Why is Transport for London facing a financial black hole?

An entire Tube line may have to close because Transport for London faces a dire financial crisis, Sadiq Khan has said. 

The London mayor warned that it was a “possibility” that one of the Underground’s 11 lines may have to close unless TfL could secure “long-term investment” from the government, reported the Evening Standard

Speaking to BBC 5 Live on Tuesday, Khan said: “One of the things we are looking into is the possibility of closing a Tube line. Why? Because closing a Tube line will make the savings, the cuts, that we need to introduce if we are going to balance our books.”

The 115-year-old Bakerloo line could be under threat from “permanent closure” after plans for a £3.1bn extension were put on hold earlier this year, said the Daily Mail, while the Standard speculated that the Jubilee, Metropolitan or the Hammersmith & City lines could face the chop. 

Khan’s comments came a week after TfL’s finance chief, Simon Kilonback, warned that the Tube network might have to be scaled back by 9%, and the bus network by 18% to fill a £1.9bn funding gap. 

“On the bus network in practice, this means over 100 routes being withdrawn and on the remaining routes 200 would have service-frequency reductions,” Kilonback told the TfL finance committee last Wednesday. 

“For the Tube network, we’re still analysing the impacts, for example of a full closure of a line or part of a line or smaller reductions across the whole network.”

Why is TfL facing a crisis?

TfL could “become a byword for managed decline”, warned Khan in the Financial Times last month. He argued that TfL has already made “massive efficiency savings” by cutting annual running costs by £1bn over the last five years – and the books simply can’t be balanced without further investment from the government. 

How TfL is funded and what has caused its financial crisis has been the source of “repeated rows” over recent years, said the BBC, but this funding gap has been caused “mainly by a drop in passengers due to the pandemic” which has left it heavily reliant on financial support from the government.

Its funding comes largely from passenger fares as a source of its income and it is “one of the only cities in the world” that does not receive government funding to support its operating costs, reported the broadcaster last year.  

TfL formerly received roughly £600m in annual operating grants from the government, but in 2015, then Chancellor George Osborne agreed to “phase out” the grants – leaving TfL to find a way to fund its own operating costs. 

The pandemic then brought with it a “calamitous drop” in fare revenues, and TfL bosses and the mayor went to the government for a £1.6bn bailout to “keep London moving”.  

TfL lost 95% of its fares income when the pandemic hit, and while passenger numbers on the Tube have recovered to roughly 65% of normal use, the transport body continues to struggle because “many commuters have not returned to a five-day week while there are few international tourists”, said the Standard. 

By law, TfL must balance its financial books year on year – and fears it might have to issue a “section 114 notice”, in which it would effectively declare itself bankrupt. If that were to happen, TfL could, in theory, wind down ”all services apart from the Woolwich ferry and some school bus services – the only services TfL is legally obliged to provide”, explained The Guardian last year.

The Department for Transport has argued it has already given over £4bn to keep the transport network afloat during the pandemic and said it was now focused on finding a “sustainable financial footing in a way that is fair to taxpayers across the country”.

TfL’s current government Covid bailout expires on 11 December. The body is seeking to secure £500m to keep services running until next April, plus about £1.2bn for 2022/23.

But at an event hosted by the Centre of London think tank, Khan revealed bailout talks have “not even started”, reported City A.M. – despite limited time to agree on a new bailout deal, if any.


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