Transport for London (TfL) has confirmed that it is rejecting the current government funding offer, while it continues to negotiate the terms of the package available.

It was also confirmed that while there’s a risk that without an agreement, TfL would be forced to start major cuts to services to balance its finances, that is not yet expected to happen. TfL, which had been on course to break even in running costs in 2023, had its finances thrown into disarray by the pandemic, being required to provide a public transport service while its fares income that it depends on was almost entirely wiped out.

Since then, there’s been a series of interim funding agreements over the past couple of years to keep the service running, but with ever increasingly tight terms being applied by the Department for Transport (DfT) on TfL. Many of them are cost cuts, but calls for TfL to spend money on driverless trains, even though every study into that finds it would be a poor investment, speaks to a political agenda at work as well.

It didn’t help that the DfT’s current offer of funding was delivered at 10pm on a Friday evening, giving TfL just a few days to study it. A request for two weeks to study and negotiate the terms was refused and TfL was offered just five and a half days — which expired last week.

TfL is therefore running on its own funds without any government support. At the moment, cash reserves are sufficient to pay suppliers and staff, but this will eventually run out unless a deal is signed.

At a board meeting this afternoon, held at short notice to discuss negotiations with the government over the funding deal to keep London’s public transport services running, the Mayor, Sadiq Khan said that it was “extremely disappointing that they haven’t reached a deal yet, but it’s not for want of trying”.

The funding settlement was to give TfL enough support to keep London’s public transport services running while it recovers from the pandemic, and cuts services to reduce costs, but that package expired last week, and TfL now has a theoretical hole of £900 million in its annual finances. As TfL is regulated as if it’s a local authority and is required to run a balanced budget, it should be starting to make deep cuts to buses and train services — covered by section 114 of the Local Government Finance Act 1988.

However, TfL’s interim chief financial officer, Patrick Doig said at today’s board meeting that while discussions are ongoing, there are reasonable grounds to expect that a funding settlement for the rest of this year will be signed, and so he doesn’t need to issue the S114 order forcing TfL to make those drastic cuts.

While it’s not a huge secret that the public arguments between the Mayor and the Transport Secretary have been heated, the private discussions between TfL and the DfT have been “constructive albeit challenging and sometimes frustrating” but at least they’re talking.

In the board meeting late this afternoon, the Mayor confirmed that some of the conditions in the offer from the DfT cannot be accepted, although the specifics were not outlined in the public part of the meeting. He did confirm that the issues are not political in nature, but are operational issues and issues of principle that cannot be agreed to.

The government proposal was described by TfL’s Commissioner, Andy Byford as being a “very complex mechanism”, and he noted that while TfL responds within 24 hours, it has to wait longer for DfT responses. Apart from the specific terms being argued over, it seems though that a major sticking point is a request by TfL for a long-term capital investment agreement to avoid the threat of a managed decline in services.

This is not to cover running costs, but to cover maintenance and upgrades on the network. While they can be carried out on an ad-hoc basis, it’s much cheaper for TfL, and better for their suppliers, to have a long-term settlement. Otherwise, you end up back in the 1970s/80s, when London’s transport was dependent on annual negotiations with the government, and people with long memories will remember what the service looked like back then.

TfL says that it has made revisions to the DfT’s draft proposed funding settlement. However, the DfT has not, to date, confirmed or rejected those revisions and is outstanding to provide a final draft proposal. At the moment then, it seems that the ball is in the DfT’s court to decide if it will accept the suggested revisions or send back the funding agreement for more negotiations.

This is not just a situation of two organisations arguing over technicalities, it’s the future of London’s public transport that’s at stake.

City mayors around the UK often say they want a London-style transport network. They might be changing their mind if they watch how torturous the negotiations have been.

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20 comments
  1. UCHE MICK CHINONSO says:

    Just what I expected: the Tories are levelling down London while doing nothing for the rest of the nation. They are here to divide and impoverish. GET THEM OUT!

    • Alan says:

      Why should the London area receive more public transport subsidy than the entire remainder of England? Whilst London bus fares are kept artificially low and Billions of pounds spent on projects such as HS2 and Crossrail in London, in the rest of the country bus routes are fast disappearing, train frequency reduced and fares are becoming so high that many people cannot afford to travel to work. Is this what the Government calls levelling up?

    • ChrisC says:

      Alan – it doesn’t

      Only approx 1/3rd of the cost of crossrail was paid for by the UK taxpayers. And UK taxpayers includes those living and working in London.

      The remaining 2/3s will be paid for by a rate levy on London businesses, infrastructure levies on London developments and fare income paid by users.

      As to HS2 it may have escaped your notice that the bulk of the line isn’t in London at all.

      And buses are cheaper in London because higher tube fares subsidise them.

