Service cuts and higher charges are shape of things to come

Setting fares is difficult at the best of times. At the depth of a recession it becomes a whole lot worse.

Tube, bus and tram users expect the Mayor to spare them big fare rises when the economy is in the doldrums and the retail prices index is negative. If prices are falling, why shouldn't fares?

Former mayor Ken Livingstone generally put up fares at the rate of one per cent ahead of the increase in retail prices. That was during a period of apparently endless economic and passenger growth, so the increase in the overall fare yield allowed him to fund new projects. Moreover, he was given new multi-billion-pound grants by then chancellor Gordon Brown.

Things are very different now. Fare revenue is plunging as passenger numbers dwindle because of the recession. Yet costs are rising.

The East London and London Overground lines are being significantly enhanced. Crossrail will begin to cost serious money next year.

The Tube investment programme will be re-priced next year, possibly adding as much as £1 billion per year to costs.

Boris Johnson has decided fare rises and some service cuts are the least-worst way to keep projects going. He is unwilling to use council tax to increase subsidy to TfL.

Many bus and Tube pay-as-you-go fares will rise sharply, while Travelcards are held down, presumably because of links to regulated national rail fares.

However, the decision to put up the congestion charge, while oddly inconsistent with the decision to scrap the Western extension, will to some extent share the rising burden.

This package is a leading indicator of what lies ahead for the boroughs and for Whitehall. Spending cuts and increases in charges and/or taxes will soon be the norm. Boris Johnson is merely ahead of the curve.

Tony Travers is director for the London group at the LSE.