TfL faces crucial decision on final government funding offer as cash reserves dwindle


Report to next week’s special board meeting reveals lingering concerns over capital investment with effective bankruptcy declaration possibly within days

After months of sparring with the government over pandemic funding, the critical moment may finally have arrived for London’s beleaguered transport network, according to Reports going to an emergency Transport for London board meeting next week.

TfL has been running on empty, having relied on dwindling reserves to keep public transport running in the capital for almost a month since the last funding deal with Whitehall expired on August 3, the report said.

Network chiefs are warning the board, chaired by Sadiq Khan, that failure to sign a new deal at next Tuesday’s meeting could mean TfL effectively declares itself bankrupt, possibly within days.

The law requires a balanced budget to be managed by TfL, which will be obliged to issue a ‘Section 114 report’ under the relevant provision of the Local Government Finances Act if it cannot cover its costs. This would end non-essential spending and could mean dramatic cuts to services and jobs.

“This position remains a constant backdrop to our funding discussions with the government,” the report says, and explains that with the latest negotiations with Whitehall “now complete”, TfL faces tough choices: “Whether the decision of the Board is to agree to the additional funding arrangement referred to in this document, it is not deemed necessary to issue an s114 report at this time.

In a notable contrast to the megaphone diplomacy characterizing previous negotiations, City Hall and Whitehall have been silent since July 22, when the government put its latest offer on the table. It includes a 20-month capital agreement worth £3.6 billion, which Transport Secretary Grant Shapps argued is in line with TfL’s own spending plans for 2019.

But the report features a flurry of last-minute behind-the-scenes talk as officials tried to reach agreement on what TfL chief Andy Byford described as “extremely complex” proposals.

Byford originally asked for a two-week funding extension to consider the new offer, but was only granted five-and-a-half days until August 3 when emergency government funding officially ended, leaving TfL “without any income protection or other government support” in the words of the report.

A revised government proposal arrived on August 4, a third “late evening” offer on August 9 and a fourth and final on August 16, followed by further negotiations.

Speaking on August 9, before the latest government offers had arrived, Byford reiterated his call for a three-year deal, adding that “it is vital that we get the quantum right and the terms must be fair. “.

The report to next week’s meeting does not disclose the terms of the final deal that the board will consider, with most of the details contained in a separate 35-page report to be discussed behind closed doors. But the six pages placed in the public domain suggest lingering concerns, including about capital funding.

With ridership on London’s Tube and buses still significantly below pre-Covid levels, TfL faces a ‘continued structural reduction in passenger revenue’ of around £1.5bn a year compared to 2019, according to the report, government support not completely closing the gap.

Byford has nonetheless been able to chart a course to break even by next April, making the current financial year the last year that revenue support, estimated at around £1.2bn, will be necessary. This position has already been accepted by the government.

But the report hints at less consensus on TfL’s bid for longer-term capital funding, which it says is needed to avoid what it described as a “managed decline” scenario, trapping the network “in a vicious circle of deteriorating services and falling demand”.

Shapps’ assertion that its final offer matches TfL’s investment plans for 2019 is “superficial”, he says, as it fails to take into account a number of factors including higher inflation, additional expenditure to complete Crossrail and increased costs resulting from planned maintenance. reduced as fare revenues fell during the pandemic.

TfL figures suggest a shortfall of some £800million in planned capital expenditure over the next two years compared to pre-Covid plans, which would lead to major cuts to promotion programs for walking and cycling, the removal of rounding program funding, and station conversions to provide walk-free access put on hold.

“Even a modest increase in capital funding above the managed decline level can unlock significant benefits for London and – through our supply chain impact – across the UK,” the report says. “Avoiding a managed decline is key to supporting London’s economic recovery, and therefore the national economic recovery.”

With the threat of a Section 114 report looming, the time to argue with the government about its offer seems over. But disputes over funding for London’s public transport look set to continue.

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