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Fares Fair was a public policy advocated by the Labour Party administration of the Greater London Council (GLC), then led by Ken Livingstone. The policy of low public transport fares was implemented in 1981, but was later ruled to be illegal in the courts and rescinded the following year.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 1981 GLC election, the political moderate Andrew McIntosh led Labour to victory, but the following day he was voted out by the Labour members of the GLC and replaced by Livingstone. Proceeding with the Fares Fair policy which they had promised in their electoral manifesto, they reduced London Transport fares by 31 per cent in October 1981.
The legality of the Fares Fair policy was subsequently challenged by Dennis Barkway, Conservative leader of the Bromley London Borough Council. Taking the GLC to court, Barkway argued that the citizens of the London Borough of Bromley were having to pay extra taxes for the London Underground, which did not serve the borough.
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 rein in under centralised control, something that would have angered traditional Conservative supporters.Carvel 1984. pp. 110–111. The government at the time stated that their policy was that all public transport should be able to operate without any subsidy (this was never achieved in practice).
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.Carvel 1984. p. 112.
Because the rate demand for 1981 had already been issued some seven months earlier, the GLC attempted to raise the funding for the scheme up until April 1982 by issuing a supplementary rate demand for the extra money. This had the unintended consequence that it gave London ratepayers full visibility of how much the scheme was costing them.
Once the fares fair scheme was up and running, people travelling around London enjoyed fare reductions of about one third on buses and the London Underground, though the better off rate payers were expected to pay more than the savings in extra rates. This was as the GLC council intended, the better off subsidising the transport costs of the poorer residents of London.
London Transport was similarly instructed that its reduction of the fares was unlawful (as it was dependent on an unlawful subsidy), and the fares had to be restored to a level where the buses and underground were self funding.
As a direct result, the fares on both the buses and Underground were raised to a level that was significantly higher than fares pre-reduction. This was because London Transport had to recover the shortfall in income resulting from the fare reduction which it had expected to receive from the GLC but was no longer going to receive.
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