Fourth TfL bailout agreed
Latest deal keeps services moving, but there are strings attached.
A four-month funding agreement between the Department for Transport (DfT) and Transport for London (TfL) was announced on February 25, that will sustain TfL until June 24.
Negotiations had been ongoing for some time, as the previous bailout that began on May 29, 2021 was originally due to have expired on December 11, 2021. This date was extended twice in December, initially by a fortnight and then until February 4. As no agreement could be reached, the funding was extended twice again in February.
The postponements were due to the “unacceptable” conditions that the DfT wanted to impose as part of the agreement. Meanwhile, the Mayor of London, Sadiq Khan, had publicly made statements that TfL was preparing for three long-term outcomes:
■ Managed Decline – doing the bare minimum to maintain services
■ Financially Constrained – investment stabilises, allowing rolling stock to be replaced
■ Policy Consistent – greater levels of investment, resulting in infrastructure renewal programmes to improve reliability
Additional noises were made, highlighting the likelihood of TfL declaring itself bankrupt. These messages appear to be a calculated political move by the mayor. Two years of supressed passenger numbers due to the pandemic have meant that TfL has not received the income it needs to cover its day-today operational costs and repayment commitments on previous loans.
Although the DfT has committed to financially support TfL until April 2023, a condition of the agreement is that TfL becomes “financially sustainable” by this date. This will be a challenge, as TfL’s financial model means that it has more than a 70% reliance upon daily passenger income. This is significantly more than comparable metro systems. The closest model is Madrid, however this is still a network where 53% of its operating costs are met through taxation and commercial income.
TERMS AND CONDITIONS
There are multiple conditions that are attached to the agreement. These include commitments from the repair of Hammersmith Bridge to a continued effort to identify how TfL will be able to generate between £500 million and £1 billion of additional revenue from April 2023 onwards.
From the perspective of London Underground, one of the headline conditions includes the continued commitment for TfL to investigate driverless trains alongside the DfT, so “TfL’s record of modernisation and innovation should not leave it behind other European networks”.
TfL has been asked to provide evidence-based recommendations by developing and testing innovative driverless train technology. The aim is to enable TfL to save money. However, as noted previously on this page (October 2020 issue): “Central Government will need to be willing and sufficiently motivated to invest the very substantial funds necessary to see the project through”.
This is an issue that has the potential to cost billions of pounds in the short term. While it might successfully remove the need to employ staff on a completely selfcontained route such as the Waterloo & City, it is questionable whether this level of automation (known as GoA4 (Grades of Automation)) will be possible on many other parts of the network. If not, there will be little or no financial gain from a significant investment.
Separately, claims that TfL has also been forced to commit to informing the DfT five days prior to making any announcements about potential changes in service levels are clearly a response to the mayor’s threat to reduce services as part of his negotiation tactics.
PAY AND PENSIONS
A particularly contentious issue currently is that of pay and conditions.
TfL has been forced to acknowledge that recent London Underground pay awards have been significantly higher than other front-line workers. Meanwhile, TfL is also expected to continue with its pension review, with a final report due on March 31.
The funding agreement is set to levels that anticipate a return of passenger levels and income. While the DfT acknowledges that future passenger revenue is outside of TfL’s control during the Fourth Funding Period, it expects to be repaid any surplus income TfL receives from higher passenger numbers. The DfT also expects to be reimbursed for any revenue lost if free travel for all Londoners aged under 18 and between 60-65 is reintroduced.