TfL’s talks with the government to secure a long term funding deal have been extended yet again after a deal was not agreed by the Friday midnight deadline.
Since the pandemic caused a collapse in fares income, TfL, as with all public transport operators has been supported by the government to keep services running while the economy recovers from the lockdown. However, while funding has been largely unconditional for most transport operators, TfL has been locked in negotiations for months about a long term funding settlement to ensure that it can function in the new post-pandemic world.
The impact is significant as TfL is unusually dependent on fares for revenue, compared to most cities, and as such, a decline in 5-day-week commuting will leave a long term hole in its finances that was not expected when previous financial plans were agreed.
The talks have been extended several times, always with a new deadline agreed, but this time the talks are open-ended, with no deadline specified by either side of the negotiations.
UPDATE 21st Feb — A deadline has been announced, and the current funding deal will expire at midnight on Friday 25th February 2022.
A Transport for London (TfL) spokesperson said: “We continue to discuss our funding requirements with the government. There is no UK recovery from the pandemic without a London recovery and there is no London recovery without a properly funded transport network in the capital. We hope these discussions can be concluded successfully soon.”
However, in a separate statement from the Mayor of London’s office, they threatened to effectively shut down a large part of London’s public transport if a funding deal is not agreed quickly.
In the statement, the Mayor’s office noted that if Government doesn’t give a clear indication of the support it is willing to provide in a matter of days, TfL will not be able to offer certainty as to whether it can balance its budget, as it is legally required to do.
The Mayor’s office added that if the financial settlement is not forthcoming, then it may need to issue a “report under section 114 of the Local Government Finance Act 1988 – in effect declaring TfL bankrupt”
If TfL were to issue a section 114 notice, then it immediately has to stop any new activity that could worsen its financial situation beyond any statutory obligations that it holds. These statutory requirements on TfL include running buses for school children who live more than 2 miles from a school, the Woolwich ferry and some road maintenance works. Everything else could be closed down if needed.
In normal times, the tube makes an operational profit, while buses make an operational loss, which coincidentally is roughly equivalent to the surplus made by the tube. If TfL is forced to run without a loss, then it’s likely that the hammer would fall heaviest on the commuter bus network to try and balance the books.
It’s worth noting that while the Mayor’s office says it may have to consider filing a section 114 notice if it does not receive from the government a “clear indication of the support it is willing to provide”, that need not be a full financial agreement, nor even an indication of what the long term plans will be.
A Letter of Comfort, which is a document from the government confirming that it will not let TfL go bust could be all that TfL needs to avoid filing the section 114 notice, and Letters of Comfort have previously been issued during the pandemic that can allow TfL to manage its financial commitments knowing that they will be met, eventually.
Until then though, TfL keeps operating on a very tight leash under the terms of the financial aid agreement signed in June 2021.
Suspend 20% of all services TODAY. Trains are running at 25% occupancy. This is not a sustainable business model. If any tube train drivers, making £95,000 a year, are still getting guaranteed overtime, someone has some explaining to do.
This just isn’t true Chris. I was on the Victoria Line yesterday and it was totally rammed, to the extent that people waiting couldn’t board trains.
DELETED
Comment deleted for posting libellous statement about the Mayor of London.
I just made the mistalke of reading your face book post of this.
What a load of ignorant people there are out there!
Replying specifically to Chris. LUL Train Operators don’t earn anywhere close to £95k. Where do you get your information from? Also, their own framework agreement – vehemently protected by their Unions – don’t allow them to do any voluntary overtime whatsoever.
Time for the government to call Sadiq’s bluff. If he cuts services then take away his control of TfL.
There are political choices to be made between cuts to capital expenditure, cuts to services, increases in fares, or cuts to bloated staff budgets – and the axe should fall firmly on the latter.
The Department for Transport should ensure they have full control of the TfL board, and use that control to freeze the pay of overpaid and lazy TfL staff, and change their pensions to defined contribution at the statutory minimum levels.
They will strike, but strikes have massively far reduced impact now that WfH is so prevalent. The festering sore of over generous pay settlements needs to be cauterised.
You keep spouting this. At least this time you didn’t mention automatic trains – for which there is no money to install and even if there was would take years to install.
The Government does not want the responsibility of running TFL.
For them to take over the board would require legislation to remove it from the Mayor’s control.
Changes to pensions take decades to fully work their way through the system, They don’t generate instant savings.
The next GLA and Mayoral elections are in 2024. I expect to see your name on the ballot paper but with these policies but I don’t rate your chances.
ChrisC – so what if legislation is required? The govermnent has a majority with which it can legislate.
As it happens, the government has already taken over two seats on the TfL board as a condition of the emergency funding to date – Andrew Gilligan and Clare Moriarty. They can easily take over more and force through an agenda of radical change.
Making pension defined contributions will generate savings immediately, in terms of having to fork over less to pension reserves, and will have enormous benefits to TfL finances over the long-term. TfL will be able to borrow on far better terms if it addresses long-term liabilities.
Sadiq Khan doesn’t have the political will to take on the RMT, ASLEF and TSSA – but the dire state of TfL finances mean he can now be compelled to. He is now a beggar; he doesn’t get to choose.
It might concentrate the minds of the Westminster village folks if Westminster tube station was closed “to save money” along with the lines which pass through it. There can’t be a solution until the Tories stop attacking Khan because their boy didn’t win the election (twice).
It’s easy to see who wants a full London recovery and restoration of normal capital city services, and who needs to see London fall as a distraction from more personal failures.
Impassioned and dare I say playground tribalism helps not. Deep breaths, civility and clear thinking are needed. Desperately it seems.
Of course if the buses were cut back (or entirely) it could have a knock-on impact on tube fare collection too, making tube services less profitable…
Although I’m sure TfL have stats on how many bus riders connect with the tube