Comparing the effects of financial incentives on individuals and families from different socioeconomic backgrounds and travelling across the capital and outside London for different purposes allows us to illustrate how such incentives affect Londoners differently. These policy papers also illustrate how these financial incentives would interact with existing financial incentives in place in London.

Policy paper 1: Subsidised annual membership of bike hire scheme for people on low incomes

Policy objective: To encourage more people to cycle.

Policy description: Shared bike hire schemes are popular among Londoners. This measure will provide a 90 per cent discount on an annual subscription to Santander bikes for people on low incomes.

What is the effect on Londoners?

This measure targets low-income households. In our model, only Sophia and her children, and Peter and Zara would be eligible for this scheme. However, Peter, Zara and their children are unlikely to cycle to visit their family as the journey is 21 miles. On the other hand, Sophia can cycle to the shop, and her children – aged 14 and 16 – are both allowed to use Santander bikes. Looking at the cost per trip isn’t telling for this measure, as the Santander annual subscription already reduces considerably the cost of cycling per trip. But an annual subscription is paid upfront, meaning a family of four individuals will need to pay £480 to allow them all access.

Policy paper 2: Free bike for people on low incomes

Policy objective: To incentivise people on low incomes to cycle.

Policy description: Travelling by bike is one of the cheapest modes of transport. But purchasing a bike and the right equipment can be costly and can be a barrier for people on low incomes. This policy will provide people on low incomes with free bikes.

What is the effect on Londoners? 

Only Sophia and her children will benefit from this scheme as it only helps low-income people who haven’t yet bought a bike. However, our model only captures a specific moment in time, and this measure could benefit other families and individuals in the model – such as Peter, Zara and their children – as and when they are eligible for the scheme.

This policy would be more effective if introduced with affordable cycle hangar spaces as Sophia doesn’t have any space to store her family’s bikes at home. Alone, this measure isn’t likely to encourage her and her family to cycle (see policy paper 4).

Policy paper 3: Cycle scheme for all Londoners

Policy objective: To incentivise people on low incomes to cycle.

Policy description: Travelling by bike is one of the cheapest modes of transport. But purchasing a bike and the right equipment can be costly and can be a barrier for people on low incomes. This policy will offer a 32 per cent discount when purchasing a bike. This could be modelled on the cycle to work scheme, allowing individuals to spread the cost of purchasing a bike over several months.

What is the effect on Londoners?

Mike, Sophia and Nikhil would benefit from the scheme as they are currently ineligible for the cycle to work scheme, and they are either going to purchase a bike or have purchased one. Whilst people who have owned a bike for a long time, such as Luke, Matt, and Peter and Zara, wouldn’t experience any immediate benefit from the scheme, it could support them when replacing their bikes in the future. Leila, Paul and Lena are already eligible for the cycle to work scheme, so they wouldn’t benefit from this scheme.

Policy paper 4: Lower the cost of cycle hangars

Policy objective: To provide affordable cycle hangars for all Londoners.

Policy description: Travelling by bike is one of the cheapest modes of transport. But having a secure space to store a bike is necessary, and many people don’t have this at home. Cycle hangars have been installed to address this issue, but a hangar space can be expensive. The cost can be up to £72 a year per bike, making cycling unaffordable for people on low incomes and families.

There are two types of policies: those that lower the price for every Londoner and those that target specific demographics. In this policy paper, we analyse the effect of:

1. Free cycle hangar space for people on low incomes;
2. Discounted cycle hangar space for people on low incomes;
3. Cycle hangars at £30.

Free cycle hangar space for people on low incomes

Policy description: This policy provides free cycle hangar space for people on low incomes.

What is the effect on Londoners?  

Sophia and her children will benefit from this measure as she is on a low income, and she doesn’t have any space to store the family’s bikes at home. Looking at this policy on a per trip basis isn’t really telling as the cost of a cycle hangar is paid upfront every year. The average cost of a bike hangar is £58 per year. This means Sophia could save up to £216 a year on cycle parking. However, our analysis found that some local authorities oppose free cycle parking on the basis that people could leave their bikes in the hangars and not necessarily use them more.

Discounted cycle hangar space for people on low incomes

Policy description: This policy introduces a 10 per cent discount on the annual price of a cycle hangar space for people on low incomes.

What is the effect on Londoners?  

Sophia and her children will benefit from this measure as she doesn’t have any space to store bikes at home. Looking at the price saving on a per trip basis, the policy doesn’t make a big difference. But this isn’t really telling as cycle hangars are paid upfront every year. With this measure, Sophia could save £21.60 on cycle parking. This saving may sway her decision making if she is considering purchasing bikes for her family but would be more effective if combined with another measure to reduce the cost of owning bikes.