      As clearly stated in this and in many other articles by Ian and elsewhere in the media there is no day to day subsidy from the UK taxpayer for TfL. I politely suggest you read them.

  2. MPW says:

    It is hard to separate emotions from logic here. What could the Government possibly be trying to achieve other than political gain? Their arguments only seem to be finger-pointing at the Mayor (to be fair, pretty much true in the other direction). Other countries/regions are making efforts to reduce transport costs to encourage modal shift. Why is that still so demonised here?

    Clearly public transport deserves both maintenance AND growth capital in the current state of the world.

  3. Alex says:

    Well, imagine going to your parents for a £1bn bailout when structurally you are haemorrhaging cash and many of your commuters are working from home. Do you give well compensated staff a billion pounds? Or do you give £700m with conditions?

    Both sides have to agree something sensible. Otherwise the handouts will never stop.

    • ianVisits says:

      The article notes that they will break even operationally next financial year, so the handouts will stop — they just need to get through this year.

  4. LMonroe says:

    Make TfL staff eligible to retire only at state pension age not 55.

    Force through automation.

    Make transport strikes illegal.

    It’s easy to find £900m of savings. It just requires some guts to stand up to the bully boy thugs in the RMT.

    • ChrisC says:

      The Tories have continually promised to make transport strikes illegal but continually fail to bring in let alone pass the necessary legislation.

      Even if you exclude 2010-15 when they were the Government because of the coalition they’ve had 7 years to bring in the legislation. They’ve still had 5 if you exclude 2 years for covid.

  5. ChrisC says:

    Board paper available here

    https://board.tfl.gov.uk/ieListDocuments.aspx?CId=138&MId=706&Ver=4

    If anyone thinks the DoT / Government has simply given the amout of lost fare income to TFL will be disabused of that notion by reading ‘table 1’ in both papers (same table in 2 documents)

    Even just taking into account financial years 20/21 & 21/22 the figures are £5.8 billion of lost fare income and £ 4.2 billion of ‘extraordinary funding.

  6. JP says:

    To make strikes illegal would be nothing less than a woeful admission of failure of all sides to use that thing in the mouth called a tongue, the little grey cells above that and the pump that’s in each person’s chest which governs existence and civility called the heart.

  7. Uche Mick Chinonso says:

    So if I’m mistaken, this article addresses the operational funding not the long-term funding that would initiate the long-aborted Bakerloo line extension, right? If that’s the case, then we should be in the clear.

  8. NG says:

    What Uche Mick Chinonso said … tory levelling-down. { And Grant Schapps posturing to the “shires” gallery }
    – L Monroe: REALLY?
    “Force through automation” – which cost many £billions & takes years
    “Make transport strikes illegal” – how nice, both Stalin & Adolf did this (!)
    You appear to have never worked for an abusive employer or had a manipulative boss …

    • mclm says:

      “You appear to have never worked for an abusive employer or had a manipulative boss …”
      Perhaps they are one.

  9. Philip Esq says:

    It would cost in the region of 7bil to automate the tube!

    I guess we’re going to magically get that sum and at the same time say the transport system doesn’t need funding!

    London is the ONLY major city in the world that has ZERO funding from the govt thanks to the Tories! It carries the most passengers so it’s time to fund our transport system whatever it needs. London makes up 60% of the UK economy so whatever London transport system needs, the govt must supply.

    • Alan says:

      London makes up 60% of the economy because of the huge public investment there and the lack of regional development. It really is time that funds were directed away from London and towards other areas of England, particularly the socially and economically deprived northern half of the country.

    • ianVisits says:

      London already contributes more money to the government than is spent on it — to the tune of £35-40 billion every year. That’s £350 billion every decade that is being spent in the deprived northern half of the country paid for by London.

  10. Keith says:

    I wonder if TFL are hoping under the next PM they may be offered a more generous long term settlement deal, as the new PM won’t happen to be the previous Mayor of London. It’s quite possible this has been a factor in the current funding standoff.

  11. Nicholas Bennett says:

    Several of the underground lines and the Elizabeth Line were built for automation.

    The arguments against are weak, Paris has an automated line as do others around the world. The DLR has been automated since it was started.

    Of course it will take money but it is a long term investment which will not only make it safer but will get rid of the power of the unions to call out highly paid drivers on strike.

    • Keith says:

      Surely the Waterloo & City line is the ideal candidate for automation as a start, given that it only stops at each end.

  12. AJ says:

    Why is it every London asset and patch of prime real estate is sold to the highest international bidder, yet the transport system of the same city is on its knees?!

    Cut the strings with the DfT and just sell TfL off to some vague consortium in the Middle East, shut your eyes to the source of funds, and watch the billions pile in!

    New tubes on all lines, Bakerloo Line extension, Elizabeth Line to Kent – all possible in the next ten years! All we just have to deal with is Crossrail 2 being renamed ‘Aramco Line’ …

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