Tag Archives: Budgets

Sadiq Khan Asks for £1 Billion Bail-Out

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Sadiq Khan may be asking for as much as £1 billion to bail-out Transport for London (TfL). He did not deny it when interviewed on BBC television. The organisation is haemorrhaging cash as most of its income comes from bus and tube fares and usage of those has severely declined. It may be unable to pay its staff very shortly without some Government support and has already “furloughed” 7,000 staff from today. TfL will be able to access funding from the Government’s Job Retention Scheme for those staff, saving the organisation millions of pounds every week, but that’s only a short-term and temporary solution to the Mayor’s financial problems.

How did the Mayor get TfL into the position where it cannot survive the problems caused by the coronavirus epidemic? In essence because the Mayor is financially inept and has allowed TfL to run up massive deficits so it has minimal reserves to cope with such an event. We have commented on this issue repeatedly – for example here on the TfL budget in January: https://freedomfordrivers.blog/2020/01/17/tfl-business-plan-and-budget-for-the-next-5-years-more-of-the-same/

Total borrowing was forecast to reach £12.3 billion within 2 years because of delays to Crossrail and other issues, and that was before the impact of the coronavirus. A lot of the problem is caused by the Mayor spending money on programmes such as cycle schemes, Active Travel, Healthy Streets, Vision Zero road safety, the ULEZ and other policies for which there was no cost/benefit justification provided in this Mayor’s Transport Strategy (MTS). Now we are seeing the result of this financial incompetence and inability to manage the budget.

We suggest that before the Government hands the Mayor any cash, they should lay down some conditions on how it will be used and insist on some changes to the MTS. Scrapping the expansion of the ULEZ would be a good starting point.

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TfL Business Plan – Mayor Sadiq Khan Wants More Money

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Just before Christmas, Transport for London published their proposed Business Plan for the five years to 2022/23. See http://content.tfl.gov.uk/fc-20171205-item10-draft-business-plan.pdf for the details, but what follows is a summary, with some comments.

The foreword by Mayor Sadiq Khan contains the usual whinging from him about the lack of central Government subsidy and his budget difficulties. It is true that TfL no longer receive a central Government grant for operating subsidies, but that was agreed by Boris Johnson on the basis that they would obtain extra income from the new Elizabeth line. There are still substantial capital grants though.

The Mayor is of course suffering from his self-imposed hair-shirt by promising to freeze public transport fares in London when campaigning to get elected. He has implemented that, at least as far as TfL controlled fares are concerned. He even goes so far as to say that this “will put £200 back in Londoners’ pockets by 2020”. Surely he is confusing stopping increases (which mainly covered inflation), with reducing fares?

TfL’s latest budgets are particularly constrained by a reduction in forecast public transport revenues. Bus usage for example has been falling, so revenue growth is anticipated to be lower than expected in previous budgets. Bus operating deficit was £599 million in 2016/2017 but will rise to £632 million this year and be has high as £647 million in 2022/23. These are enormous numbers.

Looking at the Financial Summary (page 30), shows that overall TfL will show an operating surplus before “capital renewals” and “financing costs”. After the latter they are running big deficits up until 2020/21. This is what one might term “political presentation of finance data”. Cash flow was negative to the tune of £1,353 million in 2016/17 and it only really becomes positive 4 years later. For someone with experience of looking at the finances of organisations, as this writer has, this looks a very unhealthy financial profile.

One result of this financial plan is that the Mayor is cutting funding for road maintenance that goes to local boroughs. This will not necessarily affect minor road maintenance but it will mean cuts to major projects. Part of the reason is because a lot of the money is going to support cycling initiatives, the redevelopment (pedestrianisation) of Oxford Street and other major projects that are mainly in central London.

Local boroughs are likely to be very unhappy with the cuts to funding of Local Implementation Plan (LIP) programmes, particularly as projects tend to be planned years in advance so abrupt changes in funds available may mean a lot of planning work is wasted.

The lack of major renewal work on roads will surely cause the proverbial “stitch in time” to come true. It will lead to expensive short-term fixes, and more major work in due course if proper maintenance is delayed. For example, bridges often require substantial work after many years of use and that cannot be deferred forever.

Big projects that are consuming the funds are more cycle superhighways, Vauxhall Cross, Wandsworth Gyratory, the Silvertown Tunnel and the Rotherhithe to Canary Wharf bridge (which I commented on negatively as regards its’ financial wisdom in a previous blog post).

