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24 June 2022

How much longer can the government kick the TfL funding can down the road?

Another short-term, last-minute deal will do little to resolve London's key transport issues.

By Harry Clarke-Ezzidio

After much strife, signalling and confusion, the government has agreed a fifth emergency financial injection for Transport for London (TfL), which will provide funding for the operator’s services for another month. Once again, London has caught up with the transport funding can, and now it needs another kick.

When London Mayor Sadiq Khan made his opening statement at Mayor’s Question Time yesterday morning, the situation seemed desperately bleak. “We now only have a little over 24 hours until the current emergency funding deal for Transport for London expires, and we’re yet to hear a single word from Grant Shapps, the Transport Secretary,” he told City Hall.

“Even if the government… was to make an offer, it’s simply impossible for TfL to consider that before the deadline,” Khan later added. “That’s why it beggars belief that with 24 hours to go, we’ve got no offer.”

The deal’s specific details are as yet unclear. “I think what this speaks to, and it’s very clear in the letter that Grant Shapps sent to the Mayor, is that relationships are poor – and seem to be getting worse,” Claire Harding, research director at the Centre for London think tank, told Spotlight. Pulling no punches in his letter to London’s Mayor on Thursday, Shapps accused Khan of orchestrating “campaigns of scaremongering and threats” over TfL’s future.

TfL has been in a perilous financial position since the pandemic hit, and since spring 2020 it has received temporary funding deals from the government to help keep services running.

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Having to continually pay overheads during lockdowns for the likes of furloughed staff and service maintenance, as well as ongoing infrastructure projects such as the recently launched Elizabeth Line, all without incoming commuter fees – which make up 72 per cent of its funding – means that TfL’s debt has increased, with the operator facing a funding shortfall of £1.1bn in 2022-23. 

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Relations between Shapps and Khan’s respective offices have soured amid disagreements over the amount, length and conditions of each of the previous four deals, and this was evident in Khan’s comments yesterday. “Just weeks after we celebrated the opening of the Elizabeth Line, the government wants to level-down London and push our transport network into [a] managed decline,” Khan said. He also warned that without adequate funding bus services could have been cut by 18 per cent, with London Underground capacity cut by 9 per cent – “the equivalent of losing an entire tube line”.

“The transport infrastructure, particularly the rail [and] the night tube, is vital to our industry,” Michael Kill, the CEO of the Night Time Industries Association, told Spotlight. Kill, along with 14 other London-based business groups and leaders, signed an open letter addressed to Shapps and the Chancellor, Rishi Sunak, urging them to avoid a “managed decline” scenario and agree a long-term capital deal with TfL.

“Given the critical nature of the period of time that we’re [in] – which is the first year that we’ve started to move into some sort of certain recovery – what we don’t need is a collapse of the infrastructure,” Kill said.

The toing and froing between City Hall and central government over money for TfL has been tense. Sadiq Khan called former London mayor Boris Johnson a “liar” after the Prime Minister said that TfL was “effectively bankrupted” by Khan prior to the pandemic. Even yesterday, when Shapps said the Mayor was “playing politics” when confirming the funding extension in his letter, Khan called the Transport Secretary’s statement “nonsense”, adding that Shapps had “no basic understanding” of TfL’s finances or “no respect for the truth – a common theme with this government”.

Has all the mud-slinging between the two sides contributed to delays in securing the service’s long-term future? “I don’t think it’s personal,” Elly Baker, Labour’s transport lead in the London Assembly, told Spotlight from her office in City Hall. “I don’t think it’s about the individuals, but I absolutely think it’s about party politics. It’s very politically useful to the government to require the Mayor to do all sorts of things that are unpopular, like cutting transport, and then blame a Labour Mayor for it,” she added. “If I had been him, I would not have been able to be so diplomatic and circumspect.”

City Hall insiders have previously told the New Statesman that negotiations with the Treasury and Department for Transport have been “the worst experience of people’s careers”. Both sides want a long-term capital funding plan that secures the long-term future of the network, builds infrastructure and adapts to changing travel habits, but the government will want it at a price palatable to the Treasury and Tory MPs. Moving forward, Shapps has said there will need to be a “reset” of the relationship between City Hall and central government.

Though Khan said he’d be “delighted” to meet with Shapps if he “wants to reset the relationship”, both sides will have to iron out one particular major point of contention, above all others, before the current deal ends: pensions. As a condition of accepting the previous funding agreement in February, Shapps and his department want TfL to propose changes to its pension scheme, after a 2020 review of the operator’s finances labelled it “expensive” and “outdated”. However, a recent independent review commissioned by TfL suggested the current system should largely be maintained, placing a fork in the road.

And as both sides look to future negotiations beyond one more month of funding, pressure for a long-term solution is growing. “There’s so much consensus over this issue,” Baker argues. “There’s going to come a point where the amount of voices pushing back against [delays] will become impossible for the government to ignore: you’ve got a range of businesses lobbying in London, the trade unions, community groups, everyone. So either they [the government] don’t care about London at all, which doesn’t seem feasible, or at some point, they’re going to have to listen.”