Crossrail – Should we be cross? Part 2
An unpopular congestion & pollution tax is needed to cover the extra costs
The Mayor of London, Sadiq Khan, will introduce an extension of the Ultra Low Emissions Zone (ULEZ) in August that is forecast to raise an additional £250m per year. Originally the ULEZ covered Central London only, but the extension will mean that drivers of non-compliant vehicles in Greater London will pay a £12.50 charge for each day of use.
The extension to the scheme is highly unpopular. It is subject to a legal challenge and several London Boroughs affected have stated that they will not allow Transport for London (TfL) to install the cameras necessary to enforce the scheme.
The stated purpose of the ULEZ is to reduce the harm done by pollution. Opponents to the scheme point to the other forms of harm done to less financially secure Londoners outside the centre. These might be people who are unable to upgrade their vehicles but have to use them anyway; for instance in order to work or to take elderly relatives to hospital. For these people the ULEZ will work as a regressive tax. There will also be impacts to businesses and other organisations.
An Imperial College study cast doubt on the efficacy of the ULEZ in reducing pollution, since many older cars are replaced with new as part of the normal replacement lifecycle.
TfL state that the revenue from the income received from the ULEZ will be ‘reinvested into improving the transport network and making London’s air cleaner’. So, how long before the £250m per annum income from the ULEZ will be reinvested?
The additional construction cost for Crossrail/Elizabeth Line arising from the delays are quoted as £4bn (£4,000 million).
Part 1 of this post concluded that the interest charged on £4bn would be £136m per annum (approximately 3.4%). My simple calculation is that it would take around 23 years to pay off the additional construction costs of Crossrail using the revenue from the ULEZ. Since the overnight construction costs are only part of the true cost of the overrun, it is likely that it will take at least a generation (20 to 35 years) of ULEZ income to pay off the additional cost of Crossrail.
“Our growing coalition of London councils are not satisfied with the justification for the expansion and remain strongly opposed to it. Until we have seen compelling evidence to the contrary, it remains our position that this scheme will not translate successfully to outer London and the negative impact to local households and economies will far outweigh the negligible air quality benefits.” - Harrow Council statement on ULEZ expansion
Sources & Notes
1) ‘Inside Sadiq Khan’s Ulez cash machine’ - Daily Telegraph, 17/Dec/2022. Inside Sadiq Khan’s Ulez cash machine (telegraph.co.uk)
2) ULEZ expansion plans stretching to Surrey border could be stopped by legal challenge - Get Surrey, 14/Jan/2023. ULEZ expansion plans stretching to Surrey border could be stopped by legal challenge - Surrey Live (getsurrey.co.uk)
3) ‘London's Ultra Low Emission Zone resulted in only 'marginal' air quality improvements’ - Sky News, 16/Nov/2021. London's Ultra Low Emission Zone resulted in only 'marginal' air quality improvements shortly after it was introduced | Science & Tech News | Sky News
4) TfL statement on reinvestment - 08/Apr/2019. World’s first 24 hour Ultra Low Emission Zone starts in London | London City Hall
5) Our latest statement on the Mayor of London's ULEZ expansion – Harrow Council 13/Jan/2023
6) Payback period calculated using the ‘Number of Periods’ function of Microsoft Excel.
Payback Period = NPER(Interest Rate, Payment, Present Value)
Payback Period = NPER(3.4%, £34m p.a., £4000m)