Transport for London (TfL) is predicting that fares will have to rise as it faces a £2.1 billion hole in its revenues projections for the next five years.

In addition to likely fare rises, TfL is delaying a number of planned upgrades and will be seeking to make further cost cuts in its operations.

It may not seem it when squashed into a tube train, for while London’s population growth continues unabated, passenger numbers are not growing as fast as expected for some reason, and that’s having an unexpected impact on future revenue projections.

Passenger revenue – ticket sales — represents half of TfL’s annual income, and over the past four years, there’s been a 15 percent decline in public transport travel by Londoners. Various theories exist to explain this, such as uber taxis, online shopping/food deliveries, and issues such as Netfix keeping people indoors are high on the suspect list.

Basically, it’s Game of Thrones fault.

The difference in the amended projections is roughly 140 million fewer train journeys by 2021 than had been expected — from around 1.52 billion to 1.38 billion. However, the tube makes an operating surplus — that is, excluding investment and debt servicing, it’s actually profitable to run the tube service. Despite lower passenger growth, the aim is to double the operating surplus to £1.4 billion by 2023.

Buses are faring worse, with declining passenger numbers, with the 2016 plan projecting 2.5 billion journeys, but this now falling to as low as just 2 billion bus trips. The bus network also runs at an operating loss, of around £700 million, which they are looking to cut. That’s though the changes that are already being proposed to cut some routes and reduce bus frequencies.

TfL also faces a declining central government grant, which has progressively declined over the past five years to zero. TfL is making cost cuts to offset the loss, but is pushing back the date it expected to break-even by a year to 2023. That in turn increases debt, which itself is an additional cost to maintain.

A £600 million loss of revenue from the delayed opening of the Elizabeth line doesn’t help. There is though the possibility that they could start Reading to Paddington services ahead of completion of the rest of the Elizabeth Line to help mitigate revenue loss from the delay.

TfL is also faced in London with funding road maintenance out of its own budget instead of from central government funds, as is the norm outside London. That puts more pressure on TfL’s finances, although some would counter that TfL also benefits from income through the Congestion Charge, which tops up its finances.

Looking forward, TfL is looking to cut its back office costs by 30 percent on top of the 20% of cost savings already made over the past few years.

A £300 million surplus is also being expected from commercial development, and the expectation that they will break even on rail and “other operations”, which notably seems to include the cycle hire scheme, but not the Cable Car (although as it’s technically managed by the DLR, that might be hidden).

On the Elizabeth line, there’s more detail about the £1.4 billion grant being provided by the government to complete the railway. It’s now confirmed that the grant will be paid back over a 10-year timeframe, from MCIL revenues. However, those revenues had already been earmarked for Crossrail 2, which could see that project delayed until Crossrail 1’s debt are paid back.

The start of construction work on the Holborn station upgrade appears to have been pushed back from 2021 to 2023/24, while the completion of the Bank station upgrade seems to have moved back slightly to late 2022/23, while preparations for the Camden Town station upgrade is being delayed.

TfL has also halted work on selecting a signalling upgrade supplier for the Piccadilly line.

Not everything is grinding to a halt though – TfL says that it will continue to campaign to take over more National Rail services around London, and will keep working on the West London Orbital rail link proposals.

Mobile phone coverage will be extended into the tube tunnels in phases starting next year. You can also expect to see a lot more advertising and mini-shops in tube stations.

TfL is still expected to be investing, on average, £2 billion a year over the next five years. However to meet the Mayor’s Transport Strategy by 2041, that investment needs to rise to £3.3 billion per year.

That along with reduced central government grant and the lower fares projections means that TfL’s debt is likely to hit £13.6 billion by 2023, after which it is expected to start falling as the organisation finally breaks even in operating costs and stops needing to borrow more money.

Overall, the next few years are likely to be dominated by cost cutting, and while a few transport upgrade projects will be completed, many more are being delayed, so there’s going to be a period of literal belt-squeezing by commuters squashing into ever more congested trains until delayed upgrades are completed.

And from 2021, when the Mayor’s current fares freeze ends, TfL expect that future fares could rise by 1 percent above inflation to help fill the gap. Unless the Mayor decides otherwise.

