Tuesday 20 October 2020 9:33 pm

Government warns that it will 'take control' of TfL unless bailout demands met

The government has warned Sadiq Khan that it will take the management of Transport for London (TfL) into its own hands if the Mayor does not accept its demands as part of a new bailout deal.

In return for a second rescue package, transport secretary Grant Shapps has set out a number of demands including a hike in council tax, an enlarged congestion charge zone and higher fares, the FT reported.

Read more: Government extends TfL funding for two weeks amid emergency bailout talks

If the Mayor does not comply with the demands, Shapps has threatened to take charge of the transport operator.

“We will be taking reserve legislative powers allowing us if necessary to direct TfL,” he said in a letter. “This would be combined with a further series of short-term funding settlements.” 

Khan is seeking a £4.9bn deal over the next 18 months, which has seen its revenues decimated by the coronavirus pandemic.

With the initial deadline for an agreement expiring last week, a two week extension to TfL’s funding has been granted by ministers. 

In May, the government handed over £1.6bn to see TfL through an initial six month period, but with no sign of passenger numbers returning, the transport operator is seeking an additional package to fill the hole in its finances. 

The initial package required TfL to freeze all subsidised travel and increase the congestion charge by a third, but new measures could be even more severe.

In the letter, Shapps proposed a six month funding deal which would take the body through to next March.

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As part of this, he wrote that Londoners should pay an additional sum in their council tax to help ease the pressure on TfL’s finances.

In addition, Shapps said he expected the mayor to begin “pensions and workplace reform” at TfL, accelerate the “inadequate” progress on implementing driverless trains, cut fare concessions for children and pensioners and implement a fares increase of more than the “RPI inflation + one per cent” model agreed in May, the FT reported.

Finally, he asked that the congestion zone be increased in size in line with the Ultra Low Emissions Zone, which from October 2021 will stretch from the North to the South Circular.

Union RMT said the demands amounted to “bullying” by central government.

General secretary Mick Cash said: “The speculation that the Government are threatening to take direct control of TFL sounds like more  bullying by this administration designed to impose their will on Londoners and ride roughshod over local democracy.”

In response, however, Khan rejected the transport secretary’s demands, saying that the government should instead reinstate the network’s operating grant.

He also contrasted the treatment of TfL with the support that has thus far been given to the rail industry, which has already received £4.3bn in funding with few conditions attached. 

Read more: Exclusive: TfL set for crunch talks as London bosses call on Sunak to solve cash crisis

Last week officials at the Department for Transport revealed that emergency funding for the country’s railways could cost the taxpayer as much as £10bn over the whole year.

A spokesperson for the Mayor of London said: “Negotiations with the Government continue, but suffice it to say there is simply no way any Mayor could accept conditions of this nature, which would make it harder to tackle the virus and choke off London’s economic recovery at the worst possible time”. 

City A.M. has contacted DfT for comment.