Cycle hangars at £30

Policy description: This policy sets a standard price for cycle hangars of £30 per year.

What is the effect on Londoners?

Half of the Londoners in the model don’t have space to store their bikes at home and could benefit from this scheme. The biggest benefit is experienced by the individuals or families living in the boroughs that currently charge a higher price than £30 per year for cycle hangars. However, Matt lives in a borough that currently charges less and so would see his costs increase. Sophia is unemployed and would benefit from this measure. In fact, Sophia and her children would experience the largest decrease (from £216 a year to store all their bikes to £90). This measure benefits people who have the least space at home, which is usually people on lower incomes.

Policy paper 5: Include electric vehicles in the Congestion Charge

Policy objective: To disincentivise all forms of driving within the Congestion Charging zone.

Policy description: EVs are currently exempt from paying the Congestion Charge, but they still contribute towards congestion and air pollution in central London. This policy would charge EVs the same rate as other cars (£15) for driving in the zone.

What is the effect on Londoners?

Only one of the Londoners in the model, Paul, drives an EV and so would be affected by the scheme. For Paul, the cost of driving from Kensington to see a musical in central London would increase by 63 per cent. This would discourage him from driving for this journey, because whilst Paul is relatively affluent, using active or sustainable travel for this journey is convenient and cheaper. His current cost of driving is increased by the parking tariff at his destination; however, if Paul were to find cheaper parking, the use cost of the journey could currently be close to £0. This measure would disincentivise Paul from driving short journeys.

EVs are growing in popularity in London, accounting for 25 per cent of newly registered vehicles in 2022. ¹⁶ But this popularity is not distributed evenly. More than half of the EVs sold in the UK in 2015-17 were purchased by households in the richest 20 per cent income bracket whilst just 4 per cent were purchased by the lowest 20 per cent. ¹⁷ This means that this policy would be most likely to impact wealthier Londoners.

Policy paper 6: Double fuel duty

Policy objective: To disincentivise driving by increasing the cost of car journeys.

Policy description: Fuel duty has been frozen since 2011 and cut by £0.05 per litre since March 2022. This measure looks at what would happen to Londoners’ driving costs if fuel duty were to be doubled, from £0.53 to £1.06 per litre.

What is the effect on Londoners?

We calculated the total cost of driving for all journeys in our model. In practice, many individuals and families would use other modes (more detail in appendix 2).

Peter and Zara’s family are most impacted by this measure; their costs of driving to visit Zara’s parents every week would increase by 25 per cent. Peter and Zara’s family have a low household income, so the increase would have a significant impact. However, their costs of driving are still much lower than the costs of other Londoners’ modelled journeys.

Luke’s costs of driving would also increase – by 14 per cent. Luke’s trip is for caring purposes outside of London, and he doesn’t have access to alternative modes of travel for this journey, so the impact could be considered inequitable. However, he is relatively affluent and makes the trip infrequently. His costs of driving are also much cheaper than the other Londoners modelled.

All other modelled journeys increase by less than 2 per cent as the cost of fuel represents only a small share of people’s total costs of driving. Of the people who drive, only Paul isn’t impacted by this measure, as he drives an EV.

Doubling fuel duty would be a dramatic change from government policy over the last 12 years, but there are many options for increasing fuel duty that lie between keeping it frozen and doubling it.

Policy paper 7: Norwegian-style vehicle excise duty

Policy objective: To disincentivise ownership of high emission cars. 

Policy description: Compared to other European countries such as Norway, the Netherlands or France, the UK has relatively low levels of vehicle tax. This ¹⁸measure looks at what would happen if VED in the UK was at similar rates to those in Norway in the first year of ownership. See more detail about Norwegian-style VED in the methodology (appendix 1).

What is the effect on Londoners?

Only Leila’s family and Lena are impacted by this measure because they have both purchased a new car in the last year. For Leila and her children, this policy would see the costs of driving to school then on to Leila’s work increase by 40 per cent. Therefore, this policy may have encouraged Leila to choose a vehicle with lower emissions.

In contrast, Lena’s car has ultra-low emissions, so she sees a very small cost saving with this measure.

Whilst this policy will encourage Londoners to buy low emission cars, it could also lead to an increase in the purchase of secondhand vehicles which do not pay registration fees. However, national government could explore the replacement of VED with road user charging.

Policy paper 8: Distance- and emission-based road user charging

Policy objective: To encourage people to drive less and choose cleaner cars.

Policy description: This policy replaces the ULEZ and Congestion Charge with distance- and emission-based road user charging.

EVs will be charged £0.03 per mile. Using the existing VED band, the rate will increase by £0.10 to encourage people to choose cleaner cars. In this model, people driving low emission cars, emitting between 1g/km and 50g/km, would pay £0.13. People would pay up to £1.23 per mile for driving the most polluting cars (see appendix 1 for more detail).

