Transport for London has secured a further £1.08bn in government support but will need to generate an additional £900m in savings or new revenue as a condition of the funding.
The agency’s finances, which were already under pressure before the pandemic, have been decimated by passenger numbers plummeting over the past year.
Ministers have provided a series of short-term funding packages, the most recent of which expired on Friday.
The latest deal will provide TfL with at least £1.08bn until December 11th this year, with further funds available if fares income is lower than expectations. If fares exceed projections, the overall value of the package will be reduced.
The requirement to generate £900m in savings and/or new income means the agency will need to review spending plans, make greater use of existing cash reserves and look to generate more money from commercial activities.
Transport Commissioner Andy Byford promised this would be done “while protecting front line services to deliver what London needs and to play our full part in recovery, decarbonisation, improving air quality and promoting active travel.”
He also said it was “vital that we also use this period to agree a longer-term settlement so that we can plan effectively for London’s future and deliver maximum value for money through our contracts and supply chain.”
Transport Secretary Grant Shapps said: “This £1.08 billion financial package will support London and its transport network through the pandemic, and ensure it is a modern, efficient and viable network for the future.
“Throughout this process, the government has maintained that these support packages must be fair to taxpayers across the UK and on the condition that action is taken to put TfL on the path to long-term financial sustainability.”
However Mayor Sadiq Khan has criticised ministers over initial demands made during negotiations which he said would have amounted to “huge cuts to transport services equivalent to cancelling 1 in 5 bus routes or closing a Tube line.”
While TfL has reduced the scope of such demands during talks, he said: “The Government is still insisting that TfL look at options to raise a further £500m to £1bn of revenue per year by 2023. I have been clear to the Government that there are very few options to do this and forcing TfL to impose draconian additional measures on London would be unacceptable.
“So I will continue to work with the Government to identify an appropriate source of funding. But I am hopeful that as London bounces back from the pandemic, and income from fares continues to increase, we’ll be able to avoid introducing any unfair measures on Londoners, as the additional fares revenue may be able to meet Government demands.”
One of the conditions for the new money is that TfL “make progress” on converting at least one Tube line to driverless trains. However, the Mayor said he will oppose any attempt to force their introduction, saying this “would cost billions of pounds and would be a gross misuse of taxpayers’ money at this critical time for our country.”
The London Assembly’s Transport Committee has urged both sides to reach a long-term deal and provide certainty to passengers. Chair Caroline Pidgeon said: “If TfL is to deliver £300 million of savings or new income sources in 2021 to 2022, where will these savings or new income come from?
“What is needed now is a long-term deal and I sincerely hope this extra six months will give both sides the time to come to a longer-term financial settlement which London so desperately needs.”
The FSB, which represents small businesses, has expressed concern about the implication of the latest deal for their members.
London Policy Chair Rowena Howie said: “Whilst we understand the impact the pandemic has had on the public purse, these last-minute funding deals are a concern to business.
“The short-term deal agreed last year which led to the extension of the Congestion Charge to £15 from Monday to Sunday now looks ominously like become a permanent fixture that will add to the economic costs of doing business for thousands of small firms in the capital.
“A long-term solution is urgently needed to this issue so that businesses have confidence and are not priced out of the capital city as we move towards recovery.”
The London Chamber of Commerce and Industry has also expressed concerns, with Chief Executive Richard Burge warning “the level of savings required of TfL raises the concern that this will result in a worsening of service.”
He added: “Of course the government wishes to monitor changes in passenger volumes over the coming six months but increased hybrid working and lower international visitor levels will remain beyond the end of this deal.
“Questions remain about the government’s commitment to having a public transport network at the heart of London’s success as a global city.
“Stop-start funding combined with a desire to constantly reduce the level of public funding undermines confidence in London and in the Government’s concept of a truly global Britain.”