City sickness, urban recovery

[First published by onlondon, 6 April 2020]

Coronavirus has not been good news for fans of cities. How ever important urban centres will be to the recovery, the rapid spread of the pandemic from Wuhan to Milan and from London to New York revives deep-rooted suspicions of them as close-packed seedbeds for disease (“pestilential human rookeries” in the words of one Victorian pamphleteer) and as the stomping grounds of rootless cosmopolitan types, with lifestyles and habits remote from the more “authentic” concerns of their provincial countrymen.

The early spread of coronavirus in London probably played up to both stereotypes, reflecting both density and connectivity. Reported cases of infection first soared in Kensington & Chelsea. By 10 March, 14 per cent of London’s known cases were among residents of the borough, who account for just 1.8 per cent of London’s population. Kensington & Chelsea is one of London’s most densely populated boroughs, but also one of the most cosmopolitan: nearly half of its residents were born outside the UK, and research by transport campaigners suggests they are the country’s most frequent flyers. For good and ill, London is the UK’s gateway to the world.

In the following days, cases surged in Camden, Westminster, Lambeth and Southwark (as well as Barnet). Central London’s intensity of movements and interactions probably played a role here. With a day time population that grows by 80 per cent every day and intensive mixing on public transport, in offices and in pubs, the conditions for rapid spread were in place in the city centre.

By mid-March, the epidemic was spreading fast across almost every London borough, with reported cases growing by a third every day in the week of 16 March, while they grew by a fifth to a quarter across the rest of England. The newspapers were full of talk of a lockdown being imposed on the capital.

The restrictions imposed by the government at the end of that week were nationwide rather than restricted to London, but their effect appears to have been strongest here. The rate of increase in cases dropped sharply and has remained lower than in the rest of England’s since then, as the graph below shows. Over the past week, the growth in new cases appears to have slowed nationwide, but remains lower in London: in the capital it grew by an average of nine per cent over the three days to 4 April, compared to an average of 14 per cent in the rest of the country.

 

 Source: PHE website, updated to 8 April

There are all sorts of reasons not to get over-excited about these numbers. At best, they show that the disease is spreading more slowly. There are still hundreds more cases every day even in London, and that will translate to more deaths in the days and weeks to come. And it is quite possible that the slowdown has only been temporary, with a resurgent outbreak waiting in the wings.

But it is still worth considering why London has fallen back from the forefront of the epidemic’s spread. Are fewer tests being done in London? This is possible, but since mid-March testing has been undertaken for all patients requiring hospital admission, so the slow down in cases presumably reflects a slowdown in hospitalisations.

Maybe this is a result of London’s age profile. Londoners’ median age is 35 years, compared to 40 across the UK. Perhaps, after the initial surge, this relatively youthful population is being reflected in correspondingly slower growth in the number of serious cases. Or maybe Londoners, despite crowded housing conditions and continuing denunciations from the media, are actually sticking to the government restrictions and starting to suppress the spread of coronavirus: figures on transport use at the end of last month showed the steepest falls were for use of the Tube, compared to road travel and national rail.

Despite the tough weeks ahead, apparent slow-downs in infection rates in London and across England are good news. And if London can further stifle the spread of the disease, it may yet show how cities can be at the forefront of recovery as well as of infection.

Moving out of the crisis

[Originally published on Centre for London website, 30 March 2020]

Strange days, when a transport authority claims an 80 to 90 per cent drop in passenger numbers as a success, as Transport for London’s Mike Brown did on Thursday.  It’s a success which could take a £1 billion bite out of TfL’s annual income just over the next three months (together with the loss of congestion charging revenue) – at a time when Crossrail delays were already hitting the balance sheet (and will even more while works are at a standstill).

Making up that shortfall will be one of a million urgent negotiations over coming months (and given ministerial demands to keep the Tube and buses running, the Treasury will surely have to pay a fair share), but it also prompts a more fundamental question – is it right that the operation of London’s transport system is so heavily dependent on fares and other user charges?

As Table 1 below shows, fares account for about 72 per cent of TfL’s revenues, with a further four per cent coming from congestion charging. The rest is made up of other commercial revenues, plus just over £1 billion (15 per cent of the total) coming from taxes – mainly retained business rates, with smaller amounts from general taxation and mayoral council tax.

