Transport for London’s existing funding deal with the government, which was due to expire today has been extended, again, to 4th February 2022.

The decision gives both sides more time to negotiate the terms of a long-term settlement to secure the future of London’s public transport services, which were thrown into some disarray by the latest Covid restrictions. It would not have helped that the Department for Transport (DfT) says that TfL’s own submissions for a funding package were delivered late leaving little time to study them before agreeing on a deal.

On 1st June 2021, TfL announced that an extraordinary funding and financing support package had been agreed between TfL and the DfT to support transport services in London and contribute towards TfL’s forecast revenue loss due to reduced passenger numbers using TfL services as a result of the pandemic.

The Funding Package initially provided support for the period from 29th May 2021 to 11th December 2021, which was later given a one-week extension to 17th December 2021, to allow TfL to continue discussions with the government in relation to further financial support.

Following further discussion, the terms of the Funding Package have now been extended again to last until 4th February 2022, and TfL has until 19th January to outline its proposals for a long term funding settlement.

Andy Byford, London’s Transport Commissioner, said: “The Government has today confirmed an extension of its funding support for TfL through until 4 February, for which we are grateful. The Mayor has also set out a range of proposals that will help support TfL’s financial sustainability.”

At the heart of the issue is how TfL will be able to recover its finances following the collapse of fares income caused by the pandemic and to adapt its long term finances to the post-pandemic world. TfL is seeking £1.9 billion over the next couple of years, while the DfT is seeking assurances that it hasn’t asked from other transport operators in the UK, namely that TfL is able to return to breaking even in its operating costs within a couple of years.

To do that, TfL is expected to need to raise an additional £500 million to £1 billion in revenue per year to offset the drop in passenger fares. That is coincidentally pretty much in the range of the central government grant that TfL used to receive until it was cut off in 2018.

All the existing terms of the funding deal remain unchanged.

The Mayor of London, Sadiq Khan, said: “The Government is still refusing to properly fund Transport for London which has been severely affected by COVID, yet again only providing a short-term funding deal that will only last a matter of weeks. This means that nothing has changed in terms of TfL having to plan on the basis of a managed decline of the capital’s public transport network.”

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19 comments
  1. Brian Butterworth says:

    Yay! I guess the people have North Shropshire came the aid of the people of London today!

    • Angel Hart says:

      Two things fundamentally twisted in this report. One, TfL has received over 200 billion in state aid whereas the other transport authorities haven’t. So comparing the deal for TfL with them is entirely fake news. Second, the grant TfL used to get was phased out with the agreement of the mayor and replaced with business rates which have been more. The fact is, whether the people of North Shropshire agree or not, the current mayor has caused this crisis by spending all the profit raised from fares on cycling routes as a sop to get elected that its own Travel in London Report 13 says have been a waste of money because fewer people are cycling now than when TfL was set up

    • ChrisC says:

      Angel I love a good rant but please make it accurate.

      The crisis has been caused by the catastrophic loss in fare income not by cycling lanes

      Boris dosen’t like people to know this but he left TFLs finances in a worse position when he left than when he started. Khan has reduced the Boris debit.

  2. Pat says:

    If the grant was approx £0.5b, and now without the grant theyve got to make savings of £0.5b; surely that meant they wouldn’t have made that much profit in the past.

    It was Boris Johnson while he was mayor who agreed the grant should be removed. I’d imagine some optimistic passenger growth numbers were part of the forecast and not some kind of world wide pandemic.

    • ianVisits says:

      Public transport is traditionally subsidised by general taxation as a social good — it’s not there to make a profit — as the alternative would be massive amounts of road congestion and pollution as people switch from public to private transport.

  3. NG says:

    Backing Ian up, IIRC every really major city in the developed world gets a sensible subsidy for its public transport – even NYC in the USA.
    But, thanks to Boris, who deliberately cut off this source of income for whoever his successor was going to be – London does not.

