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Cycle to Work scheme not working for London, says Labour

“While it was launched with the best intentions 20 years ago, it’s outdated and frankly no longer fit for purpose,” says Labour’s London Assembly Transport spokesperson Elly Baker

A Labour transport spokesperson has branded the Cycle to Work scheme “outdated” and “no longer fit for purpose”.

Elly Baker, a member of the London Assembly for Labour, claimed that the initiative, which has now been running for two decades and enables people to gain tax breaks on purchases of bikes and accessories through salary sacrifice, needs “wholesale reform” to help boost “affordable, healthy and greener travel options for Londoners”.

Labour’s call to reform Cycle to Work comes just over a month after a number of organisations, including the Cycle to Work Alliance, the Co-op, the Federation of Small Businesses, and British Cycling, published a letter urging then-Chancellor of the Exchequer Rishi Sunak and cycling minister Trudy Harrison to open up the scheme to lower-paid workers and the self-employed.

> Chancellor urged to open up Cycle to Work Scheme to lower-paid and self-employed workers 

The letter said that, under current guidance for participation, access to the scheme – the benefits of which have been enjoyed by millions of employees – is barred to those whose earnings are at or slightly above the National Minimum Wage, as well as people who are self-employed, groups identified by active travel advocates as having the most to gain were they allowed to take part in it.

This week Labour revealed that, according to figures from the Department for Transport, between January 2017 and December 2021 there were 242 Cycle to Work applications approved for the department's London-based workers, with 138 of those coming since January 2020.

Baker, Labour’s transport spokesperson at the London Assembly, compared the apparent lack of recent interest in the scheme under its current access restrictions (though the numbers highlighted by the party only apply to the DfT) with the success of the city’s bike-sharing initiative, Santander Cycles, which recorded a monthly record of 750,000 hires in February.

> How to save money on a bike with the Cycle to Work scheme 

“The Cycle to Work scheme needs wholesale reform,” Baker said in a statement. “While it was launched with the best intentions 20 years ago, it’s outdated and frankly no longer fit for purpose – that’s plain to see in the sheer lack of Londoners using it.

“It is vital that people have easy and affordable access to healthy forms of transport, particularly those on low incomes.

“The success of Santander Cycles has had an impact on people taking up the scheme, but it also shows the increased demand for cycling in the capital.

“If the Government updated the Cycle to Work scheme to make it more accessible for Londoners, it could have the potential to play an important role in boosting health, clamping down on air pollution and helping efforts to reach net-zero.”

This article has been amended to clarify that the figures supplied by the Labour party apply only to London-based employees of the Department for Transport. Labour has since recalled the press release.

Ryan joined road.cc in December 2021 and since then has kept the site’s readers and listeners informed and enthralled (well at least occasionally) on news, the live blog, and the road.cc Podcast. After boarding a wrong bus at the world championships and ruining a good pair of jeans at the cyclocross, he now serves as road.cc’s senior news writer. Before his foray into cycling journalism, he wallowed in the equally pitiless world of academia, where he wrote a book about Victorian politics and droned on about cycling and bikes to classes of bored students (while taking every chance he could get to talk about cycling in print or on the radio). He can be found riding his bike very slowly around the narrow, scenic country lanes of Co. Down.

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36 comments

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quiff | 1 year ago
0 likes

Are road.cc's eagle-eyed readers responsible for Labour pulling this?!
"This article has been amended to clarify that the figures supplied by the Labour party apply only to London-based employees of the Department for Transport. Labour has since recalled the press release."

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grOg | 1 year ago
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Nothing like it in Australia; and very hard to get employers to provide facilities for cycle commuters, like undercover safe parking, lockers and showers.

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CyclingInGawler replied to grOg | 1 year ago
1 like

But fair play gr0g, you could buy 2.5 tonnes of 4*4 on a novated lease, using pre-tax money to keep the cost down!

For the information of those not in Australia, up until a few years ago you actually got a bigger tax break the further you drove, and so towards the end of the tax year people would be going on road trips just to get their mileage up over their target distance. Eventually even the Australian government of the day decided they didn't really need to encourage people to hasten the death of the planet by driving needlessly, and changed it to a flat rate discount irrespective of mileage.

But you couldn't get a new bike on the same terms though.

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ktache | 1 year ago
2 likes

Always ridden to work. Since starting as a research tech in 96, I think I have only not cycled to work for 2 days. Never used cycle to work scheme, almost tempted for one day back in the mid noughties, considered getting it to buy a Cannondale Hooligan, but apart from that it never fitted the way I cycled. Keeping old rigid steel MTB going, with bits thrown at ti CX MTN bike for fun and spare commuter. Now shortish term contracts, built pricey ultimate commuter which I will try and keep going for decades.

