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"Catastrophe" Looms For London's Travel Network If New Funding Deal Isn't Secured

Transport for London not securing funding deal could have "catastrophic" consequences, analyst says (Alamy)

5 min read

The government faces fresh travel fallout as a new prime minister prepares to enter Number 10, as one analyst warns of potentially “catastrophic” consequences if Transport for London (TfL) fails to secure a new funding deal.

TfL has received a number of funding packages from ministers since the start of the pandemic, as their cash flows – which are reliant on passenger fares – were hit hard by people staying at home during lockdown, and as a result of altered working patterns when the economy reopened. 

While passenger levels overall have recovered somewhat, significant discrepancies between weekend and weekday travel are still leading to shortfalls from fare income. 

At weekends the network had returned to 93 per cent of pre-pandemic level ridership on the Tube on August 6, and bus passenger numbers at a similar level on July 30, according to Department for Transport figures. The highest passenger numbers since the pandemic were recorded over the Jubilee Bank Holiday weekend, when 118 per cent of usual levels were recorded on the Tube.

But numbers remain low in the week, hovering around percentages in the 60s and 70s on the Underground, and 80s on the buses. 

TfL is now running on its cash reserves, and the situation leaves a problem that the next Prime Minister will have to solve “very quickly”.

It is the latest in a long line of travel related woes for the government in recent weeks, with numerous strikes across bus, train, and the London transport networks, and a significant reduction in Avanti West Coast services between the capital and the north due to staff shortages.

TfL has been searching for a longer funding arrangement, and the Department for Transport offered the body a 20-month deal worth £3.6bn in July, but discussions over it are still “ongoing”.

There is due to be a board meeting of the body next week, where members will be updated on the current state of talks by officials involved. 

Nick Bowes, chief executive at the Centre for London think tank, who previously worked on policy with London mayor Sadiq Khan at City Hall, has said that officials will be “sweating hard” over the current state of TfL’s finances as there remains a a “stand-off” between Grant Shapps' and Khan's teams. 

"I think the top bods in the finance team at TfL are going to be sweating very hard over the current financial state of TfL," he told PoliticsHome.

"Money is ticking down and there's less and less by the day left in their bank account.” 

Should TfL get to the point of bankruptcy, they would have to issue a Section 114 notice, which is effectively a stop on spending.  

“They're going to run out of cash at some point and at that critical moment, the consequences could be catastrophic if a section 114 has to be issued because it means that they have to start cutting back," Bowes explained. 

“So that's fewer services, salaries start to get cut, suppliers don't get paid.

"And the ripple out of that not just in London, but across the whole country, it will be really felt hard, and people will find it harder to get to work.

He added: "There's a bit of a standoff at the moment. There's only a couple of weeks left to try and find a way through this." 

Bowes questioned whether the reluctance of government departments to sign off on big spending commitments while the Conservative leadership contest is ongoing could have caused delays.

There is likely to be a new cohort of ministers in the coming weeks, as the competition comes to an end on 5 September and a new prime minister, widely expected to be Liz Truss, moves into Number 10. 

Bowes explained: “We're waiting for a sign that there's a deal and I'm sure behind the scenes that there's lots of beavering away conversations between officials really trying to work through this but ultimately, this will be a political decision."

He added: “I do wonder whether some of this has been wrapped up in that where there's a hesitancy to take big spending decisions, so close to there being a new government taking up the reins.”

Officials said this was not the case, and a deal being reached is not dependent on the new Prime Minister being in place. 

A spokesperson for the Mayor of London, said: “Securing a long-term funding deal for London’s transport network is key to our economic recovery. 

“Discussions between TfL and the government are ongoing and will seek to ensure the draft funding proposal is not only deliverable but provides the funding needed to avoid implementing reductions to TfL services.”

A Department of Transport spokesperson said: “Over the past two years, the Government has provided TfL with more than £5 billion worth of funding and ensured our capital’s transport system kept running throughout the pandemic.

“In addition to this, the latest settlement we have offered would support more than £3.6 bn worth of major projects – such as tube upgrades and extensions and new active travel schemes to allow for less congestion and pollution.

“It is clear we are committed to supporting London’s transport network, but this must only be done in a way that is fair and represents value for money for taxpayers across the country. 

“This deal, which would transform the travel for millions of Londoners, remains on the table as we continue our discussions with TfL.”

Andy Byford, London's Transport Commissioner, said: "TfL kept London moving through the darkest periods of the pandemic and we have consistently made the case to government that there can be no UK recovery without a London recovery and no London recovery without a properly funded transport network.

"We remain in active discussions with the government to ensure that the draft funding proposal that they have made is fair and deliverable and can prevent the managed decline of the capital’s transport network.

"It is essential that we keep our board apprised of the discussions with government, and will be updating them on progress next week.”  

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