    • Duncan Martin says:

      Of course public transport should be subsidised. The people who gain most from good public transport are those who don’t use it because it leaves space for them to drive around.

    • Mo H says:

      In point of fact, it was George Osbourne who demanded the “subsidy” be removed, not Boris Johnson. Osbourne demanded cuts to all local council and authority budgets as part of the “austerity” measures, and the withdrawl of tfl funding was a belated part of this.

  4. Ilford says:

    Khan has ruined London what is he doing about the unnecessary strikes Nothing as he is funded by the union

  5. Christopher Benjamin says:

    Angel Hart has given a rather diluted version of the truth. TFLs financial situation improved dramatically under Khan following Johnsons spendthrift tenure. 100ms wasted on a bus we were told wouldn’t cost the tax payer anything, scaling back the congestion charge, the cable car and garden bridge. The list is endless but the height of stupidity was the removal of the subsidy which has left uncertainty and made long term planning more difficult. Khan has worked miracles given the poor hand Johnson left London

  6. James Law says:

    What has happened to all the revenue from congestion charge and Ulez charges

    • ianVisits says:

      Easy to find out with a simple online search – the C-Charge is funnelled into supporting public transport, the ULEZ has only just started and as such it’s not expected to cover its set-up costs for a year or so yet.

  7. Chris Rogers says:

    ” TfL’s own submissions for a funding package were delivered late ” Insert your own joke…

  8. Lizebeth says:

    Once more: public transport is an ESSENTIAL SERVICE. It should be funded by the government, at least until there is some recovery from the current extraordinary circumstances. If people are forced to use alternative means, you can bet that most will choose driving, not cycling or walking, and this is a disaster in the making. Will the horse return to London’s roads?

    But how do we as Londoners put pressure on our politicians to make them see reason?

  9. Ed says:

    People forget that transport in London is already subsidised as part of the Mayor’s precept on the Council Tax. It raises more than £1 billion per year and helps fund the administration and all the services that the Mayor is responsible for, i,e TFL, roads etc.

    The Mayor raised the precept by nearly 10% in April 2021 and it is due to increase way above inflation, for the next three years. The Mayor wants his cake and eat by also requesting the governmentment subsidises fares, in the longterm and not just because of the pandemic.

    Lastly, IIRC, in exchange from phasing out the government’s subsidy, which occurred in 2020, the Mayor was allowed to keep a high proportion of the business rates from London businesses, so there wasn’t any drop in income from taxation.

    • ianVisits says:

      As you know about the size of the Mayor’s precept, then I presume you also know that TfL gets the grand sum of around £50 million a year from it — barely enough to keep TfL running for 3 hours.

  10. Ed says:

    This proves that central government grant was replaced by the GLA being able to keep additional funds from London’s businesses. Khan wants his cake and eat it, as central government funds were replaced, pound for pound with London’s business rates.

    Business Rates
    9. The Chancellor announced in the 2016 budget that, as part of the Government’s
    devolution strategy, the Department for Transport would no longer pay any investment
    grant to the GLA from April 2017. Instead, the GLA will receive an equivalent amount
    through retention of a larger proportion of London’s business rates. The high level
    principles of this agreement between the Government and the GLA are set out in
    annex C.
    10.As a result of these changes, the existing Investment Grant (CDEL) will cease to be
    paid by the Department and will instead become part of your business rates income.
    From April 2017, the GLA will retain an additional amount in business rates that will be
    sufficient to cover the TfL investment grant as shown in annex C. We continue to
    expect this money to be used for transport and particularly infrastructure investment as
    set out in annex C.
    11 .This approach to investment funding is being piloted by the GLA in advance of the
    wider changes to the Business Rates Retention Scheme. The Government intends that
    the piI~ted approach should be without detriment to the resources that would have
    been available to the GLA for TfL.

    https://content.tfl.gov.uk/tfl-funding-agreement-letter-march-2017.pdf

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