Both sides claim victory in last minute funding deal for TfL


The Government and Transport for London (TfL) have agreed a last minute financial rescue package worth around £1.7bn, though Londoners face tax and fare rises and the mayor must make substantial savings in return.

London mayor Sadiq Khan now has to find £160m through additional income or savings over the next six months and raise fares by RPI+1% to pay for the deal, which runs until March 2021.


He is also set to increase council tax by raising the existing TfL element of the Greater London Authority’s council tax precept and TfL plans to retain the increases to the central London Congestion Charge that were introduced in June 2020

Despite this, Mr Khan claimed victory in the bitter negotiations by keeping free travel for under-18s and over-60s going under national funding regimes such as the Freedom Pass and preventing the expansion of the congestion charge zone.

Mr Khan said the Government has suggested the £15 daily charging area should be extended to the North and South circular roads but he had rejected this plan.

The mayor must make his final choices over how to pay for the deal by January 2021 under a plan for the long-term financial sustainability of TfL.

Negotiations were 'appalling and totally unnecessary' 

London's City Hall pointed out that private rail operating companies were given an 18-month funding package with no conditions attached, whereas TfL was only given another six-month extension deal with strict conditions.

'This means another financial agreement will have to be negotiated just before next year’s mayoral election, a far from ideal time to negotiate a fair long-term deal for London,' a City Hall statement said.

Mayor Khan said: 'These negotiations with Government have been an appalling and totally unnecessary distraction at a time when every ounce of attention should have been focused on trying to slow the spread of Covid-19 and protecting jobs.

'The pandemic has had the same impact on the finances of the privatised rail companies as it has had on TfL and the Government immediately bailed them out for 18 months with no strings attached. There is simply no reason why the same easy solution could not have been applied to London, which would have allowed us all to focus on the issues that matter most to Londoners, which are tackling the virus and protecting jobs.

'I am pleased that we have succeeded in killing off the very worst Government proposals. These proposals from the Government would have hammered Londoners by massively expanding the congestion charge zone, scrapping free travel for older and younger Londoners and increasing TfL fares by more than RPI+1. I am determined that none of this will now happen.

'This is not a perfect deal, but we fought hard to get to the best possible place. The only reason TfL needs Government support is because almost all our fares income has dried up since March as Londoners have done the right thing.'

'Fair to taxpayers across the country'

Transport secretary, Grant Shapps, said: 'Just as we’ve done for the national rail operators, we’ll make up the fare income which TfL is losing due to COVID-19. Londoners making essential trips will continue to be able to use tubes, buses, and other TfL services, thanks to this government funding.

'At the same time, the agreement is fair to taxpayers across the country. The mayor has pledged that national taxpayers will not pay for benefits for Londoners that they do not get themselves elsewhere in the country.

'Over the coming months, as we look to move beyond the pandemic, I look forward to working with London’s representatives to achieve a long-term settlement, with London given more control over key taxes so it can pay more costs of the transport network itself. This agreement marks the first step towards that, potentially allowing a longer-term, sustainable settlement for TfL when the course of the pandemic becomes clearer.'

Details of the financial arrangement

The funding package includes a £1bn 'core element' consisting of a £905m Extraordinary Support Grant payable under section 101 of the Greater London Authority (GLA) Act 1999 and £95m in incremental borrowing by TfL from the Public Works Loan Board.

This cash amount is based on assumptions that the passenger demand over the six-month support period will stay at approximately 65% of pre-coronavirus levels.

City Hall said this was 'higher than the ridership assumptions in TfL’s revised budget, published in July 2020, which forecast a funding shortfall of approximately £2bn for the second half of 2020/21'.

In recognition of the uncertainty over future revenue, the funding package could go up or down depending on actual passenger revenues and is expected to provide approximately £1.7bn to £1.8bn based on the amount of passenger revenue.

'This could increase if actual revenues are lower than that,' London's City Hall said.

Two government special representatives will continue to sit on TfL’s board and a new 'government-chaired oversight group' will monitor the implementation of the agreement and the sustainability plan.

This is the second second major COVID funding package for TfL. The previous support package was £1.6bn

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