The ongoing fares freeze on TfL services could be coming to an end, with TfL’s financial forecasts now expecting fares to rise by above inflation rates from January 2021.
TfL is setting out a 5-year plan for its future investment, and is explaining how it cut costs in the past, and continues to do so, but is facing increased financial pressures, not least from the Crossrail delays.
It’s important to note that the expectation that fares will start to rise in 2021 is TfL’s own business planning projection, as the fares are set by the Mayor of London, who might want to continue the fares freeze if he wins reelection next year.
If the fares freeze continues though, it’s likely to start to impact heavily on the organisation’s ability to manage it’s network unless it secures some form of central government funding. Politically, the fare’s freeze can be sold as an event that cannot continue since the government cut its central funding grant to TfL and the costs of the Elizabeth line delays make fare rises inevitable.
The ongoing delays and cost overruns at Crossrail means that TfL is looking for an additional £400-£650 million to complete construction work and that it misses out on around £1.2 billion in revenue phased in over the next four years had the line opened on time.
To help meet the shortfall, TfL has already diverted £100 million a year away from investment into running costs and expects to keep doing that until 2023.
Despite these problems, TfL says that it is on target to generate an operating surplus by 2022/23 — which is an essential requirement if the transport body is to start paying down its significant debt pile, which now stands at around £13 billion.
Looking to the future, while London has benefited from additional third-party funding for transport projects, such as being bids from the Government’s Housing Infrastructure Fund, TfL did not see any commitment in the 2019 Government spending round. There has also been a reduction in central government grant, which amounted to some £700 million per year.
TfL is warning that this is now materially limiting long-term investment in the transport network.
A counter-argument being that despite massive cost-cutting over the past few years, the Mayor of London’s fare freeze has also substantially impacted on TfL’s revenues and its ability to fund investment from its own income. Inflation alone would have seen TfL’s income rise by some £160 million a year.
TfL is still cutting costs, and expects to shave another £700 million over the next five years, although that could be wiped out by inflation if other charges, such as fares and commercial costs cannot also rise in line with inflation.
Despite that, there will still be around £1.9 billion invested in the network each year over the next five years, covering ongoing maintenance and plans for major upgrades such as the new trains for the Piccadilly line and DLR, the London Overground extension.
Those upgrade on bus and rail, along with the Elizabeth line is projected to see customer numbers rise by 8 percent over the next 5 years. Considering that Crossrail is expected to increase central London capacity by around 10 percent, that’s looking like a reduction in overcrowding — slightly.
TfL is also still lobbying to take over more rail services, and its report specifically cites Great Northern as one target, and is also lobbying to get Crossrail 2 approved.
One change that’s likely to have a bigger perception of change than the real financial impact is that Oyster cards will soon cease to be available with a £5 deposit, and will instead cost £5 to buy. The aim is to reduce short-term use by tourists, as the £5 will be credited to the Oyster card… after one year.
Next year marks the 20th anniversary of TfL’s formation. With funding constrained, but ambitions for growth undiminished it’s likely to be a very different organisation on its 25th anniversary.