Table 1: London transport revenue sources

millions	Transport for London (2020/21)
Fares	£5,124	72%
Congestion charge	£255	4%
Media and rental	£275	4%
Other	£515	7%
Retained business rates	£969	14%
Grants	£5	-
Council tax	£6	-
	£7,149	100%

Source: https://www.london.gov.uk/sites/default/files/finalbudget_march20.pdf

But is that the right balance?  Is transport a product to be bought by individual customers, or is it an urban service, something that is provided as much to the city as a whole as it is to individual passengers? Cities rely on mass transit just as tall buildings rely on lifts. Without transport systems that can move millions every day as efficiently as possible, cities grind to a halt – or hollow out as corporations flee congestion. In both cases, reliance on private cars rises, with all the pollution that entails.

Supporting mass transit is therefore in the interests of businesses, of the environment and of the city as a whole – whether or not individual citizens use the system, they rely to some extent on other people being able to move around the city (and on roads being kept free for freight). So there is a case for public sector support, of the system as a whole and for the people who cannot afford to pay full price.

But relying so heavily on passenger revenues does not just make TfL vulnerable to events such as the current crisis, but also makes revenue dependent on mass transit systems that are themselves under strain. To address those pressures and reduce carbon impacts, the Mayor and TfL have committed to promote ‘active travel’ (walking and cycling), but it is only public transport (and congestion charging) that makes money. With some of the highest fares in the world, TfL’s commercial and strategic interests are not well aligned.

It’s not always been this way. The reliance on passenger revenues is a relatively new phenomenon: as recently as 2010/11, more than 50 per cent of TfL’s revenues were in the form of a grant from central government.

And it’s not the way other cities operate either. Comparisons are imprecise and no city is perfect, but New York and Paris both have very different funding models (tables 2 and 3 below). Both cities have some subsidy from different tiers of government – around eight per cent of the NY total, and 18 per cent in Paris (or rather the larger region of Île de France). 

Table 2: New York transport revenue sources

millions	Metropolitan Transport Authority (2018)
Fares	$6,200	41%
Tolls	$1,900	12%
Media, rental etc	$685	4%
Fuel taxes	$2,300	15%
Mortgage and property taxes	$1,002	7%
Payroll taxes	$1,700	11%
Other taxes	$306	2%
City and state subsidies	$1,200	8%
	$15,300	100%

Source: http://interactive.nydailynews.com/project/mta-funding/

Table 3: Paris (Île de France) transport revenue sources

millions	Île de France Mobilités (2017)
Fares	€3,664	36%
Media, fines etc	€249	2%
Fuel taxes (TICPE)	€94	1%
Payroll tax (VT)	€4,238	42%
Public subsidies	€1,893	18%
	€10,085	100%

Source: https://www.iledefrance-mobilites.fr/wp-content/uploads/2019/03/presentation-idf-mobilites-2019_EN_20-03-2019.pdf

Both cities also draw some revenue from taxes on petrol and diesel: 15 per cent in New York compared to just one per cent in Paris. In the UK, fuel duty and vehicle excise duty are collected and retained nationally, with VED ring-fenced for road maintenance outside London.  Allocating London its share would give the city around £500m extra per annum, but both fuel duty and VED are set to decline in coming years, as more efficient vehicles proliferate. Centre for London has argued for a comprehensive approach to road user charging, rather than tethering London’s transport to an eroding tax base.

New York draws another 7 per cent of its revenues from taxes on mortgages and property transactions, but both comparator cities also rely heavily on payroll taxes. In New York, employers pay from 0.11 to 0.34 per cent of payroll costs (depending on payroll size); in Île de France, rates range from 1.4 to 2.6 per cent (depending on location).

The sums generated by these business taxes are higher than retained business rates in London, much higher in the case of Paris, and could be argued to relate more directly to how far companies rely on the public transport network to enable employees (and customers) to travel across the city. Payroll taxes may not be the right answer for London, though a devolved alternative to business rates is long overdue, but the current crisis should prompt longer-term thinking about the right mix of taxes for a 21^st Century transport system.

Seeking higher government grants is one way to reflect the civic value of London’s transport system, but seems likely to have limited mileage at a time of regional rebalancing (and persistent allegations that London already receives more than its share of transport funding). Even Paris draws less than 20 per cent of its funding from national, regional and local subsidies.

London should seek devolution to enable innovation, not a squabble about regional allocation. How much should businesses and residents pay for the infrastructure that keeps the city running? Should tourists and other visitors pay through a hotel tax? Should taxis and minicabs, and new arrivals such as electric bike and scooter companies, pay more for their use of London roads? 

When London’s economy and civic life begin to defrost, and the Tube once again feels the – once tiresome but now longed-for – strain of urban rush hours, it will be time to think again about who pays what for the hundreds of millions of journeys that take place in London every year.