TfL has secured a six-month lifeline to keep London’s transport network running until the end of next March.
TfL was on the verge of facing the risk of a large scale shut-down had the funding not been agreed by last night, as it would have breached its legal authority to spend money. That could have seen London’s buses and trains taken out of service by Monday morning.
The funding deal, worth up to £1.8 billion is less than the £2 billion that TfL had been seeking, and is also based on passenger numbers that are higher than TfL was projecting, even before the latest lockdown announcement.
The funding assumes that passenger demand between now and next March will stay at approximately 65% of pre-coronavirus levels. This is higher than the ridership assumptions in TfL’s revised budget, published in July 2020, which forecast a funding shortfall of approximately £2 billion for the second half of 2020/21.
The funding deal is currently made up of a government grant worth £905 million, and a loan of £95 million – but this can be increased to an estimated £1.8 billion, depending on passenger numbers on the trains and buses. It could be higher if passenger numbers are lower than expected.
TfL is also being required to find an additional £160 million, either through increased revenue from somewhere, or cost savings — likely to be a mix of deferring capital investments, and lower operational costs.
The changes to the Congestion Charge will be maintained, although plans to expand the Congestion zone have been scrapped. The current removal of free travel in the morning peak for holders of 60+ / older persons freedom pass will also remain. There was no mention of the withdrawal of the under 18s travel pass.
They are also still negotiating over the £1 billion needed to complete the Crossrail project.
The Mayor of London says that plans to increase fares by more than the previously agreed “inflation plus 1%” from next year have been scrapped, but as part of the deal, London will also have to raise extra money in future years. Decisions about how this additional funding will be raised are yet to be made, but some of the options to be looked at include a modest increase in council tax as well as keeping in place the temporary changes to the central London Congestion Charge that were introduced in June 2020 — both would be subject to consultation.
Those decisions need to be taken by January 2021, at the same time as the Mayor of London presents a plan for the long-term financial sustainability of TfL.
The Mayor of London said that the deal is ‘not ideal’ but adds that he fought hard against the Government’s determination to punish London.
The funding deal expires at the end of next March, and TfL has already said that it will require more government support to see it through the following year as passenger numbers are still expected to be below normal levels.
Andy Byford, London’s Transport Commissioner, said: “Reaching this agreement with the government allows us to help London through this next phase of the pandemic. We will continue to work with the Mayor and the government on our longer-term funding needs. As always, our staff are working tirelessly to serve London’s people and businesses; supporting the city’s economy and providing an excellent, safe and reliable service to our customers every day.”
Update – Although TfL and the Mayor of London say the funding deal is worth up to £1.8 billion, the Secretary of State for Transport, Grant Shapps says it’s worth £1.7 billion.
Update – Corrected comment about fare rises.
Update – More details have been provided by the Department for Transport into the funding settlement.
TfL will be required to produce by 11th January 2021 a plan with options as to how financial sustainability could be achieved by as soon as possible with a target date of the full year 2023. That plan will require TfL to agree in advance with the DfT as to what its long term network upgrades will be — effectively giving the government a veto over TfL.
TfL will also be expected to increase its land and property sales, and increase commercial income from other sources.
In the long term, it’s likely that any costs that TfL bears for offering free travel for under-18s, and free travel for people aged 60-65 will have to be borne entirely by London taxpayers. Free travel on buses for over-65s is a national government issue.
In relation to Crossrail 2, TfL has been told to prioritise safeguarding activity but also bring an
end to consultancy work as soon as possible.
TfL is to prioritise the delivery and operation of a temporary walking and cycle ferry for the Hammersmith Bridge, but the cost is coming out of TfL’s own budget with no government support — and TfL will have to pay £4 million towards the stabilisation of the bridge. The bridge has been owned by Hammersmith & Fulham Council following the abolition of the GLC in 1985, although TfL has been leading the taskforce to repair it.
The government is also still expecting TfL to investigate driverless trains, even though that’s already been dismissed as a lot of money spent to achieve very little.
And finally, the government may agree to remove its current oversight from TfL at the end of March 2021, if it thinks that is possible.