Sadiq Khan has been given the green light by ministers to continue to use council tax to bail out Transport for London.
In a statement, issued by Levelling Up Secretary Michael Gove, the government has agreed to allow London’s Mayor to add an additional £20 to benchmark Band D council tax bills from next April to help TfL balance its day-to-day budget.
Mr Khan had announced last year that he planned to add a £20 a year levy to average council tax bills for three years to provide extra funding to TfL, which has seen its fares income collapse due to the pandemic. This would be the second of three annual TfL hikes. TfL is facing a shortfall in income because almost one in four Tube weekday Tube passengers are yet to return to regular travel.
Mr Khan is yet to announce his draft budget for the 2023/24 financial year but proposals are due this month. His current Band D “precept” - which is paid by Londoners alongside their borough’s share of council tax - is almost £400.
The mayor has become increasing reliant on council tax to fund TfL, despite describing it as a “regressive” tax that hits the poor hardest. Last month he said £25m of City Hall reserves would be used to limit the scale of bus cuts in central London.
He is also planning to use £110m of City Hall funds to pay for a scrappage scheme for the Greater London expansion of the ultra-low emission zone, which is due to happen next August.
Announcing the Government’s decision on Monday, Mr Gove criticised the Mayor and the Greater London Authority for hitting London taxpayers at a time when household budgets are being badly squeezed by the cost of living crisis.
He said: “The Government has expressed ongoing concern about the management of TfL by this Mayor, and it is disappointing that London taxpayers are having to foot the bill for the GLA’s poor governance and decision-making.
“Whilst the Government will not oppose this request, any decision to increase the precept is solely one for the Mayor, who should take into account the pressures that Londoners are currently facing on living costs and his decision to raise council tax by 9.5 per cent last year.”
But a spokesperson for the Mayor accused the Government of trying to rewrite history.
“The Government’s 2015 removal of its operating grant made TfL over-dependent on fares income, which created a financial emergency when the pandemic hit,” the spokesperson said.
“Passenger numbers have increased but are yet to reach pre-Covid forecasts. TfL was previously on a solid financial footing thanks to Sadiq.
“The GLA has been forced to consider raising council tax by the Government to keep our Tubes and buses running. This is an extraordinary attempt to rewrite history by the very Government who insisted the Mayor raise over £500m a year as a condition of emergency funding for TfL - including explicitly proposing that council tax was raised to do so.”
