At lunchtime today, Transport for London’s (TfL) board held an urgent meeting to discuss if they will accept the funding offer from the government to keep London’s transport running.
The public part of the meeting outlined some of the risks of not accepting the offer on the table, not just deep cuts to public transport services, but even the potential for the government to take direct control of TfL.
The most recent funding package, which covered running costs to keep services running expired at the start of this month. Although the Department for Transport (DfT) said at the time that the funding package it was offering was the final one available, TfL has been pushing back and the offer they were discussing today was, as TfL’s Commissioner Andy Byford said “quite different” from the so-called final offer sent to them a month ago.
Andy Byford also commented that the negotiations had been “absolutely exhausting”.
As Commissioner, he has long been pushing for a medium to long term settlement so that TfL is able to plan ahead properly. He said they’ve been running with a “planning window of months at best, sometimes even just weeks” which is not conducive to running any organsiation. He also said that the offer on the table would protect and respect TfL’s 27,000 staff, although it slipped out in the later discussions that a pension and wage constraint of some sort exists in the government’s offer.
The board was reminded that any financial support involves conditions and that the alternative to the package on offer was a rapidly deteriorating situation at TfL, the possibility of a direct government takeover of TfL, or declaring effective bankruptcy under a Local Government Section 114 order.
Andy Byford warned that the alternatives to the offer would leave TfL “exponentially worse” than if the board says yes to the package being offered.
Saying yes would, as he put it, “leave TfL in charge of its own destiny”, and that this was the “best possible outcome that could be achieved” in what he also described as a very one-sided negotiating environment. Andy Byford concluded that while the funding settlement is not entirely sufficient, it would be enough to plan for the immediate future.
TfL’s interim Chief Financial Officer, Patrick Doig outlined the financial implications in a situation where TfL is facing an ongoing structural reduction in passenger income of £1.5 billion a year.
TfL’s current financial budget forecasts are based on the “managed decline” scenario, and on a like-for-like comparison of pre-pandemic maintenance, there’s an £800 million hole in the funds. Although no new contracts have been signed, without a funding settlement, they’ve had to transfer operational revenues to supporting pre-existing capital contracts that had been signed in the past. That means without the deal, they will have to make further cuts to services to pay the bills that TfL has already committed to.
He predicted an 18% reduction in buses and a 10% cut to tube services would be needed to balance the accounts, which is far deeper than the 4% cuts to bus services that are being proposed at the moment.
As a Chief Financial Officer, Patrick is also required to keep an eye on whether TfL is able to operate with a balanced budget, as it is legally required to do. If he feels that cannot be achieved, then he would be forced to issue the Section 114 notice, effectively the nuclear option, forcing deep cuts in services to balance the books.
There’s a gap of around £900 million between TfL’s budget and revenue for this year, and that’s the scale of the cuts that TfL would have to undertake.
So far, he’s held off issuing that 114 order because talks looked as if they are progressing, but if the board today rejects the offer on the table from the government, then he may be forced into taking that action.
After the initial public presentation, the meeting went into a private session to discuss the small print of the offer.
If the board, in their private discussions decide that they will accept the offer, then the document needs to be signed by the Secretary of State, Grant Shapps, and once TfL receives back that signed document then they can announce a deal has been agreed.
People now need to keep watching TfL Towers looking for white smoke.
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UPDATE – TfL has accepted the deal. Details are here.
