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Here we go again. For the fourth time since the start of the pandemic, London’s transport system is facing a financial apocalypse. Thanks to a slower than expected recovery in passenger numbers, the hole in Transport for London’s finances is £1.2 billion bigger than previously thought. Balancing the books, as it is legally required to do, would, it claims, require reductions of nine per cent to Tube services and 18 per cent to buses, and closures on key road links like the Rotherhithe Tunnel, too.
If the Government doesn’t come up with the funding, Mayor Sadiq Khan warned yesterday, TfL would be forced into a programme of “managed decline”. The Department for Transport has yet to respond.
To see how we got into the mess, you need to understand how what looked like TfL’s biggest strength turned out to be its greatest weakness. In 2015, the capital’s then mayor, an obscure chap by the name of Boris Johnson, agreed a new financial settlement for London’s transport system. The roughly £700 million a year it got from the Treasury to keep the Tube and buses running would be phased out. In its place, a fair whack of business rate revenue would be devolved to the capital. Mostly, though, TfL would be funded by its users.
For the first couple of years after the 2018 reforms this worked beautifully, and TfL largely paid its own way without taking money from the governmental equivalent of its parents. Instead, its money came through advertising, congestion charging, and, most of all, fares.
The latter has recently provided around 72 per cent of TfL’s money, compared with only 38 per cent in New York or Paris and as little as 21 per cent in Singapore. This is, in its way, pretty impressive — and best of all it protected London from the whims of the Treasury.
But then the pandemic happened. Britain locked down; commuters stopped commuting, and fare income collapsed. In May last year, TfL came unnervingly close to running out of money. London almost ground to a halt.
The Treasury provided a bailout, with a few strings attached to ministers’ pet projects, and has since done so twice more, but there’s still no word on what a long-term settlement looks like. TfL is more dependent on Treasury whims than ever. The most recent bailout runs out in a month, and fares still don’t cover operational costs.
It’s abundantly clear, however, that the Chancellor is not in a giving mood right now. Even as Khan was issuing his press release, northern MPs were in uproar at the way the Government’s Integrated Rail Plan had scaled back the rail investment promised to the North. In this environment, yet more money for the capital will be a hard sell.
So what else can TfL do? Some foreign metro networks, notably Hong Kong’s MTR, subsidise operations through property development and rents. TfL has been moving in that direction but the numbers being discussed don’t seem likely to fill the £100 million hole in its budget every month, and even if they could, won’t do so any time soon. The Mayor can put up council tax, but is understandably not keen to add an estimated £340 a year to the average bill.
More likely are taking control of London’s share of Vehicle Excise Duty, almost all of which is spent elsewhere in England, or introducing a Greater London boundary charge, paid only by cars registered outside the capital. Each of these could raise a cool £500million a year. The former, though, is the Treasury handing more money to the capital by another name; the latter means a tax paid by people substantially more likely than Londoners to vote Tory (no wonder Sadiq Khan supports it).
Neither plan has so far won government support, and anyway the scale of the crisis means that, even with this extra revenue, there would still be substantial cuts to services. “The reality is,” one TfL source says, “we can’t solve this problem alone.”
That said, TfL also maintains that, with 17 more months of support, it can be sustainably funded by April 2023 — at least some of the crisis talk may be a negotiation tactic. Nonetheless, there is a reason no other major world city relies so heavily on fares to fund its transport system — sometimes, the numbers just don’t add up.
The Government may find it difficult to hand more money to London — especially if it’s not willing to show some largesse to the regions, too. But if it wants the economy to recover, it needs London to recover, too — or it won’t just be the capital facing managed decline.