TfL’s financial strain
Transport for London is “clearly struggling to cope with the financial impact of its fares freeze”, says London Assembly.
TRANSPORT for London is “clearly struggling to cope with the financial impact of its fares freeze”, according to the organisation that examines its budget.
London Assembly’s Budget and Performance Committee says income from fares is well below expectations, meaning that TfL faces tough decisions.
Chairman Gareth Bacon, a Conservative Assembly Member, said: “We are not convinced that TfL has a solid understanding of the reasons for a fall in passenger numbers.
“TfL has had to revise its fares forecast down for the fourth year in a row, and its capital spend (even after adjusting for the Elizabeth Line) is set to fall. The figures in the draft budget don’t back up the Mayor’s claim that he is investing ‘record amounts in modernising our transport infrastructure’.”
The number of rail journeys fell by 5% in 2017, there were 13 million fewer journeys on the Tube last year, and the number of bus passengers has reduced by 6% in three years.
The metropolitan authority also no longer receives revenue support for transport from central government - a loss of £700 million. And London Mayor Sadiq Khan has partly frozen fares, with the cost of that put at £640m over four years.
The budget committee described this as “financial stress”, noting that capacity upgrades on London Underground had been cancelled, with bus services also due to be cut by 7% over five years.
Last October, TfL cancelled plans to buy new trains that would have increased capacity on the Jubilee and Northern lines. It had previously described the Jubilee upgrade as one of London Underground’s “lowest-risk and highest-benefit projects”.
Khan told the committee: “We are the only major public transport body in Europe not subsidised by central government. It’s astonishing. But we have made massive savings across the TfL organisation for the first time since its inception.”
He added: “But who would have predicted four terror attacks in one year in relation to the leisure visitors to London? I am confident TfL will do better next year.”
Another sign of financial pressure was TfL’s plan to enter its first rolling stock sale and leaseback agreement. It intends to sell some of its trains to fund capital investment on the Piccadilly Line, and then lease the trains back from the new owner ( RAIL 844).
TfL’s revised revenue forecast for the current financial year is £4.6 billion, £240m less than expected.
The budget committee commented: “We have repeatedly raised concerns around TfL’s overlyoptimistic forecasts in our 2015, 2016 and 2017 pre-budget reports. This is the fourth time in four years that TfL has had to revise down its forecasts.
“If the fall in passenger numbers is primarily down to short-term economic factors, then it may be reasonable to predict an upswing. But if it is down to lifestyle changes - with more people working from home, shopping online, and using ride-hailing apps - then this upswing may not materialise. TfL may be facing a structural and permanent change to its fares revenue.”
The committee points out that because of the fares freeze, the only way to increase revenue is to carry more passengers.
The Elizabeth Line (Crossrail) will bring increased income when it opens in December. The committee pointed out that it is hard to make forecasts for new services, or to model the impact they will have on existing journey patterns.
To cover the shortfall, TfL will cut the money it hands to individual boroughs aimed at promoting greater use of walking, cycling and public transport. It will also reduce spending on road maintenance.
TfL’s business plan shows that capital investment, after stripping out Crossrail, will be lower in each of the next four years than in 2017-18.
“We are concerned that this will mean that the condition of London’s roads, trains and stations will deteriorate,” concludes the report.