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mark edwards | 1 year ago
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i have that skeam where i work in london but never used it ,  1 can not get a bike i want 2 can buy cheeper on the net with a bit of serching . 3 most people wont use a cycle anyway especially when it gets cold or wet and to get the health benefits it need to be regular . 4 most dont even have space to safley store a bike here in london so why buy an expensive one that wont get used or will get knicked 

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Hirsute replied to mark edwards | 1 year ago
4 likes

Oarsome post their.

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grOg replied to Hirsute | 1 year ago
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reely kewl..

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mark1a | 1 year ago
4 likes

Aside from the rights or wrongs of a salary sacrifice scheme disproportionately benefitting high rate taxpayers, and people on minimum wage not having access to a scheme...

I've found by far the best scheme available is Green Commute Initiative. Used it several times now. 
 

Advantages are:

Very easy application process for employees

Employer doesn't have to "sign up" for anything

Employer can either fund the bike or take a loan costing less than employer NI saving

No large end of agreement bill, just a nominal buy/leaseback fee of £1

Retailers seem to prefer it, commission is 5% not 10 or even 15

Operates as a Social Enterprise so profits are reinvested in the business

No upper limit on bike value 

I have no connection with GCI, just a happy user of the service, and feedback from employer and bike shop is similarly positive. 

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jh2727 replied to mark1a | 1 year ago
2 likes

My employer wouldn't do GCI last time I bought a bike - they would only offer CycleScheme. CycleScheme would have saved me a bit of money and about the same for my employer but by far the biggest winner with CycleScheme is CycleScheme themselves - so I didn't bother, I paid cash (and considered changing my job). GCI seems to be the best scheme by far, for employees, employers and for cycle retailers.

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quiff replied to mark1a | 1 year ago
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I tried to get my employer to use GCI - mainly because they were, I think, the first provider to get themselves authorised so you could exceed the £1,000 limit without your employer being FCA authorised. Employer wasn't interested. They stuck with the Halfords-based scheme, which eventually followed suit and we now have a higher limit.   

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holtyboy | 1 year ago
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1% take-up is typical for a large employer for a C2W benefit. It can be higher where the workforce is more male, and in certain sectors such as engineering.

DfT have 15k employees, lets assume 5k of them are in London, typically you would expect 50 requests per year so bang in line with what has happened.

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HoarseMann | 1 year ago
4 likes

If you looked deeply into the reasons people don't cycle to work, I'm pretty sure "it's because of VAT" would rank fairly low.

The C2W scheme has managed to get itself into employee handbooks and onto company HR websites. In that regard, it does at least help advertise cycling to work as an option.

But I think it should be canned and replaced with a points based system linked to Strava...

Every time you log a ride as a "commute", you could get points, weighted by the number of others who cycle commuted that day, so that those who brave foul weather get rewarded for their efforts. Not sure what prizes the points would turn into, but could just be an annual cash award, paid out on bike to work day!

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Milkfloat | 1 year ago
1 like

I am pretty sure TfL employees get a free travel pass which would explain low take ups. For sure TfL pensioners do at age 50. 
That being said, Cycle2Work is a pretty poor scheme, it would be far more simple and help far more people to just make bikes VAT free. 

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ktache replied to Milkfloat | 1 year ago
2 likes

And parts, keep those old bikes going.

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Steve K replied to Milkfloat | 1 year ago
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The take up figures are for the Department for Transport, not TfL.

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Secret_squirrel | 1 year ago
17 likes

C2W is pretty bizarre. The people who can most afford it get the biggest discount and those who are on low wages get SFA. 
it needs reforming and either inversely based on tax code or NI contributions. 
 

The need for companies to enroll in it needs to be dropped too. Mine just can't be arsed. Should be run by a quango or not for profit so self employed can take advantage. 

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Brauchsel replied to Secret_squirrel | 1 year ago
3 likes

The system as it's set up requires employer involvement, as the tax breaks are calculated through their payroll systems. Bigger employers should be arsed, as the NI savings they make should outweigh the fairly minor set-up costs [source: many years working in employee benefits including C2W]. Smaller ones may not. 

It could be moved to an employee/HMRC-driven system, as they've done with tax-free childcare. But, that makes it harder for employees to sign up and I doubt HMRC has the resource or inclination for a new system. 

Making bikes zero-rated for VAT would probably be the easiest option, but then government loses the (tenuous) connection of the bikes being an incentive to commute sustainably, and I suspect the Mail et al would make considerable hay out of Pinarellos suddenly becoming £4k cheaper while hard-pressed motorists have to pay for petrol. 

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OnYerBike replied to Brauchsel | 1 year ago
2 likes

Regarding the VAT approach, one option might be to make the first £500 (or there abouts) of a bike VAT free, with VAT charged on the remainder. So anyone buying a bike for <£500 (which would get you a basic but functional hybrid new) would pay no VAT; anyone buying a bike for more than that would pay some VAT. The VAT on a Pinarello would be £100 lower, which would be substantially harder for the DM to make a big deal over!

