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Fares Fair was a public policy advocated by the Labour Party administration of the Greater London Council, then led by Ken Livingstone. The policy of low public transport fares was implemented in 1981, but was later proclaimed to be illegal in the courts and rescinded the following year.
The Fares Fair policy had widespread support among Labour London members, who viewed it as a moderate and mainstream policy; no one had ever considered the legality of the move. In the 1979 GLC election, the political moderate Andrew McIntosh led Labour to victory, but the following day he was voted out by the party members and replaced by the hard left figure of Livingstone. Proceeding with the Fares Fair policy which they had promised in their electoral manifesto, they reduced London Transport fares by 32% in October 1981.
The legality of the Fares Fair policy was subsequently questioned by Dennis Barkway, Conservative leader of the Bromley London Borough Council. Taking the GLC to court, Barkway argued that the citizens of Bromley Borough were having to pay extra taxes for the London Underground, which did not reach into the London Borough of Bromley.
In 1979, the incumbent Labour government of James Callaghan lost the United Kingdom general election, to be replaced by a Conservative government under the leadership of Margaret Thatcher. The 1979 Conservative manifesto had stated that "Any future government which sets out honestly to reduce inflation and taxation will have to make substantial economies, and there should be no doubt about our intention to do so." The party had also stated that it did not want to implement unpopular spending cuts to the National Health Service, social security and defence, and so the funding cuts instead fell primarily on housing, education and social services, programmes which were primarily provided not by central government but by local authorities. Thatcher's newly appointed Secretary of State for the Environment, Michael Heseltine, was charged with decreasing local government spending; problematically for Heseltine, there was a tradition of local autonomy in England which he was hesitant to reign in under centralised control, something that would have angered traditional Conservative supporters.
Central to Heseltine's reforms was the Grant Related Expenditure Assessment (GREA), an educated estimate of how much each individual council had to spend to provide an average standard of service. Under Heseltine's new system, if a local council spent at GRE, its ratepayers would have to pay no more than the standard, national-average rate. Alternately, if a council spent more than its GRE, the local ratepayers would have to pay an increasing percentage of the financial burden. This, he hoped, would influence local authorities to keep their spending at the GRE.
The 1981 manifesto commitment was to subsidise fares on all London Buses, London Underground and British Rail services in Greater London. This would cause a reduction in fares of approximately a third and cause a corresponding increase in the transport costs of the GLC. The funding for the change was planned to come from a 5% increase in local government rates. The subsidy to British Rail was blocked by central government, which restricted the policy to the buses and the London Underground. This also had the effect of restricting the GLC subsidy in many of London's 32 boroughs that were not served by the London Underground.
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