Charles Wright: You thought Transport for London’s financial problems were over? Think some more

Charles Wright: You thought Transport for London’s financial problems were over? Think some more

The capital breathed a collective sigh of relief last year when a longer-term funding deal was finally struck between Transport for London and the government following agonising months of stop-start support. But it was limited relief only. With little over 12 months of the settlement to run the beleaguered network still faces major challenges.

The deal brought significant consequences for Londoners, commuters and visitors to the city – the most obvious being the 5.9 per cent fare increase implemented yesterday, effectively forced on Sadiq Khan by ministers.

The biggest percentage fares hike in a decade has predictably not been popular. It will “undoubtedly hit many Londoners hard in the middle of a cost-of-living crisis” and “goes against the need to get more people onto public transport as part of the capital’s net zero strategy” said employers’ organisation BusinessLDN. It would be “challenging for many people” added passenger watchdog London TravelWatch.

The deal has also left TfL with a significant unfunded budget gap. It must find some £204 million in additional recurring savings by next March, over and above cuts already agreed, according to its latest financial reports. The transport body was only able to meet its legal requirement to deliver a balanced budget this year thanks to the Mayor plugging the gap with a temporary finance facility of up to £500 million, a commitment which has also bolstered the network’s credit rating.

There are other impacts too: restrictions on concessionary fares, a £20 hike for Council Tax payers this year and next and a slowdown in “active travel” schemes compared to pre-pandemic plans. A confrontation over government demands for savings on TfL’s pension fund costs is also brewing, with a Whitehall-imposed deadline of 17 March for details to be agreed. The RMT union has announced strike action for 15 March, saying Tube bosses have “refused to rule out attacks on pensions or ripping up agreements on conditions of work”.

The deal also still leaves TfL dependent on fares for 72 per cent of its income – far more than other major capital cities. Even with the 5.9 per cent increase, weekly ridership figures hovering at around 80 per cent of pre-pandemic levels mean fare revenue is expected to be down in 2023/24 compared to 2019.

But it is TfL’s ability to keep renewing and improving the network that is already exercising officials on both sides of the table. The deal did unlock some £3.6 billion in capital spending, but according to TfL the bulk of that was for schemes already underway. The prospects of other enhancements, from upgrading Camden and Holborn stations to replacement trams along with new Piccadilly Line signalling, the Bakerloo Line extension and Crossrail 2 remain uncertain.

Unveiling a much-needed £700 million upgrade to Bank station just a couple of weeks ago, Khan warned it could be the last major engineering project on the rail network for some time. “I worry that unless the government invests in public transport in London we could have no more great, exciting projects like this opening,” he said.

Behind the scenes, talks are underway following the finalisation of TfL’s 2023-26 business plan. “Like every other major transport authority around the world, we will need ongoing government support for capital investment, and we are already discussing our shared priorities with the government,” the plan says. “We are making the case that, beyond 2024, we should be working together to support jobs, homes, carbon reduction and economic growth through capital investment in transport.”

It’s not easy to find anyone arguing against that case. Only last week the Centre for Cities argued in its report on the capital’s productivity problems that reform was needed to “underpin the sustainability of this key part of the ‘plumbing’ of London’s economy”.

In the same week, LSE London’s Tony Travers highlighted the transport network’s role in the capital’s success story, from early 20th Century expansion to recovery from post-war decline and more recent development, including extensions to the Northern Line and the Overground to Barking Riverside and the Elizabeth Line, which is already the most heavily used railway in the country.

Yet some existential questions remain, including the longer-term impact of the pandemic on commuting and business travel, as well as the “levelling up” agenda, which continues to make it harder for the ultimate decision-makers in central government to be seen to be investing in the capital.

TfL’s over-heavy dependence on fares is a further stumbling block to making further investment in capital improvements, entailing making something of a big and possibly uncertain bet on ridership not only retuning to what it was but increasing. For the Mayor and many others with an interest in a thriving city, that means more devolution and new powers to raise revenue must be on the agenda as those talks with government on TfL’s future proceed. Either way, the need for another dose of long-term financial certainty means the clock is already ticking.

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Categories: Analysis

1 Comment

  1. James Miller says:

    In the 170s, I wrote a project management computer system, that went on to be used on half of the world’s major projects in the 1980s and 1990s, including the Channel Tunnel, HS1, the Jubilee Line and DLR extensions.

    There has been some very bad project management London over the last few years, that has resulted in TfL’s problems. A large project like the Lizzie Line needs a large numer of workers. For the tunneling, Crossrail knew there would be a shortage, so trained more at TUCA in Ilford. But for the fitting out, all London politicians gave planning permission to large numbers of secondary developments clustered around the stations. These were often built by developers with bottomless pockets and they created a shortage of labour. So the developers stole the workers from Crossrail and it was late, thus banging a big hole in TfL’s finance and credibility.

    All of this secondary Crossrail development, should have been phased to start after Crossrail opened.

    Did anybody in the Mayor’s Office add up all the number of workers needed?

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