TfL is warning that without a solid long term funding agreement from the government, it will be forced to start cutting services within months and look at running the public transport network under a programme of “managed decline”.
TfL is an unusual public transport network, relying on fares revenue for nearly three-quarters of its income, whereas most major city public transport networks receive a much larger portion of their income from general taxation. Outside of London, taxation subsidises public transport to make it more appealing, as the alternative is gridlock caused by road congestion, with the economic and environmental problems that would cause.
With the collapse in fares income from the pandemic and the expectation that fares income will be subdued for many years to come, TfL has to either cut services or raise income from somewhere.
Although TfL is still in discussions with the government about a funding deal, which needs to be agreed by 11th December, as TfL is legally required to balance its budget over the short to medium term, in the absence of capital and revenue funding pledges from the government, it has to prepare a budget for the years ahead based on the assumption of severe cuts to income.
TfL is now warning that the savings being looked under its requirement to balance its budget means that London’s transport network is facing a future of “managed decline”, despite previous warnings of the “severe impacts to our service and the wider economy” if this was to happen.
That means cuts to maintenance and upgrades so that services will progressively get worse over the years.
At least in the 1970s and 1980s, the government had an excuse to put London’s transport in a managed decline as London’s population was shrinking. Since the 1990s though, London’s population reversed into growth, and public transport passenger numbers have rocketed.
A managed decline of London’s transport network at a time of population growth is something that cannot be logically or economically justified.
It’s taken 20 years to catch up on the maintenance and neglect caused by that period of managed decline, and TfL is still carrying out upgrades that should have been done years ago, such as the sub-surface signalling upgrade.
A managed decline today means less fares income to pay down the debt built up over the years funding the upgrades and Crossrail project, and hence less capacity to catch up on delayed maintenance when passenger numbers, and fares revenue, does finally recover.
TfL’s previous financial plan published at the start of this year forecast that they would be able to build back to operational financial sustainability by 2023/24, that is to be in a position where the day to day running costs are matched by income. That doesn’t allow for capital investments or maintenance works though. Assuming a small cut to bus services and other cost savings, TfL was expecting to be able to reduce the huge losses it’s making at the moment to around £500 million a year.
To put that £500 million into context, TfL spends around £7,000 million a year operating and maintaining the network, so balancing the budget amounts to cuts of around 14 per cent in TfL’s services.
TfL says that moving to “Managed Decline” would mean that only projects already underway, or those required to be compliant with safety and other statutory regulations would continue – meaning no new investment by TfL at all in the transport network.
Although existing commitments, such as new trains on the Piccadilly line and DLR would be delivered, the signalling upgrades needed on the Piccadilly line to deliver the capacity upgrade won’t happen. That means lots of new trains paid for, but no way of carrying the extra passengers needed to pay for them.
Also, considering the long lead time needed to deliver the project, no fresh orders today means no new services for London for the best part of a decade.
So the Bakerloo and Central line fleet replacement would be pushed back to the late 2030s /early 2040s, and Jubilee line replacement would not begin until the mid-2040s.
With a reduction in the maintenance budget, as trains, trams and buses age they will become progressively less reliable, leading to services being cancelled. As reliability declines, people become less willing to use public transport, and then you end up in a spiral as fewer passengers means less money for maintenance, leading to even fewer passengers, and so on.
Although TfL funded station upgrades, such as Camden and Holborn would obviously have to be cancelled, there would also be a lack of funding to take advantage of property developer supplied upgrades. For example, the Elephant and Castle redevelopment is seeing a new station for the Northern line built by the developer, but it could remain a concrete box if TfL can’t fund the fit-out costs to open it to the public.
The sort-term cuts already being looked at could see planned bus cuts of 4 per cent increased to a cut in bus services of around 18 per cent. Their initial review suggests that around 100 bus routes would need to be cancelled, and about a third of the bus routes would have fewer buses on them. An alternative would be to hike fares by a substantial degree, and TfL is currently trying to work out which is the least bad option.
As buses carry roughly double the number of passengers as the London Underground, the impact on how people get around London would be considerable.
Unlike buses, where cutting services leads to immediate cost savings, rail services have high fixed costs, so service reductions don’t really save that much money. TfL still thinks it might need to reduce tube and rail services by nearly 10 per cent.
There would also have to be a reduction in investment in the parts of the road network managed by TfL, so planned improvements in, for example, road junctions would be put on hold, and maintenance on road bridges delayed.
The short term impact on public transport in London would see more overcrowding on services that even today are often standing room only in the rush-hours and far less money in the long term to repair the damage caused by the short-term funding problems.
In most things, delaying maintenance today means a much higher bill tomorrow, so cutting investment today means it will cost a lot more later to catch up. This is the lesson learned by the managed decline in the 1970s/80 that took decades to then undo.
The London economy is a net contributor to the government finances, in that it pays more in tax than the government spends on services in London. If London was losing money, it might be arguable that cutting services is needed to reduce the loss, but to cut services when London is a profit centre for the government is, to put it bluntly – bloody stupid.
TfL’s current funding agreement with the government expires on Saturday 11th December. After that, expect cuts to services to start getting a lot worse.