Industry

18 MAY 2020

LONDON MAYOR DESCRIBES TFL'S £1.6BN BAILOUT AS "STICKING PLASTER"

The mayor of London, Sadiq Khan, has described the government’s initial £1.6bn Covid-19 funding and financing package for Transport for London as a ‘sticking plaster,’ and called for a new funding model to be developed and agreed for the longer term.

TfL operates services for around a billion passengers a year, serving a city of 10 million people. More bus journeys were completed in London last year than across the rest of England put together, but the coronavirus pandemic has had an unprecedented impact on the tube and bus network.

The £1.6bn package -  a grant of £1.095bn and a loan of £505m – only runs until October 2020, and comes as TfL’s income from fares has fallen by 90% during the last two months because of the Covid-19 crisis.

The financial package also comes with a series of government imposed conditions, which the mayor says he had “no choice but to accept to keep the tubes and buses running.” The government imposed conditions include increasing service levels as soon as possible to ensure people can follow social distancing guidelines while on the network, making sure those who have no alternative to public transport can travel safely.

A London Covid-19 task force, comprising representatives of the government and TfL, has also been established to oversee operational decisions during the crisis. The collective focus will be on taking all practicable steps to increase the number of services as quickly as possible to benefit passengers who have no alternative to public transport.

In order to safeguard services in the future, the package will see the reintroduction of fares on buses and reinstatement of the congestion charge. It will also focus on promoting traffic management and active travel to maximise the benefits of cycling and walking. 

Transport secretary, Grant Shapps, said: “People should avoid using public transport and work from home wherever possible, but as measures are slowly lifted it is vital that Londoners who need to use TfL services feel safe and secure. We must drive an increase in services to support social distancing and ensure our capital keeps moving, driving the economic recovery of this country going forward.

“To put TfL on a sustainable footing for the longer term and help safeguard its future, the mayor has agreed that the government will carry out an immediate and broad-ranging review of the organisation’s future financial position and structure, including the potential for efficiencies. Two special representatives will represent the government on TfL’s board, its finance committee and its programmes and investment committee, in order to ensure best value for money for the taxpayer.

“The mayor has also agreed to increase fares next year on all modes by RPI plus 1%, in line with the proposals in TfL’s own business plan, in order to put the organisation on a more sustainable footing.”

Sadiq Khan, mayor of London, said: “I want to be completely honest and upfront with Londoners – this is not the deal I wanted. But it was the only deal the government put on the table and I had no choice but to accept it to keep the tubes and buses running.

“In the last few years, London has been the only major city in western Europe that hasn’t received direct government funding to run day-to-day transport services since it was cut by the last government. This means we rely very heavily on passenger fares to pay for the services we run. 

“Fares income has fallen by 90% in the last two months because Londoners have done the right thing and stayed at home, so there simply isn’t enough money coming in to pay for our services. The government is, in effect, making ordinary Londoners pay the cost for doing the right thing on Covid-19. They want fares to go up next January – ending the four years fares freeze I delivered after the last election. They have insisted that free travel is temporarily suspended for Freedom Pass and 60-plus card holders at peak times. We agreed it was the right thing to review the Congestion Charge.

“The government has also insisted that, unlike the deals done elsewhere in the country, TfL takes on £505m of additional debt. This will undo the hard work we’ve put in to fix TfL’s finances over the last four years, when TfL’s operating deficit has reduced by 71%. This deal is a sticking plaster. The old model for funding public transport in London simply does not work in this new reality – fares income will not cover the cost of running services while so few people can safely use public transport. 

“Over the next few months we will have to negotiate a new funding model with government, which will involve either permanent funding from government or giving London more control over key taxes so we can pay for it ourselves - or a combination of both.”

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