Mayor requests urgent meeting with Secretary of State to ‘reset relationship’ and address TfL financial crisis

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DATE OF RELEASE: July 4th 2022

The Mayor of London, Sadiq Khan, has responded to the Secretary of State for Transport by asking for an urgent meeting to ‘reset the relationship’ in order to agree a funding deal and protect the future of London’s public transport.  

On Friday 24th June TfL agreed with the Government that the existing funding agreement will be extended until 13 July 2022. Following this short-term extension, and with a long term capital funding deal yet to materialise, the Mayor has replied to the Minister asking for a meeting to achieve the ‘reset of the relationship’ the minister agreed to in his letter, and to urgently discuss TfL’s funding situation. The Mayor has repeatedly asked for meetings with the Secretary of State, but to no avail.

The Mayor’s letter reminds the Minister that TfL’s financial crisis has come as a result of the pandemic, and that TfL’s Financial Sustainability Plan and a 4 per cent reduction in bus services were both a requirement of Government funding.

On the need for an urgent meeting, in his letter, Sadiq said:

“I was glad to read that you agree we must reset our relationship, and I once again ask you to meet with me so that we can finally agree a fair, sustainable, long-term funding deal that will protect London’s transport network – for the sake of the capital and the whole country.”

On the reason for TfL needing Government funding, Sadiq said:

“The pandemic is the only reason Transport for London (TfL) is facing a financial crisis. Having already refused to devolve additional funding sources, if the government continues to refuse to properly fund public transport in the capital, TfL will have no choice but to put London’s transport network into managed decline. TfL’s impartial experts have been clear that this would be the inevitable consequence of the conditions forced on it by the government.”

Addressing TfL’s Financial Sustainability Plan and the reductions needed to TfL bus services, the Mayor highlighted this comes as a direct requirement of the Government’s conditions:

“The 4 per cent bus reduction in bus services currently under consultation are part of TfL’s Financial Sustainability Plan (FSP), but the FSP was itself a response to a condition from the 31 October 2020 emergency funding deal with the government. The 4 per cent reduction was then locked in as a condition of the current deal, which required TfL to implement the reductions set out in its FSP. The bus frequency reductions outlined in your letter would not save anywhere near the required 4 per cent.

“Your letter shows that you seem to fundamentally misunderstand the financial challenges facing TfL. Contrary to your claims, the proposed bus cuts are related to capital funding. Without a longer-term capital funding deal, TfL is having to redirect its funding sources to pay for the new Piccadilly line and DLR trains, which were committed to before the pandemic. The only way TfL would be able to avoid further reductions to bus services is if the government provides sufficient capital funding so that this redirection is not necessary.

He adds: “It’s expected that the refined approach will save £35m a year. It’s fantasy to think this level of savings could be achieved by increasing bus priority lanes alone, as you suggest in your most recent letter.”

Addressing the requirement for TfL to review its pension arrangements, the Mayor said:

“In addition to being forced to cut bus service levels, TfL was required to undertake an independent review of its pension scheme – one of 60 commitments it has met as conditions of government funding agreements. As things stand, it is clear that treating TfL’s Pension Scheme as a private sector one imposes unnecessary costs and risks on TfL. TfL has been raising this issue, unsuccessfully, with the Department for Transport and the Treasury for some years now, prior to the pandemic. Beyond this, I do not believe the case for change has been made. Not only am I deeply concerned that it would likely lead to more industrial action, but it is also not clear that cost reductions would be achieved through changes to the TfL Pension Scheme, which is currently in surplus.”

The Mayor reiterated the importance of a long-term capital funding deal for TfL in order to protect the future of London’s public transport and safeguard the economic benefits TfL provides to the entire country:

“The costs of operating new infrastructure, including the Elizabeth Line, plus a post-pandemic backlog of maintenance work and three years’ worth of inflation, means more revenue is now needed overall to be able to safely maintain and run TfL’s services.

“This is why the TfL Board has repeatedly warned that further service cuts are likely to be necessary to balance TfL’s budget and that a ‘managed decline’ scenario is the unavoidable consequence of no longer-term funding deal from the government. TfL has made huge savings before and since the pandemic, with like-for-like operating costs £200m lower than 2015/16, despite years of inflation.

“London’s farepayers, taxpayers and businesses have been helping to fund big infrastructure projects in the capital and these have wider benefits right across the UK. The Elizabeth Line, a national asset, will add an estimated £42bn to the national economy, but nearly 70 per cent (almost £13 billion) of the funding comes from local sources in London.

“In short, London has played its part in funding new infrastructure that benefits the entire country, while receiving virtually none of the resulting tax income.

“The net revenue Londoners pay to the Treasury that gets spent outside London is approximately £36bn a year. By comparison, TfL is asking for less than £1bn over the rest of this financial year to keep London’s public transport system running and then a small fraction of London’s annual contribution to the national exchequer for ongoing capital investment. This is absolutely vital to help London to continue to recover from the pandemic and to maintain our significant contribution to the national economy.”

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