Transport for London (TfL) has published its draft budget for the next financial year 2019/20 which continues the organisation’s progress towards breaking even on the cost of day-to-day operations by 2022/23.

The organisation needs to cut costs in the face of a shrinking central government grant, declining passenger numbers on buses and the fares freeze imposed by the current Mayor of London.

The budget covers the first year of TfL’s Business Plan and shows how TfL will continue to invest in the vital transport improvements London needs, despite a number of significant challenges, including an average £700m per year reduction in government funding, a subdued economy and the financial impact of the delay to the Crossrail project.

It demonstrates that TfL’s previously budgeted operating deficit of £968m in 2018/19 has been significantly reduced and is now forecast to be almost halved to £500m by the end of 2018/19.

This year’s projected income of £6.67 billion is however also lower than what TfL earned in 2015/16 and 2016/17 — even as inflation has pushed up costs by 7% over the same period.

TfL is now projecting an income for the year ahead of £6.97 billion, of which £4.86 billion will come from passengers fares, with the rest made up from other income and grants. In 2019/20, TfL will receive £1.9bn of business rates and around £300m in grants from the Mayor and the Government’s various schemes.

TfL no longer receives any operational grant from the Government to offset the cost of day-to-day services, and it also operates the only part of the UK’s strategic road network that receives no routine funding from the Government.

The biggest hole in the finances is the losses incurred by the bus networks, which ran at a loss of £640 million over the past year, and projected to rise to a loss of £722 next year. This is mainly due to declining passenger numbers, and unlike other parts of TfL, operating costs are rising rather than falling.

That compares to an expected operating surplus of £823 million from the London Underground. The bus network does however carry roughly twice as many passengers as the London Underground.

Passenger Numbers

A trend in declining passenger numbers on the buses since 2015 is consistent with survey data showing a decline in bus trip rates over the same period by low income households, who represent the majority of bus users. The reduction in passenger numbers is concentrated in the weekends and school holidays.

London Overground and TfL Rail demand fell in 2017/18, which was broadly consistent with a decline in overall rail demand across London and the South East, although they forecast this to recover in 2018/19.

Underground journeys were in decline in late 2017 and most of 2018, before growth returned in the last quarter of 2018. The number of journeys outside Zone 1 has been in decline over the last two years, which likely reflects a reduction in discretionary journeys.

Borrowing and Debt

TfL’s debt is expected to reach £12.5 billion by the end of the 2020 financial year, up from the £11.7 billion this year, representing 179% of income.

The borrowing for 2018/19 has been completed and they are now looking at the most appropriate options for the 2019/20 borrowing requirement.

Last month, one of the big-three ratings agencies, Fitch placed the UK government — and hence, also TfL — on Rating Watch Negative owing to the ongoing uncertainty over Brexit and the likely impact on the UK economy.

A ratings downgrade usually means higher interest rates have to be paid on debt that TfL borrows.

Cost Cutting

To date, in 2018/19, operating costs are £311m below budget – £277m of this is from net cost reductions across the business.

Elizabeth Line

The impact of the delayed launch of the Elizabeth line is still around £600 million in lower revenues, although as the line is not operational, their operating costs are also considerably lower. The increased borrowing and debt to cover the cost overruns will also affect TfL’s finances in the years ahead.

One interesting snippet from the report is that TfL is assuming that it ” will take over services from Paddington to Reading in 2019″, which does fit in with previous suggestions that this will happen — although not until late this year, although another part of the report talks about the “last quarter of 2019/20”, which means this time in 2020 before the service can start.

Clearly there is still a lot of confusion about the scale of the delay to the Crossrail project.


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  1. Tim Burns says:

    “TfL is now projecting an income for the year ahead of £6.97 billion, of which £4.86 will come from passengers fares”. Wow! Some subsidy and cheap fares …

    Pedant bit finished. Thanks for the articles.

  2. Rowan says:

    £722 is quite the increase in losses over £640,000,000 🙂

  3. Nicholas Bennett says:

    TfL’s deficit isn’t helped by the number of staff earning more than £100k and getting free travel.

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