London’s boroughs could be hit by a bill for up to £100m after mayor Boris Johnson reneged on a deal over the funding of the capital’s Freedom Pass scheme.
With up to £22m to be found next year, borough leaders fear they will be unable to hold council tax bills low enough to take part in the council tax freeze and have claimed the costs are a direct result of Mayor Johnson’s decision to raise bus fares by 12.7% last year.
Transport for London claim the fault lies with London’s boroughs for failing to sign a deal when it was originally offered.
The Freedom Pass entitles Londoners over 60 to travel for free on the capital’s public transport. The cost of the scheme – some £251m this year – is borne by London’s boroughs which negotiate an amount by which they reimburse Transport for London for the costs of the scheme. TfL has reserve powers to impose a cost should negotiations founder.
Under a five-year deal struck in 2009, London Councils and TfL agreed to cap the costs of the scheme each year and for the mayor to sponsor a private bill to significantly amend TfL’s reserve powers. But due to a dispute over an early-termination clause, London Councils didn’t sign the deal until this summer.
However, at Mayor’s Question Time on 15 September, Mayor Johnson announced he would no longer be abiding by the terms of the five-year deal.
London Councils now claims the costs of the Freedom Pass to boroughs could amount to an extra £22m next year - from £280.7m to £303m - and between £90m and £100m over the next four years. Officers are seeking urgent talks with TfL counterparts so that an agreement can be reached before 31 December at which point the reserve scheme would kick in allowing TfL to set a charge without any negotiation.
“For Boris, it’s heads we lose, tails he wins,” one London Councils officer said. “When he put the fares up this year, they went up by more than was assumed when we struck the five-year deal. Now he’s trying to recover that extra cost.
“The extra couple of hundred thousand pounds this will cost every borough will affect their ability to keep bills below 2.5%,” he added. “For one or two, the effect of the increase will take up a substantial proportion of that 2.5%.”
However, a TfL spokesman insisted London Councils were to blame for not signing the deal back in 2008 when it was first available.
“Legal responsibility for funding the Freedom Pass sits with London Councils and we reached an outline agreement with them in 2008 on a five-year funding deal,” he said. “London Councils failed to sign that deal and since that time the financial burden on TfL of the proposal has increased significantly. That means we need to take another look at the amount London Councils would provide to ensure they make a fair contribution.”
However, sources at London Councils pointed out that a letter from TfL’s transport commissioner Peter Hendy sent to London Councils on 15 September indicated that TfL would have exercised the early-intervention clause even if the deal had been signed. “Recent circumstances have been quite exceptional and would have led to TfL exercising its right to terminate even if the deal had been signed last year,” the letter stated.
Late 2008 – Boroughs and Mayor/TfL start negotiations over five-year funding deal
Feb 2009 – Agreed deal sent to London Councils’ Transport and Environment Committee
Oct 2009 – Boris Johnson announces 12.7% rise in bus fares, 3.9% rise in tube fares
July 2010 – London Councils relents over inclusion of early-termination clause and signs five-year deal; Boris Johnson does not sign deal
Sept 2010 – Boris Johnson announces he no longer intends to honour five-year deal
31st Dec 2010 – Date at which TfL reserve powers kick-in, allowing it to set the charge without negotiation