The transport dilemma that will tax any mayor

The only way to avoid becoming the most unpopular person in London will be to take on the Government

NO WONDER the Labour Party has resorted to conscription, and the Tories must wish they had done the same. Mayor of London is a job for a saint or a lunatic. It's the transport, stupid; that electors care about. But the economics of London's transport problems are truly horrible. And the purse strings are still held by the Treasury.

London is the most densely populated city in the United Kingdom, or indeed (excluding Brussels) in Europe. It has the highest income per household of any region in Britain, but nearly the lowest level of car ownership. So far, so good news for transport providers; this rich density creates plenty of potential demand.

The problem, of course, is that this demand is concentrated in two "unhappy hours", when the Underground and road systems operate at or beyond capacity. London clogs up with frazzled commuters from outside, and the statistics show that even London dwellers themselves take longer to get to work than people living in any other part of the country.

This is a severe constraint on the conventional solution, that the way to decongest London is to move more people out of their cars and into public transport. Such a solution means either making car driving more painful (which is easy) or making public transport more attractive (much harder).

The dynamic of congestion charging, provided for in the Greater London Authority Act and the Transport Bill, is supposed to work like this. Drivers are dissuaded from using their cars by fees for entering crowded areas. Those who go on driving provide the revenue to improve public transport. A rather wobbly consensus of lobby groups has bought this idea, but now the fun begins.

There will be pressure to exempt most of the people who actually use London's roads. The utilities will argue that charges imposed on them would not affect road use but would flow straight through to the London consumer. So will all those who can demonstrate that their use of the roads is not price-elastic. And no London politician will willingly take on the cab drivers.

It will not take the politicians long to work out that it would be better to charge those who cross the boundary - ie, who vote outside London. But outer boroughs would greatly resent the loss of trade from entry charges, and will point out that they benefit least from a centripetal public transport system.

So it is easy to see why congestion charges are already being dubbed "London's poll tax". The have the same weakness: a need for exemptions and rebates, which erode revenues and acceptability. London's newspaper, the Evening Standard, has got hold of a consultants' report to the Government Office for London which illustrates the difficulties. This appears to suggest pounds 200m a year could be raised, but only if there were no exceptions other than for 999 services, a pounds 5-pounds 10 daily charge and hefty enforcement. Small beer, set against London's transport problems.

Workplace parking is relatively easy to tax through an annual charge, and this same report apparently indicates a charge of pounds 3,000 could be used to raise over pounds 100m. The trouble is that, like the tax disc, it would discourage ownership but not use. Companies would be concerned to use parking spaces to capacity. And those who had bought the "right" to use the roads would be less forgiving of the dreadful unsuitability of so many of London's main entry routes.

Most lobby groups (like the Liberal Democrat's candidate for mayor) say there should be no "push" until there is some "pull" - the improvement in public transport must come first. But it will take more than one mayor's lifetime to add to London Underground's capacity; the Jubilee Line extension has taken nearly eight years to build. Some (like Ken Livingstone) favour a "pull" from cheap fares. But if fares are cut on the Underground, before capacity can be increased, that will only increase peak-time overcrowding. Meanwhile, of course, this would fly in the face of the Government's plan for the financing the Tube, which assumes that fares will rise faster than inflation.

The Government's partnership scheme is the lineal descendant of privatisation. Quite right, Mr Livingstone. But there has been some cross-breeding on the way. Privatisation transferred ownership, management and crucially the financing (of, for example, British Steel or British Telecom) out of the public sector. By contrast, "contracting out" transferred day-to- day management (of, for example, catering or waste collection) to private enterprise, but left ownership and financing in the public sector. So then there was the "private finance initiative", closely followed by "public- private partnerships", which passed both financing and management (of, say, the building of a hospital) to the private sector, although leaving the public sector ultimately responsible.

The beauty of these partnerships was that - like privatisation and unlike mere contracting-out - they took the financing off the public sector's books, provided the Treasury was convinced that management had passed to the private sector, too. Whitehall is painfully aware that it took private-sector Bechtel to rescue the Jubilee Line Extension, and so wanted future Tube projects to be in private sector hands. So far, so clear. But the London Underground wanted to go on operating train services, and ministers were keen to let it do so, given Labour's "no-privatisation" Manifesto pledge. So that required another complicating tweak.

The result is that the Government has ended up involving the private sector, including Railtrack (even though ministers have helped to make it an object of hate) in leasing deals to manage the infrastructure of the Tube, while leaving service operations in the public sector. That could only work if everybody believed in it, and neither the Tube's political masters nor potential private-sector partners show signs of doing so. Those participating in these arrangements will be responsible not to the Whitehall department which designed them but to the new mayor and his transport board, and the most popular candidate for the job has made his scepticism abundantly plain.

The original rationale for this kind of financial engineering - getting the funding off the public sector's books - looks a lot less needful at a time when the Chancellor is running a very healthy surplus. Indeed, if this way of raising money proves expensive, John Prescott will find himself answerable to the Public Accounts Committee.

Meanwhile, it is hard to imagine that Londoners will be happy if both Tube fares and road use get more expensive. Which brings me back to the mayor's parlour. As Tony Travers, of the London School of Economics' Greater London Group, has pointed out, the appointment of an executive mayor marks a more radical change to the British political system than Scottish devolution. Expectations will be high. But with only the fragile financial tool of charges, the mayor will be dependent either on "precepting" higher council taxes from the boroughs or getting bigger grants out of Whitehall. So the only way to avoid becoming the most unpopular person in London will be to take on the Government. There are already demands to "repatriate" London's tax revenue from the heavily subsidised Scots. Which is fine for everyone but Faithful Dobson, who is standing on the loyalty ticket. This would presumably inhibit him from biting the Government hand that fed his campaign. No wonder he had to be conscripted.