Encouraging more Londoners to travel using active and sustainable modes is critical if London is to achieve its 2030 net-zero carbon emissions target.

This can also improve Londoners’ health and reduce congestion, air pollution and road accidents. To encourage modal shifts, policymakers can use different instruments including infrastructure investments, regulations, education and nudges, and financial incentives.

This report focuses on how financial incentives, including taxes and subsidies, can be used to encourage modal shifts. Other factors such as the transport environment, people’s capabilities and needs, and attitudes are explored in the accompanying report Supporting Sustainable Transport in Outer London.

For most Londoners, driving is the most expensive mode of transport because of a combination of financial disincentives and intrinsic costs involved in owning and using a car. Positive financial incentives are also in place to make using public transport and shared mobility more financially attractive. Despite these financial incentives, 40 per cent of daily trips in London are made using cars. What else can be done?

In this report, we explore the different financial incentives in place in London and how the landscape could be altered to further encourage people to take sustainable modes of transport. In our research, we found that policy packages, where carrots and sticks are combined, are more effective than standalone policies – improving effectiveness and public acceptability. Effective communication is also important to maximising the potential of financial incentives – people can’t make change when they don’t know what their options are.

New technologies such as Mobility as a Service (MaaS) will be key to support future urban mobility. However, for financial incentives to be effective and fair, policies influencing transport costs, including national taxes and local road user charging, will need to be aligned. This is difficult as transport policies are the responsibility of different levels of government, and of different teams, with competing priorities and scarce resources.

The next sections outline some recommendations on ways to use financial incentives to help the transition to lower pollution and lower carbon travel whilst maintaining fairness:

• Our first set of recommendations are about ways policymakers can make financial incentives more effective and fairer.
• Our second set of recommendations are about practical changes to the current financial incentives landscape in London.

Recommendations about ways to make financial incentives more effective and fairer

To communicate effectively about travel costs and existing financial incentives

1. National government, Transport for London (TfL) and local authorities should make it easier for people to know the overall cost of driving relative to other modes of transport such as car clubs, cycling and bus, and to find out about existing financial incentives not to own a car.

Here are some ideas on how this can be done:

• A campaign could be launched at different levels of government to raise people’s awareness about the actual costs of driving. TfL already shows how much a car costs on its website, but national government and local authorities could also introduce similar campaigns to reach out to more people.
• Local authorities could share information about existing alternatives to owning a car when residents renew their parking permits to ensure their campaigns target the right people.
• Local authorities could also share information about schemes available in their boroughs, such as ‘try before you bike’, when a new resident registers for their council tax.

2. National government, TfL and local authorities should communicate about any new financial incentives or disincentives in advance of their introduction to allow people time to adapt their travel behaviours (e.g. giving plenty of notice that the price of resident parking will change so people can look into alternatives to owning a car).

To consider all incentives as part of a package of measures to boost their effectiveness and ensure fairness

Policy packages are more effective than standalone policies in encouraging modal shifts as they improve public acceptability and fairness.

3. National government, TfL and local authorities should consider the push and pull framework when designing a new policy in order to increase public acceptability and ensure fairness.

For example, local authorities can increase the price of their residential car parking permits and lower the cost of their secure bike parking or parking spaces for car clubs.

4. National government should seek to align their existing policies that impact the cost of travelling, such as fuel duty or annual rail fare increases, to work towards the same objectives.

Recommendations for practical change and policy solutions to encourage active and sustainable travel

This section sets out some recommendations for practical policy solutions to encourage more sustainable and active travel.

To further disincentivise driving where alternatives are possible

1. Local authorities should use their parking strategy to encourage modal shifts.

Here are some ways to do this:

• Local authorities should support their teams involved with parking and active and sustainable travel to work together. This will ensure decisions about parking costs are aligned with active travel objectives.
• Local authorities could introduce emission-based parking permits if they haven’t already. Local authorities would need to engage with residents and offer advice and support for those who would be the most impacted by the change. To maximise its effectiveness, this measure will need to be introduced over a period reflecting the time needed for such behaviour change.
• Local authorities could consider introducing more granular emission-based bands for their residential parking permits to ensure a more comprehensive and fairer pricing structure.
• Local authorities could raise the overall price of their residential parking permits to manage demand for parking. Any surplus could be reinvested to support active travel.
• Local authorities could consider reducing the cost of parking permits for car club vehicles.

2. TfL should introduce distance- and emission-based road user charging. To discourage people from driving for short journeys, TfL should consider a minimum charge equivalent to at least a single bus fare to ensure driving remains more expensive than public transport.

3. TfL should offer a scrappage scheme to Londoners on low incomes or disability benefits to dispose of their cars (irrespective of the car emissions) in exchange for ‘mobility credits’ that can be used to pay for public transport and a range of shared mobility providers.

To unlock cycling – from acquisition to storage – reinforcing the financial attractiveness of cycling

4. Local authorities should provide affordable and secure cycle parking with reduced rates for households on Universal Credit.

5. TfL should provide more funding to London boroughs to install and maintain secure parking for bicycles when its financial position allows.

6. National government, local authorities, TfL and Business Improvement Districts should encourage businesses to participate in the Cycle to Work scheme, focusing on Small to Medium sized Enterprises (SMEs).

7. National government should offer tax incentives and loans to all citizens wanting to buy a bicycle. This could be based on the current cycle to work scheme but be available to more people, particularly those who currently face the biggest barriers to access. To unlock cycling – from acquisition to storage – reinforcing the financial attractiveness of cycling.

To encourage public transport use 

8. National government should either provide sufficient funding for TfL or grant the Mayor of London greater powers to raise funds in the capital.

More detail is given on this recommendation in our report on Supporting Sustainable Transport in Outer London.

9. National government and TfL should consider freezing public transport fares as a way of helping people with the cost of living crisis.

To encourage multi-modal travel through a consistent and affordable pricing system

10. TfL, national railways and local authorities should deliver high quality, free and safe bike storage at every train and tube station.

11. TfL should seek to work with operators and app developers to integrate payment mechanisms for shared mobility providers with payments for public transport in London.