and fresh air for me when last year the Zone was extended to my area. So, whatever it cost cut CO2! Cheers for Ken!
- Maria Munro, West Kensington
Well what can one say but please Boris Ban this congestion charge and stop every motorist being ripped off!!
- Ammar, London
I believe that Livingstone is sitting on any investigation into his megalomania at the moment and will continue to do so as long as he holds power.
Vote the greedy little weed out on Thursday and watch all the maggots come out of the woodwork.
- Mr B. I. G. Wet-Nurse., Hempstead
Oh come on. The congestion charge is only about keeping annoying poor people out of central London so there is more room for the chauffeur driven non doms and the city boys. It does nothing for congestion or air quality.
I'm asthmatic, I'd back it to the hilt if it had helped me breathe.
- Thalia, london UK
There is only word for the congestion charge: shambles.
- Bethany Griffiths, London
The whole system is automated so,apart from a small admin staff, the whole thing should cost no more than the amortised capital cost each year. Wake up London you are being ripped off!
Having said that something needs to be done about the congestion - the charge has not worked, has it? Why not pedestrianise the whole are and do away with the admin cost as well as the capital outlay.
- K A Guilfoyle, Cersay, France
The fact that the Congestion Tax hasn't made any money since it came into effect is hardly surprising. It was a flawed idea from the start. Livingstone introduced it not to reduce congestion but because he is anti-car. Congestion levels are back to pre-2003 levels so now we need to rethink. Perhaps if he had waited until the tube was capable of taking the extra volumes or ensured that buses were reliable and ran on time it may have worked. However even that leaves the question why do people still drive through London. There are two groups into which drivers fall. Those who will never leave their cars at home even though they could use public transport and those who have to use their cars. If the latter make up the greater number then there's no way you will get them to use public transport. The delivery man. The tradesman. The chauffeur. Their livelihood involves driving either because they are carrying people or goods. Livingstone & TFL failed to analyse why people used their cars and introduced the charge for one reason only. To raise money. Even that has failed.
- Marc, Harrow, UK
And all the administrative costs on this scheme? Isn't the administrative labour for running this scheme out-sourced? If so, billions are being drained out of the London economy. Why not hire locals?
- Jamie, London, U.K.
After all the waste, incompetence, and half truths perpetuated by Ken and his cronies, I will put my money on Boris. At least I have a chance that Boris may get things right, or make fewer mistakes. But with Ken, the certainty is that he will screw up the city finances again, maybe on a much larger scale.
- V Tan, London
Ken has been ripping us all off from day one, what surprises me why it has taken the media so long to see through all his manipulations, stealth taxes and lies.
The CON charge has been known to be just that to many regular motorists in the capital for a very long time,
I suppose we have to be grateful that it has taken an election to get the truth out, better late than never.
- Mr .S.Port, London
If the TfL figures are correct they certainly nail the lie that Ken is competent to run a large organisation. 15M:1.2Bn gives a profit return of 1.25% No business working on those margins would survive more than a few months. And as for spending £130M on litigation, this makes him the answer to a lawyer's prayer, the vexatious litigant. However I suspect the problem is (apart from vanity) that he doesn't actually know know what it feels like to spend a million pounds of his own money, very few people do. For the most part it doesn't matter, but when it comes to constructing the Olympic facilities or running London such ignorance carries a very very heavy financial penalty. Boris may not do better, he certainly can't do worse.
- Jeremiah, London
So TFL say it has made £382 million but your anonymous banker says it has made £14 million. I wonder who I shall believe? As for Phil Taylor, this is the same man who recently said on Dave Hill's blog that a single bus journey on an oyster card costs £1.50. It actually costs 90p. Only 70% wrong on that one then. I wonder how right he is with this?
- Adam Bienkov, London
Mr Dunton, presumably should one wish to send you copies of these reports we should just address them to Kens Cronies, the GLA building, London?
- Graham Golden, Butlers Wharf
Nick
Don't you notice your council tax bill or like Prescott perhaps you don't pay it. Mine has tripled under Livingstone - this is not from a fag packet.
- Simon, London
Although I don't pay council tax in London, isn't the fact that 'buses are running at 30% capacity' a good thing.
My recollection of living in London was that buses used to run at 110% capacity. If buses are running around 70% empty, then you'll all have a seat, and that must be a good thing, surely?
- Roger, Guildford
This is not 'news' - in the sense that anyone who reads through TfL's documents, as I have, will realise already that on TfL's own figures the Charge does not make money for anyone except them and never has.
The problem is, there only seem to have been about three of us who ever bothered reading TfL's Reports beyond looking at the pretty pictures and the Executive Summary.
What is 'news' is that, at last, people are starting to analyse the Charge. I assure you that all of this information is published by TfL, if you look, and is emphatically not "a back of the fag packet guestimate by an anonymous banker and a Tory counsellor" (sic).
- William, London
Let's hope that Boris gets in as Mayor this week because some very serious decisions will have to be made about the congestion charge over the next couple of years.
The congestion charge has only survived to date because London's economy has boomed since its launch. As that boom dissipates into recession things will begin to look very different indeed.
Paying the congestion charge to get into London is one of the first cuts that business people will be making when times get tough, and it will very soon become an expensive loss making millstone around the neck of whoever is voted in as Mayor.
Fleecing drivers when they are feeling well off is one thing, but fleecing them when they are being assaulted by price increases from every quarter imaginable is quite another.
This tax is simply not sustainable in a recession. It will only lead to many more businesses closing than otherwise would be the case.
This tax was launched with the economics of the madhouse, but it is the doghouse that London will end up in if it isn't scrapped.
- Lawrence, London
The mistake these turkeys make is to think we'd all take no notice at all of their incompetence.
Unfortunately we have no option but to notice as congestion has not improved yet we pay the price for their ridiculous policies through higher and higher taxes and charges.
Londoners have a simple choice; vote for corruption lies and incompetence with Ken or vote Boris and find that all of the detail above is just the tip of the iceberg.
There has been wasting of money at City Hall on an Olympian scale (no pun intended). To discover the size of this waste and to change the face of London permanently for the better, vote Boris.
- Robin, London
These calculations are intriguing, but they depend on a number of variables and assumptions. Why not publish them and then we can all judge?
- Mark Rogers, London, UK
I wouldn't trust Livingstone with loose change to buy a pint of milk from the corner shop, he'd lose it and come back for more. As Londoners, we need true transparency of where our cash is actually going. We need Boris to get in there and sort out the whole mess. I mean, how much public money has Livingstone lost?
- Joe, London
To be clear the sources for these figures, and therefore the premise of this entire article are.. a back of the fag packet guestimate by an anonymous banker and a Tory counsellor?
- Nick Dunton, Islington
