Transport for London (TfL) today (1 June 2021) reached an agreement with the UK government to extend its pandemic financial support, first agreed in May 2020, to 11 December 2021.
Passenger numbers have been severely affected during lockdowns, with public money essential in order to keep the UK capital’s public transport services running.
London’s Transport Commissioner Andy Byford said: “The pandemic – during which our staff have worked so magnificently to keep London moving – has shown our financial model, with such a disproportionate reliance on fare revenue, to be not fit for purpose.
“We are working hard to rebuild revenue through attracting people back to our services with nearly 60% of pre-pandemic ridership already travelling again. Today’s funding agreement with the Government provides £1.08bn in base funding and further support should our passenger revenue income be lower than forecast until 11 December 2021 to enable us to continue to run near full levels of service to stimulate London’s recovery and deliver a host of improvements like the Elizabeth line, Northern line extension and expansion of London Overground. It is vital that we also use this period to agree a longer-term settlement so that we can plan effectively for London’s future and deliver maximum value for money through our contracts and supply chain.
“The conditions placed on us by the Government agreement and the amount of funding we will receive means we need to find a further £900m of savings or new income this year compared to our approved Budget and on top of the £730m of savings already assumed in our Business Plan. We will work through this while protecting front line services to deliver what London needs and to play our full part in recovery, decarbonisation, improving air quality and promoting active travel.”
The Government will “top up” TfL’s revenues with additional grant payments if they are lower than a pre-determined passenger revenue forecast. Conversely, if TfL’s revenues are higher than the pre-determined passenger revenue forecast, TfL will be required to repay that excess at the end of the 2021 Funding Period. This provides TfL with certainty that it will receive income equivalent to £1.78bn in passenger revenue over the 2021 Funding Period in addition to the Extraordinary Support Grant of £1.08bn. This pre-determined passenger revenue scenario is broadly consistent with the revenue forecast in the TfL Budget for 2021/22, published in March 2021.
As part of the Funding Package, TfL is committing to delivering savings and/or new income of at least £300m in 2021/22. However, when taking into account the amount of funding available to TfL in the Funding Package, there remains a funding shortfall compared with the TfL Budget for 2020/21. This means that TfL will, in practice, need to deliver savings and/or new income of around £900m over the course of the year. This is expected to be met through a combination of measures, including utilising cash reserves, additional non-passenger income and reduced or deferred costs. These additional savings are incremental to TfL’s existing efficiency plans.