London commuters facing huge fare rises to fund transport plans

Ken Livingstone, the London Mayor, is planning inflation-busting fare rises on London's buses, trains and the Underground for the next two years.

The revelation comes six days after London's commuters were stung with fare increases of up to 40 per cent on certain tickets. Bus travellers, whom Mr Livingstone has attempted to woo with new vehicles and dedicated bus lanes, were particularly hard hit: a single cash fare rose from £1 to £1.20.

A spokesman for Transport for London (TfL) admitted that the rises were not a one-off. "The fares are set each year by the Mayor. There will probably be above-inflation rises next year and possibly the year after," he said.

The fare rises are to help fund the Mayor's ambitious £10bn transport investment programme, which will see the East London Line extended, further improvements to the Underground and a new bridge over the Thames to the east of the capital.

A detailed analysis of TfL's finances in today's IoS Business section reveals that funding for the projects is tight, and many schemes can go ahead only if fares continue to rise above inflation.

TfL refused to speculate on how much future fares would rise. But Standard & Poor's, a company that specialises in scrutinising companies' finances, calculates that TfL is likely to raise average fares by 10 per cent above the headline rate of inflation over the next two years. Assuming the headline rate remains at 3.4 per cent, a cash bus fare would cost £1.55 in 2007.

The fare rises will be used to underpin up to £2.9bn of bond debts that TfL will take on in the next five years. The bonds are needed to fund the Mayor's transport projects.

The TfL spokesman admitted that its business plan was ambitious. If a project ran over budget, future transport schemes might have to be shelved, he said. However, he did not specify which ones could be under threat.

The Mayor's proposal to extend the congestion charging zone west to include Chelsea and Kensington has also run into criticism, because residents of these affluent areas will be offered a 90 per cent discount when driving within the zone.

Tony Grayling, associate director of the left-leaning think-tank the Institute for Public Policy Research, said: "Extending the zone could actually result in more people driving their cars without paying the full fee."

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