Mayor Sadiq Khan and Transport for London boss Andy Byford have asked ministers for a further £2bn bailout to ensure services keep running for the remainder of the financial year.
TfL is heavily reliant on fares, which account for almost half of its income, and travel restrictions and changes of behaviour arising from the coronavirus pandemic have plunged it into a financial crisis which has already seen the agency accept £1.6bn in emergency funding from central government.
The cash came with strict conditions, including the raising of fares across all TfL services, suspension of free travel for students, restrictions on the use of free travel passes by older Londoners, and the imposition of two government representatives to the TfL board.
Both City Hall and TfL insist the agency had “achieved significant progress” in improving its finances prior to the pandemic and say it was on a strong footing despite a 2015 decision to end a government operating grant with effect from 2018, thereby increasing its reliance on fares income.
However the London Assembly has long questioned TfL’s finances, and in 2017 published a report suggesting the Mayor’s decision to freeze fares for his whole term meant the agency would be unable to deliver a series of vital upgrades.
Those concerns appear to have been well-founded, with TfL subsequently delaying major schemes such as upgrades to signalling on the Piccadilly line, and drastically scaling back spending on road maintenance and renewal.
TfL’s finances have also been hit by lost fares and commercial income arising from the delayed opening of Crossrail which was meant to begin services in December 2018 but will now miss even its revised target of next summer.
Even if ministers agree to the new bailout, TfL says it will need to halt work on a number of planned projects, including the Rotherhithe to Canary Wharf ferry and the transformation of Croydon Fiveways junction.
However it says other projects such as boosting road safety, the Northern line extension to Battersea, and finishing work on step-free schemes at nine London Underground stations, would be able to go-ahead.
Revealing the need for the bailout, Mr Khan said: “Coronavirus has had a devastating effect on TfL’s finances, which rely on fare income. Prior to the pandemic TfL were on course to reduce their operating deficit by 86 per cent and increase their cash balances by 31 per cent.
“TfL’s revised budget, should sufficient funding be provided by the Government in the months ahead, will keep services running safely and support London’s recovery from the pandemic.”
Andy Byford, London’s Transport Commissioner, added: “Prudent financial management had placed TfL on the cusp of breaking even for the first time in its history and with strong financial reserves.
“However, the pandemic revealed that the current funding model, with its unusually heavy reliance on fare revenue, simply doesn’t work when faced with such a shock.
“Our revised budget looks to keep our services running safely, while we do what we can to continue the vital capital investment which will help London recover from the pandemic.”