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12 comments on “Higher fares as London Underground’s cash crunch bites
  1. JS says:

    What utter nonsense, I travel to work every morning into Central Ldn by train & on a few occasions i’ve had to wait for a few District/Circle line trains to go by at South Kensington as the carriages are so packed there’s no room to squeeze on. Whilst it’s not as bad as that everyday one thing is for sure is that the trains are packed full of people heading to work/school. Even on weekends the Piccadilly line trains are absolutely heaving heading into London.
    It is simply another excuse to line their own pockets, we have the most expensive public transport system in Europe in terms of fares!

    • MikeP says:

      Unfortunately, your specific experience isn’t the measure of total passenger journeys. With today’s measurement systems, on a scale of “very accurate” to your “utter nonsense”, that measure will be closer to “very accurate”. Much, much, much closer.

      What this does show, however, is the folly of predicting the future based on past performance, and then building investment plans around that. London’s passenger growth was not, to my mind, going to carry on at the rate and timescale predicted. The question was when it would hit the buffers – and we’re now seeing that. Worse, there’s a perfect storm here with the slashing of central Government support. Then the coming B-word – that’s going to be a factor too, as businesses relocate to other parts of Europe.

  2. Rahul macwan says:

    What i wanna know is all these government workers work for the public so i wanna know where is the money going and getting advice and voting saying should we go with this and every manager level to the top how much are they earning and what is the bonus and why are they getting a bonus and a superhigh wage is its all going to shit?

  3. Linn says:

    People are fed up with paying over the top fares & seeing NO improvement whatsoever. And, this statement trying to justify the reasons etc shows what a useful bunch is in charge of the network, no forward planning, nothing.

  4. Rog Laker says:

    The full 4-year fares freeze was always a folly. Just for 1 to start, with aspirations to repeat based on annual reviews, would still have been enough for Sadiq to get elected. Now look at the fine mess he’s got us in.

    • Shamonthedon says:

      Ridiculous comment. The fare freezes did not apply across the board. Nonetheless it was welcome to low income families struggling. If you want to deal in facts blame a government spitefully slashing RFLs subsidy, and good ole Boris for squandering the transport legacy he was given

  5. SteveOfTheStow says:

    Anyone remarking on high fares in London should take a look at the counties and realise we are absolutely bloody lucky here. We get a frequent service day and night across multiple modes of transport, for fares that are cheaper than outside London, especially on rail.
    The Mayor’s fare freeze policy across his term was nothing short of wilful irresponsibility given the Government’s grant is subject to political whim – he blames them but should’ve realised that what he wasn’t in control of (the Government and the grant) was not reliable. Had the freeze not gone ahead TfL would’ve been able to better absorb the loss of grant, and the public wouldn’t be in for such a shock come 2021 when fares will be supremely hiked to cover the losses TfL have had to absorb these few years. I hope he gets re-elected so he has to be the one to sign off that hike.

  6. Melvyn says:

    I fail to see why public transport users should subsidise road users and thus only bus lanes will be resurfaced with the rest of road and streets not served by buses left to rot …. If local councils especially Tory ones like Barnet and Redbridge want maintained roads then they should pay from their Council Tax income .

    Sorry but Tory Government has given priority to funding the EU and not YOU!

    Reintroduce WEZ as a separate zone to raise more income.

    Oh given Crossrail hasnt opened and Oxford Street pedestrianised scheme is cancelled bring back route 25 and 242 to Oxford Street and 73 to Victoria Station along with bendy buses!

  7. Mafy says:

    Game of Thrones’ fault****

  8. Boneymaroney says:

    Maybe there’d be more money for TFL to fund repairs, new trains etc if there wasn’t free train and tube trave for all those receiving state pension in the whole of Greater London. Keep free bus travel – as that is a nationwide benefit – but surely free train and tube travel is rather OTT and extremely generous and would be subsidised by fare/tax payers.

    • harry says:

      “Free” transport is funded by the boroughs not TFL. To TFL, “free” transport actually represents *income*.

      Its unlikely that the boroughs would continue to pay that money to TFL if their residents were not receiving the associated transport benefits. Currently, the money comes from funds like car parking profits. So its actually the motorist that’s paying, and perhaps that’s not unreasonable because without free transport for those that can use it, London’s roads would be even more unbearably congested than they presently area.

      Sometimes, the “obvious cost” is misleading but if there wasn’t free transport, a lot more would have to be spent building roads.

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