HomeGovernanceGovernmentTfL considering long-term funding offer

TfL considering long-term funding offer

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More than two years after Transport for London’s finances collapsed as a result of the pandemic, there may about to be a positive solution to the Long Term funding from Government.

On 22 July, the Department for Transport (DfT) provided TfL with a draft proposal for a Long Term Funding Settlment. TfL said the terms of the proposal are subject to agreement and TfL would review it and provide a further update in due course.

London transport commissioner Andy Byford, said: “Since keeping London moving through the darkest periods of the pandemic we have been making the case to Government that there can be no UK recovery without a London recovery and that there can be no London recovery without a properly funded transport network.

“We are grateful for the support we have received so far, and maintain we have met every condition that has been set by Government as we have worked towards agreeing a multi-year funding settlement that would give certainty to London and to the tens of thousands of jobs across the country that are directly linked to TfL.

“Every other major transport system around the world receives central Government funding, and London needs the same if it is to have a transport network that can continue to support homes, jobs, opportunities and economic growth. The importance of a properly funded transport network, which can offer a viable alternative to car use and can play its part in addressing the climate emergency, has again been highlighted in recent days.

“We have this evening (22 July 2022) received a draft proposal from the Government, which we are now reviewing in detail. No agreement has yet been reached and we must make sure that the proposal is fair and that the conditions are realistic and deliverable. We will respond to the Government as soon as possible.”

Mayor of London Sadiq Khan said on 22 July: “Late on Friday evening, TfL finally received a proposal for a funding settlement from the Government. This is long overdue – and the inexcusable delay has forced TfL to plan for cuts. While sight of this offer is welcome, we will now need to scrutinise the offer in detail to understand the impact of this offer on Londoners and the wider economy. It is in no one’s interest to have conditions that could damage TfL, unfairly punish Londoners or the economy of our capital city.

“TfL only needs financial support from the government because it and Londoners followed the Government’s advice, which had a devastating impact on TfL finances. TfL need a sustainable funding deal that prevents the need for painful cuts to London’s transport network. Unless this deal offers fair sustainable funding for our capital city, which contributes £36 billion net to the rest of the country, there will be devastating reductions in bus and Tube services, harming both London’s and the national economic recovery.”

TfL announced on 13 July that the current extraordinary funding and financing agreement between TfL and the Department for Transport (DfT) had been extended until 28 July.

The DfT has provided around £5 billion in funding to keep services operating. TfL relies on income from its farebox for the majority of its revenue.

So far there have been four funding packages agreed by the DfT and TfL since the start of the pandemic. The latest was due to expire on 24 June, but was extended first to 13 July and then 28 July, and that is how the majority have worked, with short-term extensions, much to TfL’s frustration. This latest package was agreed in late-February but came with conditions that TfL had to show how it could raise an extra £400 million through either additional revenue or cost savings.

Concern has been raised consistently about the lack of long-term support for TfL by government. Support is required due to the way TfL is funded. More than 70 per cent of its income had been received through fares. In comparison, metro systems in cities such as Paris, Madrid and New York receive Government subsidy, with only around 40% of their revenue reliant on fares.

The pandemic had a huge impact, with ridership dropping to less than 5 per cent during the first lockdown. This had a massively negative impact on TfL’s finances.

Subsequently, the introduction of more working from home and restrictions on sporting events and theatres meant that many people also did not make social journeys for a lengthy period. Figures released on 20 July show that on 18 July there was only 52 per cent of pre-Covid passenger levels using the Underground, and 73 per cent of bus users. At weekends this has been higher, with 85 per cent recorded on the LU network on 16 July and 91 per cent on the bus network. The LU figure was down compared with 74 per cent on 14 July, and these figures show that midweek is busier than Mondays and Fridays due to the ‘new normal’ way of working.

The longest funding agreements, so far, have been six months long, while a funding package due to expire on 11 December 2021 received short-term extensions to 18 December 2021 and then 11 and 18 February 2021. Just before the first expiration, Grant Shapps criticised mayor of London Sadiq Khan for leaking his concerns to the press.

TfL has also previously stated that without the long-term funding agreements, upgrades to various Underground lines cannot take place and that some fleets due to be replaced in the Deep Tube Upgrade programme will not be removed from traffic until the 2040s, meaning they would be around 70 years old. Furthermore, TfL has warned of cuts to services if there is not enough funding.

Even on 22 July, when the DfT was putting together funding proposals, TfL was highlighting technology designed to cool the Deep Tube network but stating that it could not go ahead without the long-term funding. TfL also reiterated that that also remained the case with re-signalling scheme and new train fleets.

Sadiq Khan has been forced to axe his fares freeze for TfL services as well as looking at cost-cutting. Earlier this year there was a management reshuffle at senior level with roles merged and staff leaving the organisation.

Furthermore a DfT representative now attends TfL board meetings as part of the funding agreements.
Speaking to Inside Track editor Richard Clinnick at the launch of the Elizabeth line at Woolwich on 24 May, London transport commissioner Andy Byford said of the funding: “we’re aiming for a minimum of three years. Certainly Government recognises the benefit of settling with TfL on a long-term capital basis but there is a lot of negotiation to be before then that now Crossrail is open gets my full attention.”

The capital must now hope that the offer made to TfL is accepted. If not, more delays will be encountered, and neither side negotiating will want that.

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