What is the effect on Londoners?

Londoners who drive longer distances with high CO₂ emissions would be the most negatively impacted by this measure. Peter and Zara would experience the highest increase, which can be explained by the relatively low travel cost they currently face. Lena and Paul would experience marginal increases of 0.4 per cent and 2.9 per cent respectively.

Some people would benefit from it, such as Sophia and her children, and Nikhil. It would cost them approximately £2 to drive to their destinations compared with £13 in the current situation. In both cases, they are taking shorter trips, and they have paid off their car finance. Leila and her children, and Matt would also benefit from the measure.

Whilst most Londoners would still have a financial incentive to use public transport compared to the total cost of driving, this incentive would be lower for Sophia and Nikhil than with the current system. The pricing structure should ensure that using public transport remains less expensive than driving.

Policy paper 9: Increase the price of residential parking permits

Policy objective: To disincentivise car ownership.

Policy description: This policy increases the cost of a residential parking permit by 20 per cent across London.

What is the effect on Londoners?

The people impacted by this measure are those who don’t have access to off-street parking. Luke is most impacted as a percentage of current costs, both because he drives a high emission vehicle and because his current costs are lower.

Overall, this measure has very little impact on the cost of driving for Londoners. This is because parking permits account for a relatively small proportion of the total cost of driving. Unless they are dramatically increased, the costs of parking permits alone are unlikely to discourage car ownership. By law, local authorities cannot increase parking permit prices just to generate revenue, but we know from a previous Centre for London report ¹⁹ that in many boroughs, parking permits do not cover operational costs. Interventions such as emission-based charging structures can incentivise the take-up of cleaner vehicles. Discounted or preferential parking for rideshares and escalating charges for second vehicles could also be explored to further disincentivise car ownership.

Policy paper 10: Mandate emission-based parking permits across all boroughs

Policy objective: To encourage people to own lower emission vehicles.

Policy description: This policy introduces emission-based parking permits across all boroughs. At present, only some boroughs have established parking permits on this basis.

What is the effect on Londoners?

The people impacted by this measure are those who need a residential parking permit. Luke is most impacted as a percentage of current costs, both because he drives a high emission vehicle and because his current costs are lower.

Overall, this measure has very little impact on the cost of driving for Londoners. This is because parking permits account for a relatively small proportion of the total cost of driving. This policy alone is unlikely to encourage more people to drive cleaner vehicles. However, this measure would work in synergy with additional financial disincentives. This measure would be even more effective if introduced with a clear communication strategy and staggered over several years with a gradual increase in the cost of parking permits to further encourage the take-up of cleaner vehicles.

Policy paper 11: Low-income concessionary fares

Policy objective: To encourage public transport use.

Policy description: This policy introduces a concessionary scheme for people on low incomes, set at a 10 per cent discount on bus and tube fares.

What is the effect on Londoners?

Sophia and her children benefit from a 10 per cent reduction in their public transport costs with this measure. For this household, public transport was already substantially cheaper than driving for their journey. Whilst this might not prompt a modal shift for them, as a family on a low income, there are still other benefits associated with reducing their public transport costs.

Peter, Zara and their children also experience a 9.1 per cent reduction in the public transport costs for their journey. This is less than 10 per cent as the discount doesn’t apply to their 12-year-old’s tube fares. For this family, public transport is still more expensive than driving this journey, so they would also be unlikely to change their behaviour as a result.

Policy paper 12: £1 bus fare

Policy objective: To encourage people to use public transport.

Policy description: This policy lowers the standard bus fare to £1 instead of £1.75.

What is the effect on Londoners?

Only Londoners who use the bus will benefit from this measure. Sophia and her children, and Nikhil will experience the highest decrease as the bus is the only public transport mode they use. Mike already travels free on buses with his Freedom Pass, so he wouldn’t benefit from this measure. Paul and Matt are only using the tube, so they won’t benefit from this measure either.

Research has demonstrated that people on low incomes are more likely to use the bus than other modes of transport, meaning that this measure is likely to benefit low-income households. ²⁰

For Peter, Zara and their children, it would still be cheaper to drive than to use public transport to complete their trip. But this measure would lower the difference between the cost of driving (£4.40) and using public transport. This measure would be most effective if packaged with other policies disincentivising driving.

Conclusion

In the first part of the report, we demonstrated that policy packages are more effective than standalone policies. The policy papers included in this part describe individual policies, but they could be packaged together to maximise their effectiveness and boost their public acceptability.

Our recommendations for practical policy changes were detailed in part 1, and we have made some practical recommendations to encourage modal shift in outer London in our accompanying report Sustainable Travel in Outer London.