diamond geezer

 Saturday, December 12, 2020

How does TfL stay financially afloat in the future? If you read the news yesterday you might assume it's by introducing a £3.50 boundary charge for vehicles entering Greater London, but this is actually a teensy part of a 69-page report by an independent review body looking into TfL's financial sustainability (in which £3.50 is never mentioned).

The future of funding transport in London is potentially bleak. Slashed government grants have made TfL much more reliant on fares, changing travel patterns have meant fare income is in decline and COVID has more than cancelled out all the efficiencies previously introduced. The review body puts the funding gap at £2bn per year, their estimate based on the 'credible and prudent' assumption that passenger revenue falls 20%(!) by 2030.

There are numerous ways to fill that gap, for example TfL could do less, charge more, sell stuff off or demand more in grants and taxes. But not all of these options are large enough, realistic or fair, so tough choices lie ahead.

1) reduce operating costs

The following table shows examples of cuts, not a to-do list.
All the savings are the net result after taking loss of passenger revenue into account.

tube• significant cuts to off-peak services
• removal of Night Tube
save £35m
stations• reduced staffing at gatelines and on platforms
• some tube stations unstaffed
• 10 tube stations closed at weekends
save £18m
rail• ticket office closures & gateline reductions
• certain branches closed
save £26m
bus• further capacity reduction in central London
• 150 lowest revenue routes removed
save £301m
other• removal of Cycle Hire
• closure of Woolwich Ferry
• withdrawal of river services
save £48m

Some of these cuts would be really severe, while others have already happened during the pandemic. The Night Tube is already suspended, for example, and a number of stations did close throughout lockdown. But cutting off-peak tube services or closing parts of the Overground would be a different matter, and the Woolwich Ferry could only be suspended via an Act of Parliament. I suspect the cablecar doesn't get a mention because operationally it's peanuts.

But note that four out of five of these packages save less than £50m a year, so the only one that'd make a significant impact would be cuts to the bus network. Culling services in the West End might actually match declining passenger numbers, but the suggested assault on Outer London would be savage. If the 150 bus routes with the fewest passengers were withdrawn, for example, I reckon that approximately half of the routes numbered over 300 would be lost. Every 'R' in Orpington would go too, ditto every 'B' in Bexley and half the 'U's in Uxbridge, forcing thousands back into their cars.

Before you froth and get angry, the review body does not recommend significant service reductions as part of a financial solution because the cuts required would be too deep. But they do say "smaller scale service reductions could be justifiable and provide a contribution to closing the funding gap", so watch this space.

The only cost-cutting measure the review body does recommend is a review of pensions. The TfL pension model is both outdated and generous, they say, and must be modernised. Hardly any gold-plated pension schemes have survived this far into the 21st century, so bringing TfL staff a bit more in line with everyone else could reduce the funding gap by £100m a year.

2) increase funding from transport users

The report notes that in the late 1980s rail fares in London were comparable with Asian and North American comparators, but have risen substantially and are now 50-100% above the international standard. A big hike in fares is thus not recommended, just 'regular fare rises linked to wages' as the economy recovers. But the review body does see the benefit in considering an additional increase for "LU and rail fares for journeys to/through Zone 1", maybe as much as 25%, which could generate up to £500m per year. Any additional burden should rest on more affluent passengers, not bus users or those in the suburbs.

Another way to regain income would be to stop so many people travelling for free.

Concessionrevenue lost
60+ Oyster£131m 
U16 Zip£98m 
16+ Zip£78m 
18+ Student£33m 
Bus & tram discount£29m 
Freedom pass (before 9.30am)£25m 

TfL loses the most money by allowing young people to travel for less, or for nothing, but this has "a positive social impact and should be retained". Meanwhile a significant amount is lost to users of the 60+ Oyster card (that's those between 60 and 66 years of age) who get to travel around the capital for nothing despite probably having the wherewithal to pay. The review body recommends withdrawing it and continuing the suspension of the Freedom Pass in the morning peak, enabling a substantial revenue increase of up to £156 million.

Or road users could pay more. This fits better with a green agenda and would help to cut congestion. An anomaly means hardly any of the Vehicle Excise Duty paid by Londoners ends up funding London's main roads, so the review body says a slice should come to TfL. But that's a government decision, and even though they've suggested maybe handing over £100m nothing has been received so far.

Which leaves some kind of road user charging as the Mayor's best option. The review body provides two financial illustrations. Extending the Congestion Charge area to cover inner London at a reduced £5 a day could raise as much as £500m a year. A similar total could be levied by introducing a charge for crossing the Greater London boundary, "depending on the level of charge and discounts offered". This would be politically neutral for the Mayor because it'd only affect people who don't vote for him, but would throw up all sorts of borderline anomalies and cause a furore across the Home Counties.

3) reduce asset and capital investment

Don't defer investment, says the review body. Medium-term it saves nothing, and long term it only leads to a backlog which has to be tackled later. Also now is not the time for a one-off fire sale of land and assets. Perhaps better to raise council tax, introduce an employment levy, consider a VAT supplement or hike business rates... but this is looking increasingly like blue sky thinking. The best outcome would be if central government simply stumped up more money, but their reticence to do so is what got us into this mess in the first place.

Anyway, this is only a review meant to aid the Mayor in future thinking, not a shopping list of unpopular policies. What's interesting is that the sole nugget the Mayor's focused on in his press release is Vehicle Excise Duty, calling for the government "to allow the capital to keep the £500 million raised annually from vehicle excise duty charged to London-based drivers." And in mitigation all he's raised is the spectre of "a new Greater London Boundary Charge for non-residents which would apply only to vehicles registered outside London which are driven into the capital." Rattling drivers is safer than mentioning he might have to reduce train services or cut most of the buses in Orpington, I guess.

All we know for certain is that there isn't enough money for TfL to do everything they'd like to do in the future, so either we'll have to pay more or they'll have to do less.


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