Tag Archives: Business Plan

TfL’s Business Plan and Budgets – Financial Profligacy

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The Mayor of London has published a Business Plan for TfL for the next five years plus a Budget for 2018/19– see https://tfl.gov.uk/corporate/publications-and-reports/business-plan. The Business Plan is much as outlined in his adopted Transport Strategy so he aims to get the proportion of journeys taken by walking, cycling or public transport up to 65% by 2024 when it’s about 63% today. That’s despite the recent lack of progress in achieving that goal as highlighted in our previous article on London travel trends here: https://tinyurl.com/ybtchctj

For east Londoners he is committing to progress that vanity project called the Rotherhithe bridge, but there should be new Woolwich ferry boats delivered in 2019, progress on the Silvertown Tunnel and the document mentions a budget for “renewal” of the Rotherhithe Tunnel.

But the bad news for all Londoners is that the Mayor intends that TfL will continue to run a big financial deficit until 2021. That date does of course coincide with the expansion of the ULEZ zone to the North/South Circular which will be providing more income and also the Elizabeth Line (Crossrail) should also be in operation by then which will also assist. There is a small surplus budgeted for in 2022/23.

Another item of bad news for all Londoners is that “proactive” street maintenance budgets will remain at zero so we will see more short-term and reactive patching. This is surely a short-sighted financial approach. Has the Mayor not heard of the phrase “a stitch in time saves nine”.

The delays to Crossrail and falling bus usage have been two causes of the short-term deficits but the Mayor continues to hobble himself with the promise he made to freeze public transport fares so as to get elected. The Mayor claims to have reduced “like-for-like” operating costs in the last two years but that is a claim that is difficult to verify and overall income/costs are what matter.

One consequence of this financial ineptitude is that TfL are having to borrow more money. Debt has been, and will continue to rise rapidly based on the budgets. It will be 175% of revenue in 2018/19 (revenue not profits note), and financing costs will be 7.5% of revenue in that year. That does not look like a sound financial strategy to anyone familiar with the financial world. The Mayor is just in the process of building up a big problem for his successor.

What is remarkable about the two aforementioned documents is the lack of detail on where the Mayor is actually spending money, e.g. the proposed capital expenditure. We just get headline titles such as £116 million to be spent on “Healthy Streets”, £80 million on “Air Quality”, £114 million on “Public Transport”, etc. There is also little detail on operational income and expenditure. The budget for 2018/19 has to be approved by the London Assembly and there is a bit more detail in this version submitted to them: https://tinyurl.com/y78cjoyq

So for example it shows (on page 37) that the introduction of the ULEZ (for central London only in 2019) will cost around £40 million. But the revenue from it seems to be just dumped into “other income” so it is impossible to evaluate the cost versus benefit of it.

Here are some simple questions one could ask that are not answered by these documents such as:

  • How much money is being spent on Cycle Superhighways, Quietways and other cycle projects?
  • How much does the Santander Cycle Hire scheme cost to run, or does it make a profit? What is being invested in expansion of that scheme?
  • How much is TfL spending on funding wide-area 20 mph schemes in local boroughs?
  • What will be the real costs and income from the ULEZ, both before and after expansion?

There is simply insufficient detail provided to answer these questions. These documents do not provide enough financial detail to judge the merits of the Mayor’s plans at all. One suspects a lot of dubious projects and expenditure are being concealed in these public relations documents.

But there is one thing for certain. There is no budget to improve the road network in London so as to increase capacity and reduce traffic congestion. With London’s population expanding, that is a serious omission.

Roger Lawson

Twitter: https://twitter.com/Drivers_London

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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 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