London mayor warns of fare rises as TfL signs government support deal

The mayor of London has warned the capital’s residents to expect a rise in transport fares despite Transport for London striking a last-minute rescue deal with the government to support the network’s recovery until March 2024.

Under the agreement, signed on Tuesday, the government will inject around £1.2bn in capital funding into the city’s transport network and subsidise fare losses should passenger numbers fail to recover at the budgeted rate.

The state rescue package is the fifth in two years to secure TfL through a post-Covid commuter slump and takes the total amount pledged to £6bn.

Grant Shapps, Tory transport secretary, had put the deal on the table a month ago but TfL’s board rejected it three times before finally accepting the offer on Tuesday.

Sadiq Khan, the capital’s Labour mayor and TfL chair, said the deal meant that the network would not have to make the “devastating cuts to vital transport services” which ministers had previously put forward.

But, Khan warned, the network had still been left with a “significant funding gap” and would have to increase fares and proceed with some cuts to bus services.

These [conditions] are things we have had no choice but to accept in order to get the deal over the line to avoid TfL becoming bankrupt.

TfL’s annual fare revenue is currently £1.5bn less than expected before the pandemic, with weekday passenger numbers substantially lower than three years ago — particularly on Fridays and Mondays.

The network’s 2019 business plan anticipated 2022/23 revenue at £5.8bn but current projections put this at £4.3bn.

The government said it would inject £1.2bn of capital funding into the system, supporting almost £3.6bn of projects — along with £80mn a year for “active travel schemes” to expand walking and cycling in the city.

Government officials said the support would allow TfL to pursue its pre-Covid 2019 business plan. But Khan disputed the claim, saying that estimates from three years ago did not take into account inflation, which in July reached a 40-year high of 10.1 per cent.

Projects which can now go ahead include new Piccadilly line trains and modernisations and upgrades across the District, Metropolitan, Circle and Hammersmith & City, as well as improvements to Elephant & Castle station, and the extension of the Northern Line and the repair of Hammersmith Bridge.

Under the agreement there will also be a new independent property company that will build 20,000 homes on TfL land within the next decade.

During the three successive lockdowns most commuters were forced to work from home, sending ticket receipts plummeting on the London Underground and the city’s bus network.

At the same time, TfL’s debt burden reached what it described as the “limits of affordability”, preventing it from borrowing significant sums in future.

In return for its support the government has demanded a series of concessions. Not only has TfL already agreed to secure recurring annual savings of over £730mn but it has also been ordered to find £500mn to £1bn of new income-raising measures from April 2023.

Khan has also been ordered by Shapps to push ahead with the introduction of driverless trains on the London Underground, a move which is expected to infuriate transport unions.

Finally, he has promised to submit proposals to reform TfL pensions by the end of September with an “aim” of saving £100mn from future service benefits.

Khan described the conditions as “onerous” and warned that the pension reforms could lead to further industrial action and more disruption, following recent disputes with members over pay and pensions

“These are things we have had no choice but to accept in order to get the deal over the line to avoid TfL becoming bankrupt,” he said on Tuesday. “It’s simply wrong to punish Londoners and transport workers in this way.”

The transport secretary said: “This deal more than delivers for Londoners and even matches the mayor’s own pre-pandemic spending plans but for this to work, the mayor must follow through on his promises to get TfL back on a steady financial footing, stop relying on government bailouts and take responsibility for his actions.”