Thursday 4 January 2018 11:07 am

TfL faces funding crunch as bosses say end of government subsidy isn't sustainable for London

London’s transport funding crunch has been put back in the spotlight after Transport for London (TfL) bosses said yesterday that the withdrawal of government subsidy will not be sustainable for the capital in the long-term.

At a meeting of the London Assembly Budget and Performance Committee, they also revealed plans to sell part of TfL’s Tube fleet, which will then be leased back, in order to fund new Piccadilly Line trains.

The transport body has been battling a surprise dip in Tube passenger numbers – crucial as it's the only part of the public transport network to make a profit – as well as a fall in advertising revenue, and a decline in other operating income from the congestion charge.

Read more: Tube to get more reliable as TfL wraps up major upgrade work

2018-19 marks the first year in which TfL will receive no operating grant from the government, which had previously stood at around £700m a year. It has been winding down, with TfL receiving £228m in 2017-18.

London’s deputy mayor for transport, Val Shawcross, said:

It is the money on asset investment on the roads that has been particularly hit, I think, in the spending plans.

And there will be investment in safety and in repairs, but the damage being done financially onto cyclical maintenance on the roads, and I don’t think that’s sustainable for the long-term.

She added that she did not think the long-term impact on the London economy had been entirely thought through, and the issue was "business that we actually do have to address; it's not something which London can sustain with for a very long time".

TfL commissioner Mike Brown said: “When the A2 or the A3 cross the London boundary, on the outside of the London boundary there will be a contribution from vehicle excise duty nationally to Highways England to maintain and perform capital renewals on that part of the A2 or A3, or any other trunk road. As soon as it crosses the London boundary, there isn’t, and that just seems a real inconsistency to me.”

A spokesperson for the Department for Transport said: “We are taking the big decisions for Britain’s future and investing a record £23bn on our roads to improve journeys for motorists.

“It is the responsibility of the mayor to determine how Transport for London’s budget is spent.”

Concerns have been raised that the funding squeeze will also mean planned projects hit the buffers, after upgrades to the Northern and Jubilee Line were shelved in October to prioritise spending.

TfL has said it will continue to deliver upgrades and reaffirmed commitment to projects such as the Bakerloo Line extension, saying planning and development work will continue to progress.

Selling Tube trains and leasing them back

But its plan to raise £875m with the sale and leaseback of some of its train fleet to fund the purchasing of new rolling stock for the Piccadilly Line was branded "a sorry state of affairs" by London Assembly Liberal Democrat member Caroline Pidgeon.

A TfL spokesperson said: “As is perfectly standard and common practice across the rail industry, we are looking at whether we could sell and lease back some of TfL’s rolling stock, as we have previously done on London Overground. This would allow us to purchase new trains on London Underground’s Piccadilly line, where there is a clear need for a modern fleet.”

But Pidgeon added:

It does not make any sense and means for years the public purse will be paying a high price.

The only winner will be the lawyers as we saw with the failed PPP [public private partnership] on the Tube.

We need investment in our transport infrastructure not a costly PFI [private finance initiative] by the back door.

Read more: TfL says major Tube upgrades cancelled because of dip in passenger numbers