When Boris Johnson and George Osborne set off on a trade trip to China at the weekend (October 12) odds are that the London Mayor had a word with the Chancellor on behalf of cash-strapped commuters. Mr Johnson wants season ticket holders to receive tax relief to help ease their rising cost burden – with the average season ticket set to reach £2,281 next year.
The savings could be hundreds of pounds and help to offset the rising cost of gas and electricity bills, with SSE the first energy provider to announce an 8% rise for customers.
Already an e-petition has been started on the website of HM Treasury by David Ayres. It says: “I call upon the Treasury to review the possibility to grant income tax relief for commuters that use public transport to travel to and from their place of work.”
“I believe this would have a two-fold effect: Firstly, it would encourage more people to use public transport, as there would be a clear benefit to use the train as opposed to the car, for instance. Secondly, it would give the working classes more money in their pockets; in times that are hard this will allow them to spend more at the tills, thus invigorating the economy. The extra spend at the tills will compensate for the loss of income tax in the outset. The mechanism for calculation of tax relief can be worked through the standard self-assessment forms, or for PAYE earners it can be added back to their tax code via a declaration.”
Train fares are due to rise by an average of 4.1% from January (rail companies can increase prices by one point above the July Retail Price Index inflation figure, which was 3.1%). But the worst affected routes could see fares rise as much as 9.1% and thousands more commuters join the ranks of those paying more than £5,000 a year just to get to work.
“If you have to use public transport morning and night, then you know that it can take a huge slice of your income,” says Mr Johnson. “Every autumn we face the same dilemma. If we follow the pleas of our officials and raise fares to cope with inflation and the cost of investing in our systems, then we are tightening the squeeze on people who have already seen their disposable income shrink over the last five years. If we are irresponsible, on the other hand, and we fail to replenish the ‘fare box’, then we risk disaster. There is a compelling case for tax relief.”
Of course, Mr Johnson is speaking mainly on behalf of those who commute into and around the capital but the tax savings would equally apply around the country.
The Labour Party has challenged the mayor to freeze fares in London next year, attacking the regular price rises that make travel in the capital the most expensive in the world. Maria Eagle, Labour’s Shadow Transport Secretary until this month, said: “David Cameron has already broken his promise to hard-pressed commuters to cap this year’s fare rises at one per cent above inflation, with some fares rising by as much as 9.2 per cent as a result.”
Mr Johnson maintains that tax breaks would be a more effective tool than a price freeze which would “benefit tourists and casual passengers who did not need or deserve help”. Tourists, day trippers and weekend breakers boosting London’s economy may think differently. Mr Johnson also takes an apparent side-swipe at pensioners’ free travel, saying that 40 per cent of passengers travelled for nothing but there would be mayhem if any attempt was made to strip the “affluent bourgeoisie” of old-age bus passes. He says the entire burden of fare-paying is carried by the other 60 per cent including “workers on low or moderate incomes who travel large distances every day to their places of employment and who have absolutely no choice in the matter. It is time we did something specifically to help them, and that something is to give tax relief on travel,” he suggests, adding that a commuter buying a £784 annual bus pass would save £251 in tax and National Insurance, and their employer would save £108.
The Campaign for Better Transport’s chief executive, Stephen Joseph, is welcoming of the proposal but stresses it has to be coupled with an end to above-inflation fare rises to make transport affordable. He points out: “Providing tax relief for people buying season tickets is an idea we’ve been promoting for a number of years so we fully support its introduction, particularly for bus users who are generally lower paid and have seen large fare rises in the last few years. There is already similar scheme in the US that is popular, works well and doesn’t cost the government a fortune. We see no reason why a comparable scheme couldn’t work here and we know there is support from employers and bus operators. The biggest issue has always been annual above inflation fare increases and there is no change of government policy on this. This is bitter news for everyone who relies on the train to get to work, not least the large number of commuters in marginal constituencies who will be a key group at the next election.”