Funding package of up to £1.8 billion agreed for TfL

02/11/2020

Up to £1.8 billion funding for Transport for London until the end of the 2020-21 financial year in March has been agreed by the Government.

The money is needed to offset the lack of revenue resulting from a decrease in passenger numbers because of the COVID-19 crisis. It follows a £1.6bn agreement in March that expired at the end of October.

It is subject to actual levels of passenger revenue while discussions continue surrounding a longer-tern solution. Fares will rise by the previously agreed RPI + 1% as part of the package.

“Reaching this agreement with the Government allows us to help London through this next phase of the pandemic. We will continue to work with the Mayor and government on our longer-term funding needs,” said London Transport Commissioner Andy Byford.

Secretary of State for Transport Grant Shapps said: “This deal is proof of our commitment to supporting London and the transport network on which it depends.

“At the same time, the agreement is fair to taxpayers across the country. Over the coming months, I look forward to working with London’s representatives to achieve a long-term settlement, with London given more control over key taxes so it can pay more costs of the transport network itself.”

London Mayor Sadiq Khan said this was not a “perfect deal”, adding: “We fought hard against this Government which is so determined to punish our city for doing the right thing to tackle COVID-19. The only reason TfL needs government support is because its fares income has almost dried up since March.”

The funding deal provides TfL with a core £1bn for the period October 18-March 31. This comprises an Extraordinary Support Grant of £905 million payable under Section 101 of the Greater London Authority (GLA) Act 1999 and £95m incremental borrowing by TfL from the Public Works Loan Board.

These figures assume passenger demand over the Support Period stays at around 65% of pre-COVID levels. This is higher than the ridership assumptions in TfL’s revised budget published in July, that forecast a funding shortfall of £2bn for the second half of 2020-21.

The overall £1.8bn figure recognises the high level of uncertainty in predicting passenger revenue, and so allows modification of the total amount of support up (or down) depending on passenger revenues. £1.8bn is therefore the expected figure.

As part of the deal, TfL must commit to saving £160m towards the forecast funding shortfall via additional income or savings. This is expected to come via a mixture of lower capital and operating expenditure savings.

Discussions regarding the additional costs for Crossrail are not included in this deal. TfL described them as “constructive” and said they are expected to conclude soon.

RMT General Secretary Mick Cash said: “It is deeply troubling for TFL staff that this short-term deal is loaded with strings that amount to at least £160m of cuts, with the very clear threat of worse to come.”