I would also add that bikes shouldn't just be about "commuting". I bought a bike through C2W and while I do ride it to the office whenever I go in, that is rarely. So technically I am not following the scheme rules since I far more often ride the bike to the shops, into town etc. - not commuting but still utility journeys (many of which I would probably do by car if I didn't have a bike). 

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timmyotool replied to Secret_squirrel | 1 year ago
1 like

Correct me if I'm wrong here and I could be out of date but is a lack of uptake with employers also due to:

The need for the business to upfront the cash on behalf of the employee, then claim it back over 12 months. In the unlikely event of 100% uptake then for a business of 50 people that's £100k at £2k per bike.

The 2nd issue is the end of period process. And the 25% charge to own the bike (based on the London job market, people seem to move every year so extension not an option) I think a number of employers fail to administer this, but this does seem to devalue most of the benefit of the scheme.

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Secret_squirrel replied to timmyotool | 1 year ago
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I think it's the scheme operators who run the end of scheme process I was one of those stung for near the full cost of my bike when I moved jobs 12 months later. 

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jh2727 replied to timmyotool | 1 year ago
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timmyotool wrote:

Correct me if I'm wrong here and I could be out of date

Mission accepted.

timmyotool wrote:

but is a lack of uptake with employers also due to: The need for the business to upfront the cash on behalf of the employee, then claim it back over 12 months. In the unlikely event of 100% uptake then for a business of 50 people that's £100k at £2k per bike.

Depends on the scheme most offer a finance option where the company can take a loan. I think some only do it this way.

timmyotool wrote:

The 2nd issue is the end of period process. And the 25% charge to own the bike (based on the London job market, people seem to move every year so extension not an option) I think a number of employers fail to administer this, but this does seem to devalue most of the benefit of the scheme.

Again differs according to the scheme, GCI allow 1 year hire term - and regardless of the term chosen, the cost to buy at the end is only £1.

CycleScheme is probably the biggest problem with cycle2work. Most employers look at it and think "we could make a bit of money out of this" and most employees look at it and think "this is pointless the savings are virtually non-existent unless I sign up to stay with my current employer for 3 years, and even then I won't save much".

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timmyotool replied to jh2727 | 1 year ago
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Thank you for this, interesting stuff. Off to go and research GCI and talk to my employers. I'd assume the 25% was due to benefits in kind and HMRC rules.

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OnYerBike replied to timmyotool | 1 year ago
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The rules for the scheme can be found here: https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

The residual value of a bike at the end of a period is set out in Annex C. After 1 year, the residual value of a bike with a retail price of £500+ is 25% of its retail price. After 6 years, it is "negligible" (so often treated as £1). GCI allow employees to take an "extended loan" option for up to six years.

This is certainly one area where all the schemes play a bit fast and loose with the rules - with GCI you don't technically own the bike until the end of the extended loan period, but there is practically nothing to stop you changing jobs, moving house, selling the bike etc. in those six years. To all extents and purposes, you do own the bike. 

There is also a line in the Rules that "It is important therefore that the employee is not given any expectation at the outset that they may be entitled to buy the cycle outright." and yet every single scheme makes it clear that at the end of the "loan" period you will be able to buy the bike for its residual value. 

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EddyBerckx | 1 year ago
1 like

This is BS, I know of a fair few people other than myself who have used it multiple times in that time period. The data is blatantly wrong

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NOtotheEU replied to EddyBerckx | 1 year ago
2 likes
EddyBerckx wrote:

This is BS, I know of a fair few people other than myself who have used it multiple times in that time period. The data is blatantly wrong

I think so too. I've used it twice in that time as have many of my colleagues. 

There are multiple providers so maybe they just looked at one that few companies use?

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BIRMINGHAMisaDUMP replied to NOtotheEU | 1 year ago
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It is popular 

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OnYerBike replied to EddyBerckx | 1 year ago
2 likes

The article is poorly worded in a couple of places, but the 242 figure appears to refer to applications from the Department for Transport's London based employees

Without any further context, that is pretty useless information. 

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open_roads replied to OnYerBike | 1 year ago
1 like

And without confirming the total number of London based employees at Dept for Transport the number is still meaningless. It could actually be a higher %age than comparable organisations for all we know.

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quiff replied to OnYerBike | 1 year ago
1 like

The article has been edited since it was first published. The original piece suggested there had been only 242 applications in five years for London-based workers, full stop, hence all the incredulous comments here.

Presumably the author has since confirmed that the figures refer just to DfT employees as I speculated below.   

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mdavidford replied to quiff | 1 year ago
1 like

Although a number of the incredulous comments kept appearing after it had been amended. Good to know I'm not the only one who sometimes just skips the article and goes straight to the comments. 

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