Mayor of London calls for government to invest in transport
Relentless focus on efficiency and investment is helping to continue towards breaking even on the cost of day-to-day operations by 2022/23, for the first time in the history of the TfL.
Transport for London (TfL) has published its draft budget for financial year 2019/20 which outlines the organisation’s progress towards breaking even on the cost of day-to-day operations by 2022/23, for the first time in its history, while investing billions in vital transport improvements in London.
TfL’s balanced five-year Business Plan, published in December 2018, set out a fully funded plan for delivering the Mayor’s Transport Strategy up until 2024.
Improvements are being made despite TfL having experienced unprecedented cuts to its operational funding from the Government over the last five years. Unlike the rest of the UK, local authorities within London are generally excluded from Government funding schemes. For example, 99.6 per cent of London’s road network receives no sustained central Government funding for maintenance, with just those managed by Highways England receiving funding.
TfL’s budget, which is being presented to the TfL Board for approval next week, has been written in the context of a very uncertain economic environment, with the latest data from the Office for National Statistics and the Bank of England showing the British economy had its worst performance in the last quarter since the financial crisis. The budget covers the first year of TfL’s Business Plan and shows how TfL will continue to invest in the vital transport improvements London needs, despite a number of significant challenges, including an average £700 million per year reduction in government funding, a subdued economy and the financial impact of the delay to the Crossrail project.
It demonstrates that TfL’s previously budgeted operating deficit of £968 million in 2018/19 has been significantly reduced and is now forecast to be almost halved to £500 million by the end of 2018/19 as a result of tight financial management.
For the next financial year, due to improved ridership in recent months as well as further savings across the business, TfL has now revised its expected operating deficit for 2019/20 – from £897 million in its Business Plan to £742 million. This compares to a deficit excluding the former Government operating grant of almost £1.5 billion in 2015/16.
TfL has a proven track record of delivering against its savings targets and will work to further reduce its operating deficit during the next financial year. Further changes will be made to ensure the organisation is delivering as efficiently as possible, including reducing back and middle office costs by 30 per cent.
Throughout 2019/20, TfL will deliver a range of transport improvements across London, including:
- Introducing the new Ultra Low Emission Zone in central London on the 8 April, marking a major step forward in the battle to clean up London’s toxic air
- Continuing to work with Crossrail Limited to introduce the transformational Elizabeth line as soon as possible
- Pursuing the Mayor’s vision of eradicating death and serious injury from London’s roads through major safety and improvement projects including at Old Street and Highbury Corner junctions
- Continuing to modernise significant parts of the Tube network, including Bank station and new signalling on the Circle, District, Hammersmith & City and Metropolitan lines
- Continuing to make the transport network more accessible, with eight more London Underground stations on track to be step-free by March 2020, and work well under way across London at a further seven
- Record cycling investment enabling construction to start on eight major new routes, including Brentford to Olympia, Tottenham to Camden and Hackney to Isle of Dogs
- Rebalancing London’s bus network by moving capacity away from over-congested areas in Central London to outer London where it is needed most
- Unlocking land for affordable homes as part of TfL’s wider commitment to deliver 10,000 homes across 300 acres of London, all of which will have started construction by 2021.
TfL has had to manage the impact of an average reduction of around £700 million per year in government grant. Since March 2018, TfL has become one of the only transport authorities in the world not to receive a direct Government operational grant for day-to-day running costs. Despite achieving record efficiencies, the absence of adequate central Government funding has meant that, since April 2018, TfL has had to pause non safety-critical renewal work on London’s road network.
In addition, there is currently no certainty of Government capital funding beyond 2020/21. This clearly poses significant challenges for TfL when planning the pipeline of investment London requires to keep the city growing and succeeding. While TfL is planning to follow the introduction of new trains on the Piccadilly line with new signalling, and then to upgrade the rest of the deep Tube lines, such large-scale investment will not be possible without capital funding from the Government.
Ahead of this year’s spending review, TfL is making the case for long-term steady and sustained investment to ensure critical infrastructure projects can continue and London’s transport network can support the demands of all those who live and work in, or visit, the city. The Mayor has called on the Government to quickly accept that London gets its fair share of the National Infrastructure Commission’s recommended spend on infrastructure of 1.2 per cent of total gross domestic product, which would provide long-term funding to step-up the modernisation of its public transport network.
Mayor of London, Sadiq Khan, said: “By making TfL more efficient and almost halving its operating deficit, we are able to continue our vital work to transform the Tube network, take radical action to clean up our toxic air and freeze fares, making transport more affordable for millions of Londoners.
“But there is only so much that TfL can do when its government funding is slashed, it’s locked out of funding for road maintenance and faces no certainty over future Government capital investment. At the spending review this year, it is vital that the Government listens to its own National Infrastructure Commission and ensures that London gets the funding it needs to continue to operate a world-class, affordable and sustainable transport network that serves Londoners across our city.”
TfL’s latest figures show that, against a cautious set of forecasts in its last annual budget, its overall fare revenue is up more than two per cent compared to last year, just above expectations. Throughout the next financial year, TfL expects ridership on London buses to continue to decline, as has been seen across the UK in recent years, but also expects total ridership on the London Underground to increase by three million journeys.
Simon Kilonback, Chief Finance Officer at Transport for London, said: “Our Business Plan, which was published in December 2018, set out the key financial challenges we face over the next five years, including absorbing the loss of operating grant, particularly for maintaining our roads, ongoing economic uncertainty and the delay to opening the Elizabeth Line.
“Despite this, our net cost of operations in 2018/19 is one third of what it was in 2015/16, excluding operating grant. This has helped us halve our projected operating deficit to £500 million for 2018/19.”