After months of jousting with government over pandemic funding, crunch time may finally have arrived for London’s beleaguered transport network, according to reports going to an emergency Transport for London board meeting next week.
TfL is running on empty, having relied on dwindling reserves to keep public transport operating in the capital for almost a month since the most recent funding deal with Whitehall expired on 3 August, the report says.
Network chiefs are warning the board, chaired by Sadiq Khan, that failure to sign up to a new deal at next Tuesday’s meeting could mean TfL effectively declaring itself bankrupt, possibly within days.
The law requires a balanced budget to be run by TfL, which will be obliged to issue a “Section 114 report” under the relevant provision of the Local Government Finance Act if it cannot cover its costs. Doing so would halt non-essential spending and could mean dramatic cuts to services and jobs.
“That position remains a constant backdrop to our funding discussions with government,” the report says, and explains that with last-ditch negotiations with Whitehall “now concluded”, TfL is facing stark choices: “If the decision of the Board is to accept the further funding agreement referred to in this paper, it is not considered necessary to issue a s114 report at this time.”
In a notable contrast with the megaphone diplomacy characterising previous negotiations, City Hall and Whitehall have been tight-lipped since 22 July, when the government put its latest offer on the table. It includes a 20-month capital deal worth £3.6 billion, which transport secretary Grant Shapps has argued is in line with TfL’s own 2019 spending plans.
But the report sets out a flurry of behind-the-scenes last-minute discussions as officials attempted to get agreement on what TfL chief Andy Byford described as “extremely complex” proposals.
Byford initially requested a two-week funding extension to consider the new offer, but was granted just five and half days to 3 August when emergency government funding officially came to an end, leaving TfL “without any revenue protection or other support from Government” in the report’s words.
A revised government proposal arrived on 4 August, a third offer “late on the evening” of 9 August and a fourth and final one on 16 August, with further negotiations following.
Speaking on 9 August, before the government’s latest offers had come through, Byford repeated his call for a three-year deal, adding that “it’s vital we get the quantum right, and the conditions must be fair”.
The report to next week’s meeting does not disclose the terms of the final agreement the board will consider, with the bulk of the detail contained in a separate 35-page report to be discussed behind closed doors. But the six pages placed in the public domain suggest continuing concerns, particularly on capital funding.
With London Underground and bus ridership still significantly below pre-Covid levels, TfL is facing an “ongoing structural reduction in passenger income” of around £1.5 billion a year compared to 2019, the report says, with government support not fully bridging the gap.
Byford has nevertheless been able to chart a path to break even by next April, therefore making the current financial year the last year when revenue support, estimated at some £1.2 billion, will be needed. This position has already been accepted by government.
But the report hints at less of a consensus on TfL’s bid for longer-term capital funding, which it says is needed to avoid what it has described as a “managed decline” scenario, trapping the network “in a vicious circle of deteriorating services and declining demand”.
Shapps’ claim that his final offer matches TfL’s 2019 investment plans is “superficial”, it says, because it fails to take a number of factors into account including higher inflation, extra spending to get Crossrail finished, and increased costs resulting from planned maintenance being cut back as fare income fell during the pandemic.
TfL figures suggest a shortfall of some £800 million on planned capital spending over the coming two years compared with the pre-Covid plans, which would result in big cuts to programmes promoting walking and cycling, the axing of funding for borough schemes, and conversions of stations to provide step-free access put on hold.
“Even a modest increase in capital funding above the managed decline level can unlock significant benefits for London and – through our supply chain impact – across the UK,” the report says. “Avoiding managed decline is critical to supporting the London economic recovery, and therefore the national economic recovery.”
With the threat of a section 114 report looming, the time for talking with the government about its offer seems to be over. But arguments over the funding of London’s public transport seem set to continue.
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