Last week, the first report of the new London Assembly was published from the Budget and Performance Committee. TfL is by far the largest organisation in the GLA Group, and it has become the most important policy lever at the Mayor’s disposal.
As well as its core function of keeping London moving, almost anything the Mayor wants to achieve in terms of regeneration, housing, the environment or public health will involve TfL in some way.
But TfL is facing challenging times. Previously seen as the cash cow of the GLA Group, TfL is coming under severe financial pressure that will limit the Mayor’s ability to implement his manifesto commitments unless carefully managed.
Much of this is due to external factors outside the Mayor’s direct control.
Even before he took office, TfL was struggling to deal with the cut to its revenue grant from Government that will kick in two years earlier than TfL had expected – this alone will take £2.8 billion out of TfL’s budget over five years. And, as this Committee reported on earlier this year, TfL has to deal with the consequences of the failed Bombardier signalling contract which added almost £1 billion of extra cost to its budget.
This cut to Government funding is the single biggest factor behind TfL’s financial difficulties. But the Mayor knew this was coming when he campaigned – and was elected – on a pledge to freeze fares for four years, further reducing TfL’s planned income by another £640 million.
And, just this Monday, he launched his new bus hopper ticket, which will cost TfL another £30 million a year. So, from a purely financial perspective, the Mayor has made a difficult situation even harder for TfL.
He has said in public that he has found the money to freeze fares and deliver the hopper with no adverse impact on TfL’s investment programme. However, our investigation showed clearly that this has not yet been achieved and questions remain about the long term sustainability of these policy objectives.
Added to all this, the result of the EU referendum adds yet another layer of complexity and uncertainty for TfL. Will passenger numbers grow as fast as TfL had expected? Will TfL be able to attract and retain talented staff from the EU? Will TfL’s borrowing costs go up or down? At this stage, we just don’t know.
During our cross-party investigation we heard about TfL’s initial plans to deal with its financial problems. TfL told us how it would save money through better procurement, but then could not give us any examples of current contracts that are not delivering value for money.
It told us about its plans to generate more commercial income, but we’re not sure how this can be squared with the Mayor’s desire to build more affordable housing on TfL land.
And while we hope that TfL’s “root and branch” review will identify some options to make it a more efficient organisation, we don’t want it to make short-term cuts that will make it harder to implement the Mayor’s Transport Strategy, due next year.
So, while it’s obviously early days, we aren’t convinced that TfL knows how it will make the savings it needs without making cuts to its vital investment programme.
TfL has a long list of infrastructure schemes it would like to implement over the next few years, but they are all – in theory – at risk while TfL looks for ways to address its financial problems.
These are projects like the Sutton tram extension, the stations at Old Oak Common, cycling infrastructure, and station accessibility improvements for disabled people.
There is a real risk that some of these schemes could be delayed, scaled back or cancelled altogether. TfL will have to work hard to protect them. While passengers will undoubtedly benefit from the fares freeze and the hopper ticket, they may not be so pleased if planned improvements to their services are put on hold or shelved.
Since 2000, a lot of money and hard work has gone into making TfL a world-class transport authority. We cannot allow that status to slip if London is to remain a successful global city. We all know that London’s transport infrastructure needs to be modernised and added to as London’s population continues to grow.
We look forward to the publication of TfL’s next Business Plan in December – this will give us our first indication as to how TfL intends to meet its financial challenge, and whether it really can keep its investment programme on track.
Gareth Bacon AM is Chairman of the London Assembly Budget and Performance Committee