The threat of nationalisation looms if a deal can’t be done — inside the bitter battle for TfL

·8 min read
 (Evening Standard )
(Evening Standard )

HOURS after schools had closed for summer and with the great holiday getaway in full flight, an email marked “confidential” finally arrived at Transport for London. It was 10pm on Friday, July 22. In the preceding two years, TfL executives had become accustomed to late-night missives from the Department for Transport as they pleaded for funds to keep the Tube and buses running. Here at last, it was hoped, was the final deal that would allow TfL to maintain and upgrade the capital’s transport network and stand on its own feet financially from next April.

Mayor of London Sadiq Khan (right) with Andy Byford, Commissioner of Transport for London (PA)
Mayor of London Sadiq Khan (right) with Andy Byford, Commissioner of Transport for London (PA)

Those with intimate knowledge of TfL say this deal is crucial. It is now vital for the Mayor’s transport authority not to fall into the trap of refusing a deal and effectively declaring itself bankrupt. The Mayor has warned such a “nuclear option” is possible if he does not get his way — without explaining it would allow the Government to seize control of TfL and nationalise it.

Since its inception in 2000, TfL has always relied on taxpayer subsidies to balance its books, like other major metro systems across the world. But a drive to self-sufficiency began a decade ago, while Boris Johnson was mayor. Since then, a row has raged about how much extra cash TfL should receive from government to fund major projects, such as bridge repairs or a new signalling system for the Piccadilly line.

Prime Minister Boris Johnson with Transport Secretary Grant Shapps and Mayor of London Sadiq Khan on a Elizabeth Line train (PA)
Prime Minister Boris Johnson with Transport Secretary Grant Shapps and Mayor of London Sadiq Khan on a Elizabeth Line train (PA)

The collapse in income that was caused by the pandemic showed how vulnerable TfL’s finances were — at one point, fares were only five per cent of normal. This then sparked demands for a long-term fix that would allow TfL to keep buses and Tubes running but be able to access government help for “big ticket” items. Today, an agreement on a new funding deal is said to be close. If approved, this would be TfL’s fifth and final settlement; since the start of the pandemic it has received four government bailouts, under the terms which stipulated that TfL was required to break even on a day-to-day basis by the end of March 2023.

The process of begging for bailouts — to replace the fares income lost during successive lockdowns — has been “relentless and exhausting” and threatens to leave a bitter legacy for the travelling public. Another Tube strike is scheduled for next Friday over pensions. Dozens of bus routes face the axe or reductions in frequency. Bus drivers are set to strike over pay. Several TfL executives have had enough and quit. Initiatives have been delayed. Funding for the boroughs has dried up: even cycle proficiency instructors cannot be hired. And, crucially, the relationship between City Hall and central government has changed. Grants now come with strings attached. The power of the Mayor has been reduced — at least, until he can find a way to generate more cash.

What will this mean for Londoners? Probably, the expansion of the ultra-low emission zone across all of Greater London in a year’s time

What will this mean for Londoners? Probably, the expansion of the ultra-low emission zone across all of Greater London in a year’s time — though it will have to be legally justified on environmental not cash-generating grounds. It may also speed the adoption of pay-per-mile road user charging. But first, TfL will have to think hard about which services it protects and which new schemes it funds. Those unable to break even or not a mayoral priority are set to be abandoned.

One question sits at the heart of the bailout debate: what should be the future size of London’s transport network? The Government questions why UK taxpayers’ cash should be spent propping up services that Londoners no longer use to the same extent. Mayor Sadiq Khan’s counter-argument is that unless 100 per cent of services are retained, passenger numbers will never return to pre-pandemic levels. There is also the question of why relations have become so fraught and why it has proved so difficult to strike a deal. Dr Nick Bowes, chief executive of the Centre for London think-tank and a former mayoral director to Mr Khan, blames a mix of the “ideological, political and personal”. He said: “There is the ideological question about how we fund public transport — or whether TfL needs to wash its own face financially.

