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Government grants to Transport for London fund the war on cash

June 4, 2013 by Ron Delnevo — Chairman, Cash and Card World

Millions of visitors come to London each year. With taxis being expensive (especially if you use a card, because you are charged a 10 percent "convenience" fee), most visitors to England's capital use public transport.

All public transport in London is operated by Transport for London. What foreign visitors to London will not know is that more than 40 percent of all TfL revenue comes from central government grants. This is a very generous subsidy of a local transport undertaking and one not mirrored in any other town in the UK.

As England's capital, there are, of course, arguments that can be put forward for giving London a special status. However, one thing is clear. The wholly exceptional level of government grants given to TfL creates a need for exceptional monitoring of how the money is spent.

Sadly, this is not happening. For years, TfL has been forcing visitors to London to help subsidize card use. The TfL Oyster card has been the beneficiary of these subsidies. For example — and staggeringly — to travel one Underground stop by cash costs £4 ($6.12), whereas an Oyster card user pays only around £1.50 ($2.29).

The bulk of this ludicrously high subsidy of Oyster Card use is effectively coming from the hard-pressed central government purse. If the subsidy were eliminated, government grants to TfL could be substantially reduced — or even eliminated.

All of this, by the way, against a backdrop of the British Retail Consortium — which represents all of the major retailers in the U.K. — producing statistics each year that cash is the most economic payment method for retailers.

So what is the justification for TfL’s absurd subsidization of Oyster Cards? Well, for years TfL has been cozying up to various card issuers. These card issuers make massive profits from card use, but none at all from cash. So TfL has created a situation that the card issuers love: cards being favored over every other payment method!

Soon, all cards issued in the U.K. will be able to be used on every TfL service. Oyster will fade away, but what will be left is a massive subsidy for card use — and fat profits for the card issuers from the fees they charge for card use.

This is the reality of the financial disgrace that is being acted out within TfL. The London mayor is fully aware but does nothing. So visitors to London either pay through the nose to use cash or are forced to buy an Oyster card that they don't want and can't use after they go home.

A better way? Lothian Region Transport, which provides a bus service for Edinburgh that is widely-recognized as being the best in the U.K. On Lothian buses, both foreign visitors and locals still pay by cash. Or they can buy their ticket beforehand using any payment method they please. No subsidy of card use required — and no massive grant from central government for Scotland’s capital!

It is time the London mayor sorted out this situation, to make life easier — and cheaper — for all of the millions of visitors to London who want to use the cash they love!

About Ron Delnevo

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