The independence and financial future of Transport for London (TfL) could be on the line, after the Government announced a wide-ranging review of the transport authority's finances and structure.
Transport secretary Grant Shapps' department is conducting 'a broad ranging review of TfL’s future financial position and future financial structure' with the aim of identifying options for TfL’s sustainability.
This includes looking at 'alternative operating models' for TfL including consideration of structures and governance, a potential fire sale of housing and other assets and the imposition of driverless trains and job cuts.
The Department for Transport said that the mayor and TfL were consulted on the terms of reference and will provide views and options into the review', suggesting the review is not a negoiation between equal parties.
The DfT added that while regular updates will be provided to the transport secretary and the chancellor, a final written report will only be published 'if ministers are minded to do so'.
Senior figures tasked with carrying out the review include Andrew Gilligan, a transport advisor to prime minister Boris Johnson and his former cycling commissioner, and Claire Moriarty, who has held a number of top jobs at the DfT.
The news comes after a £1.9bn bailout for TfL in the wake of the COVID crisis, to compensate the body for lost revenue and ensure it could keep operating.
This bailout was itself a seen as a Government diktat by the mayor, who criticised the strings attached - including forcing TfL to introduce above inflation fare rises from January something Sadiq Khan had pledged to prevent in his election campaign.
The body was also forced to scrap free travel for the under 18s, curb concessionary travel benefits for older passengers and extend the congestion charge.
The London transport network is largely dependent on fares for revenue, and with the mayor instituting a fare freeze since coming to power in 2016 and Crossrail running late and over budget, the authority had already been strapped for cash.
There will be three levels to the review, which is being fast tracked to be completed by end of August 2020 to inform TfL's position after the current financial support package period runs out in October.
Level 1
Evidence and clear understanding of TfL’s current financial position.
To include:
- review of TfL’s current obligations and functions, including statutory and contractual
- review of the current income streams and commentary of how these have been impacted by the COVID-19 pandemic
Level 2
Evidence and options to strengthen TfL’s financial position over the remainder of the current (2020/21) and next financial year (2021/22).
To include:
- development and assessment of options for short-term revenue maximisation and assessment of the potential for raising more non-fare based revenue and commercial income, including TfL’s housing development pipeline
- identification of opportunities to deliver further efficiencies in the short term in relation to operating costs
- review of the approach to prioritising capital spending, including but not limited to asset maintenance and enhancement for rolling stock, network infrastructure and TfL estate.
Level 3
Evidence and options for more fundamental changes that could put TfL in a fully sustainable financial position by the end of the current business plan period (2024/25).
To include:
- development and assessment of medium-term options, and identification of potential longer-term options, for revenue maximisation and assessment of the potential for raising more fare and non-fare based income, including TfL’s housing development pipeline, revenue yield choices over time, and changes to road user charging schemes as foreshadowed in the Mayor’s Transport Strategy and further measures
- the identification of opportunities to deliver further efficiencies in the medium term in relation to operating costs, including but not limited to, workforce modernisation, and exploring the feasibility of extending driverless operation from the DLR to other lines which are already automatic
- review of the approach to prioritising capital spending for the remainder of the business plan period and to evaluate long-term sustainability, including but not limited to asset maintenance and enhancement for existing and future rolling stock, network infrastructure and TfL estate
- review of the current operating model and whether there are any opportunities that alternative operating models could bring over the longer term, including consideration of structures and governance
- review of the balance sheet and financing structure of TfL, including financing policy, debt sustainability, cash reserves, rating agency engagement, and CapEx vs OpEx choices
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