The Mayor and TfL are complaining that the cost of operating and maintaining London’s roads of up to £350m per year are effectively being cross-subsidised by public transport fare payers and they need some of the money raised from Vehicle Excise Duty (VED) to pay for it. This is nonsense. The Mayor has very substantial income from business rates and other sources (such as congestion charging) – these more than cover the costs of operating and maintaining the road network.

All that is happening is that the Mayor is choosing to spend large amounts of money on cycling, on his “healthy streets” projects, on expensive remodeling of gyratories (past ones have introduced congestion where none existed before), on massive subsidies to bus travel when nowhere else in the country does this take place and while removing budgets from local London boroughs. This is not a formula that will please Londoners who understand what is happening, nor improve TfL’s financial position.

Roger Lawson

Twitter: https://twitter.com/Drivers_London

 

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TfL Will Have to Disclose ULEZ Costs After All

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In April 2017 I responded to a public consultation on the proposed extension of the ULEZ. However I criticised the lack of information on the cost/benefit of the scheme, indeed of any information on costs and likely revenues at all, which made making an informed response to the consultation difficult.

As Transport for London (TfL) refused to provide such information when requested I submitted a Freedom of Information Act request. TfL refused the request on the grounds of “commercial confidentiality” so I asked for a review and subsequently appealed to the Information Commissioner’s Office (ICO).

They have upheld my complaint and so I should get the requested information after all (unless they appeal to the First Tier Tribunal). But is it not disgraceful that TfL can obstruct and delay this legitimate need for such information?

TfL claimed it was commercially sensitive because they were already talking to possible suppliers but the ICO judged that there was insufficient evidence that such disclosure would result in specific harm to TfL that would justify refusal.

As I said originally, in my view, these proposals are out of proportion to the benefit to be obtained. The fact that TfL are apparently reluctant to disclose the financial budgets for this scheme suggests to me that it is more about tax raising than simply tackling the air pollution health issue.

The costs of the scheme may be so high that even with the additional taxes raised from vehicle users, it may be unaffordable. BUT WE DON’T KNOW BECAUSE TFL REFUSED TO TELL US.

It is unfortunately typical of late for the Mayor of London, Sadiq Khan, to issue public consultations in his name that are biased polemics of the benefits of his proposals while not disclosing the facts. Democracy is undermined when a public authority acts in this way.

It is further undermined when TfL refuse to disclose information and by doing so delay its release past the consultation due date when they know any appeal process will take many months.

More information will follow when I get the requested data; in the meantime you can read the ICO’s decision notice here: http://www.freedomfordrivers.org/ICO-Decision-ULEZ-Request.pdf

That was a welcome Christmas present from the ICO, and I wish all our readers a happy Christmas and a prosperous New Year.

Roger Lawson

Twitter: https://twitter.com/Drivers_London

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TfL Business Plan – Enormous Bus Subsidies Still Rising

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Transport for London (TfL) have published their latest “Business Plan”. It gives a net cash deficit of £1.3 billion in 2015/2016 which is forecast to rise to £1.5 billion in 2016/2017. That just shows how expensive some of Boris Johnson’s policies have turned out to be, which will be aggravated by the new Mayor’s commitments on fares. But it does forecast near breakeven in later years as fares income rises, presumably as a result of the growing population of London and some new capacity.

Mayor Sadiq Khan is looking to reduce costs in TfL by £4bn which he has described as “flabby”. Will he be successful in reducing the bloated empire that is TfL? We will have to see, but this writer is sceptical. It’s always difficult to do so when an organisation is so unaccountable to the public for its activities as is TfL.

One problem is that bus usage has been declining – falling from 2,323 million in 2015/2016 to an expected 2,289 million this year. This is blamed on “reliability problems” no doubt partly arising from more traffic congestion compounded by the negative impacts of the cycle superhighways.

Bus subsidies in London are running at about £600 million per year, which is expected to rise to £680m in 2020/21.

Perhaps needless to point out to readers that these are not trivial sums. The population of London is 8.6 million (including adults and children). So that means that the typical household probably contributes over £200 per annum to support bus passengers. That figure ignores the cost London residents pay for the “Freedom Passes” paid for by the London Boroughs that enables pensioners and others to obtain free bus travel, and some other subsidies that TfL bus operations receive. You can see exactly why bus usage in London is higher than in any other world conurbations other than three Chinese cities – because it receives greater subsidies. Surely it’s time to reform this gravy train so that bus users pay for the real costs of their travel? Which of course they would be very reluctant to do.

Roger Lawson