London Targets $405 Million in Driver Fees to Plug Transit Gap

(Bloomberg) -- London Mayor Sadiq Khan plans to raise 300 million pounds ($405 million) by 2025 from new levies on polluting vehicles.

The estimate was published Tuesday as part of a revised budget plan for Transport for London, the agency that operates the city's bus and subway system. It covers proposals announced on Jan. 18 by Khan to help meet climate goals.

Under that plan, the city's ultra-low emission zone would be extended over the whole of Greater London, or modified so more combustion-engine cars are assessed. People may also have to pay to drive into the area from outside. The plans, subject to further debate and study, would take effect by May 2024.

Khan is grappling with a deficit at TfL that was exacerbated by a loss of ridership during the coronavirus pandemic. After the omicron variant triggered work-from-home rules at the end of last year, the agency now expects passenger demand to be at about 70-80% of 2019 levels at the start of the 2022-23 fiscal year in April. Previously, the target was 82%.

Inflation and rising power costs have added to the funding gap, which is now estimated to stand at 1.5 billion pounds in the 2024-25 fiscal year without further aid from the U.K. government.

Service reductions and delays in capital projects would help alleviate some of the deficit. The mayor has also proposed handing TfL funds from residents' council taxes, charging higher fares on local transit and limiting discounts for seniors.

An emergency support package for the TfL extended in December by the U.K. government is set to expire on Feb. 4.

“The government and mayor of London need to agree a long-term multi-year rail funding deal,” said Darren Caplan, chief executive officer of the Railway Industry Association, in a statement. Such a plan would “give certainty to the railway industry so it can plan, build and maintain world-class rail in London.”

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