A consultation on plans to expand London’s Ultra Low Emission Zone (Ulez) to cover the entire city has been launched (Yui Mok/PA) (PA Archive)
A consultation on plans to expand London’s Ultra Low Emission Zone (Ulez) to cover the entire city has been launched (Yui Mok/PA) (PA Archive)

“Then you can inject a party political aspect into it. We have got a city that has moved more towards Labour in the last 10 to 15 years, and a Conservative government that won a big majority at the last General Election — with London not seen as a priority. There are votes to be had in being tough on London and giving it a bit of a kicking, and not just on transport funding.”

Previous bailouts have placed obligations on Mr Khan, from the politically awkward to the unpalatable. These have included a review of the TfL pension scheme, collaboration with a government-led review of driverless trains and the mothballing of Crossrail 2. Free rush-hour travel for pensioners was suspended but Mr Khan refused to remove free bus passes from schoolchildren. “Some of the things that were being pushed as a condition of getting the money could be interpreted as things that could well have been done by the previous mayor, but weren’t,” Dr Bowes said.

He suggested it may even take the cost-of-living crisis to drive Londoners back to the office — and thus back onto the Tube. “If we have a really cold winter when people can’t afford to heat their homes, it could make it quite attractive to go into work every day,” he said. But passengers are returning, though more noticeably at the weekend than on weekdays. This is helped by the full restoration of Night Tube services.

Passengers are returning, though more noticeably at the weekend than on weekdays. This is helped by the full restoration of Night Tube services. (TfL)
Passengers are returning, though more noticeably at the weekend than on weekdays. This is helped by the full restoration of Night Tube services. (TfL)

The DfT’s latest figures show that the Tube passenger numbers were at 90 per cent of pre-pandemic levels the day after the school holidays started, while buses hit 94 per cent of “normal” the following weekend. On weekdays, though, between a quarter and a fifth of Tube passengers have yet to return, though this will also be influenced by the lack of tourists. As for the draft deal itself, the Standard understands that the capital funding is worth £3.662 billion over two years — about £150 million less than set out in TfL’s 2019 business plan, drawn up long before anyone had heard of Covid.

However, TfL wanted a three-year capital deal, and one generous enough to avoid entering “managed decline”, which would involve axing about 10 per cent of Tube services and up to 18 per cent of the bus network. Post-pandemic, TfL is being forced to operate in a different climate. Its annual fares income is now expected to be £5 billion in 2023/24 — £1.5 billion below projections. The outcome of the negotiations is seen as “pivotal” to TfL’s future.

 (PA)
(PA)

Mr Khan said TfL was unable to accept some of the proposed conditions. These are understood to include a requirement to make further progress, within a month, on government demands to reform the staff pension scheme that costs TfL £400 million a year — something Mr Khan has said he is “not persuaded” to do. There is also a requirement “not to cut services”, inserted by the Government to challenge the Mayor’s “bullshit” narrative that he is being forced by ministers to axe bus routes. Mr Khan has found himself under fire from London Tory MPs such as Nickie Aiken and Greg Hands for threatening such routes which run through their constituencies.

“The Secretary of State is pretty clear that TfL can’t have everything it wants,” one Whitehall source said. “They have been in the business for the last year or so of demanding more money than they need. They will probably categorise what we give them as a disgracefully low settlement that will lead to ‘managed decline’, but it’s more or less what they were planning to spend before the pandemic. They have always put forward unrealistic plans. It doesn’t feel like they had taken proper account of the ‘new normal’. People don’t like commuting. It’s a miserable experience. Who the hell would want to get up before dawn in the winter, not see your children, stand nose to armpit with lots of other commuters and pay £5,000 a year for the privilege? People want to carry on working from home.”

Mr Khan is perceived by the Government as having ‘played games’ in previous bailout negotiations

Mr Khan is perceived by the Government as having “played games” in previous bailout negotiations, which “soured relations”. For his part, he believes ministers have “treated Londoners with contempt”. But few details of the current offer have leaked. An emergency TfL board meeting this week was held in private to maintain confidentiality. The Whitehall source added: “It’s possible they might feel they’ll get a better deal out of a new government, but I think that is unlikely.” Mr Byford said the failure to finalise a deal was not for the want of trying.