ON MAY 7th, in the medieval splendour of Southwark Cathedral on the south bank of the Thames, Sadiq Khan of the Labour Party was sworn in as London’s new mayor, the first Muslim to hold the post. Although the campaign came to be dominated by accusations that Mr Khan was tolerant of Islamic extremism (see Bagehot), it is the more mundane issues of transport and housing that will be filling his in-tray. Transport for London (TfL), the organisation that runs the capital’s roads, railways, buses and shared bicycles takes up £10.7 billion ($15.5 billion) of City Hall’s budget of £17 billion. But there are questions over whether TfL has enough resources to build the public-transport capacity the booming capital needs.

The new mayor’s flagship transport policy is to freeze all fares on London’s public transport system, including those for buses and the Underground. He says this will cost £450m in revenue over four years. TfL claimed £1.9 billion over five years. Whatever the case, TfL is already under pressure, both financially and in demand for its services. In November the Treasury announced that it planned to phase out, by 2019, the annual operational grant of £700m to TfL, leaving a large hole in the body’s revenue predictions.

Meanwhile demand for public transport is rising fast. As London’s economy has boomed after the financial crisis, its roads reached full capacity. Bus and Tube usage has increased much faster than population growth since 2001. (see chart). Significant investment is under way, but more supply will simply create extra demand. For instance, although a signalling upgrade meant that rush-hour capacity on the Northern Line increased by nearly 20% in 2014, regular passengers complain that trains are no less crowded. Crossrail, a new rail project through London that will boost the capacity of the Underground by 10%, is not a permanent solution. With London-wide passenger volumes growing by 3% a year, when it opens in 2018 “it will be immediately full”, Sir Peter Hendy, the then boss of TfL, forecast in 2013. The new mayor will need to protect transport investment in London if he wants to meet his other pledges, for instance on boosting house-building from 25,000 units last year to 80,000 by the end of his term. Developers no longer want to build on sites without public-transport links. Only 350 houses of a total of 10,800 given planning permission in 2007 have been built at Barking Riverside in east London; it lacks a rail connection to the city centre.

Mr Khan says that he hopes to pay for his fares freeze through reorganising TfL’s maintenance division, saving money on contractors and raising revenue from other sources such as developing TfL’s surplus land. But the organisation is already in the midst of an austerity drive; in 2013 it targeted £16 billion of savings by 2021, of which only a quarter has yet been identified. And it already hopes to generate £3.4 billion of revenue from commercial development by the same year. How fast this programme can be expanded with London’s strict planning laws is not clear.

It would therefore be undesirable for Mr Khan to cut investment. But there are few other ways the shortfall could be met. He could raise council tax, or business rates, over which he will gain some control in April next year. But his costly pledges on house-building, and other competing demands, give limited room for manoeuvre.

TfL could borrow more. But the fare freeze may damage its creditworthiness, says Jennifer Wong of Moody’s, a ratings agency. Mr Khan would therefore be wise to forge a good relationship with George Osborne, the Tory chancellor of the exchequer, who has pledged to boost grants for transport investment 50% by 2020 and who can lend TfL money for capital projects through the Public Works Loan Board. But with projects such as HS2, a high-speed railway, and other devolved bodies such as Transport for the North competing for cash, Mr Khan will need to lobby hard.

Whatever happens, he will still need to make difficult decisions over his financial priorities. In part, this is what Mr Osborne, the architect of England’s devolution revolution, intended. Rather than local authorities simply lobbying the Treasury to fund as many of their projects as possible, the point of devolving budgets is to force locally elected officials to take responsibility for decisions instead. On transport, it will ultimately be London’s electorate in 2020 that decides whether Mr Khan tackled the right priorities or not.