TfL Financial Operations

Questions to the Mayor of London – answered at on 6 July 2020.

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Photo of Shaun Bailey Shaun Bailey Conservative

What discussions with TfL are you having about their financial operations over the next few months?

Photo of Sadiq Khan Sadiq Khan Mayor of London

I am in constant contact with TfL about the operation of the transport network in London and the organisation’s financial outlook.

COVID-19 has presented enormous challenges for TfL. 80% of TfL’s operating budget comes from fares and other commercial activity. Given that only 5% of normal travel happened on the Tube for much of March, April and May, it is no surprise that fares income collapsed by 90%. Londoners have done the right thing. They have stayed away from public transport, but this has hit TfL’s finances extremely hard.

At last month’s TfL Board meeting, an emergency budget was presented which assumes cost reductions and deferrals of nearly £1 billion and the use of £1 billion of TfL’s cash reserves. Even with these measures, there is a funding gap of up to £1.9 billion in the first half of the year, which has been met through the deal with the Government. At next month’s Board meeting, a revised budget for 2020/21 will be considered.

I have regular discussions with the management at TfL, the most recent being on Tuesday, and my Deputy Mayor for Transport is heavily involved in the day-to-day running of the organisation and its finances.  I chair the TfL Board and I make sure that all decisions taken by the organisation are done in a transparent way with the best interests of London and Londoners at heart.

TfL has a key role to play in delivering the recovery, but the deal we have done with the Government is just a sticking-plaster. We must now create a sustainable way of funding TfL over the medium to long term. It is an indisputable fact that TfL has under my leadership tightened its belt and tackled the profligacy of the previous administration. It reduced its net operating deficit by 71% and increased its cash balances by 16% since May 2016. We have also for the last four years done something never achieved before: reduced the operating cost year-on-year at TfL. We have streamlined the organisation and made it more efficient. The reality is that the funding model for TfL is broken. Even before the pandemic, TfL had to manage the impact of an average reduction of around £700 million per year in the Government grant and was one of the only transport authorities in the world not to receive a direct Government operational grant for day-to-day running costs.

I will be doing all I can to find a sustainable long-term answer. I just hope the Government will do the same, too.

Photo of Shaun Bailey Shaun Bailey Conservative

Do you accept that as a major consequence of your financial mismanagement of TfL over the last four years, TfL was in an appalling position to cope with lockdown?

Photo of Sadiq Khan Sadiq Khan Mayor of London

No. For the last four years, we have managed to reduce the operating deficit by more than 71%. It went from £1.5 billion to £200 million. We managed to increase the cash balances by more than 16%, which meant that before the pandemic our cash balances were more than £2 billion. We have managed to year-on-year reduce operating deficit, never done before in the six years before I became Mayor and TfL being formed. We have reduced, for example, the numbers of non-permanent labour by more than 57% over the last four years and we are also servicing the debt of more than £7 billion taken out by the previous Mayor.

We were in a good state and we had plans to go into surplus over the course of the next year and a half, but COVID will impact TfL’s budget by around £4 billion a year. Every transport authority in the country has been affected by COVID and every business in London has been affected by COVID as well.

Photo of Shaun Bailey Shaun Bailey Conservative

Even if you do not want to admit your culpability, your recent statements give us a clue that you recognise some of your mistakes. Do you recall just over three months ago on 13 March [2020] you admitted that if re-elected you would raise Tube fares?

Photo of Sadiq Khan Sadiq Khan Mayor of London

What I said was I would freeze the bus fares, as I have done over the last four years, which means in 2024 Londoners will still be paying £1.50. I said I would extend the Hopper fare, which has benefited hundreds of millions of journeys across our city. Any other fares will go up by no more than the cost of living.

You will be aware that the previous Mayor raised fares by more than 42%. Had I not been successful in 2016, my Conservative opponent was hoping to raise fares by more than 17%. It is quite clear. Labour Mayors freeze fares. Conservative Mayors raise them.

Photo of Shaun Bailey Shaun Bailey Conservative

You are going to raise fares? You admit to that?

Photo of Sadiq Khan Sadiq Khan Mayor of London

Let me repeat, Chair, because the Member may have had bad communication with his technology. The bus fares that I froze over the last four years are still £1.50 from 2016. They will carry on being frozen over the next four years and they will still be £1.50 in 2024. The Hopper fare will be continued going forward so that people can change fares as many times as they like within the course of an hour. Other fares will go up no more than the cost of living. It is not possible for me to freeze those fares but they will go up by no more than the cost of living. That was a ceiling, not a floor.

What the Government has done with the conditions attached to the funding deal is to not have a ceiling but to say they must go up at least by Retail Price Index (RPI) plus 1%. It is not a maximum of the cost of living. It is the cost of living plus 1%.  There is a clear difference and it just demonstrates what we know. Dogs bark, ducks quack, Conservatives raise fares.

Photo of Shaun Bailey Shaun Bailey Conservative

Why then on 15 May, after signing the bailout agreement - and I am quoting here - did you say, “They want fares to go up next January, ending four years of fare freeze that I delivered after the last election”? Had you forgotten from two months earlier that you were going to raise fares or are you trying to take Londoners for fools and shift the blame?

Photo of Sadiq Khan Sadiq Khan Mayor of London

Chair, one of the problems when you have already written your questions out is that, when I answer the question, you still read the question you have written out.

As I have answered, bus fares would have been frozen for the next four years. A bus fare in January 2016 was £1.50 and it would have been £1.50 in January 2024 as well. I would have frozen bus fares. Those bus fares are now going to go up because of the conditions attached to the funding deal from the Government. They will no longer be £1.50. It is quite straightforward, Chair.

Photo of Shaun Bailey Shaun Bailey Conservative

No, it is not, Mr Mayor.  I asked you about Tube fares. You tried to intimate that the Government had forced you to raise Tube fares when you had announced long before lockdown that you were going to raise Tube fares. I put it to you. Are you taking Londoners for fools by saying that it is the Government forcing you to raise Tube fares when you have already said you were going to do that? It was in the TfL business plan and it was in several major media outlets across London. Are you taking Londoners for fools?

Photo of Sadiq Khan Sadiq Khan Mayor of London

Chair, let me just remind the Assembly Member of the history. The business plan in 2016 that I inherited also had fares going up above RPI.  I ignored the business plan and froze the fares.

I was quite clear in relation to what my intentions were. My intentions, which I telegraphed, were to freeze bus fares. That is taken as said. The Hopper fare stays. As far as Tube fares are concerned, they could well be frozen, but they will go up by no more than the cost of living.

The conditions attached from the Government mean that I cannot do that. The conditions from the Government are that they must go up at least by RPI plus 1%, as well as bus fares, tram fares and Overground.

Photo of Shaun Bailey Shaun Bailey Conservative

Mr Mayor, in 2016 you used the words, “No Londoner will pay more to travel in 2020 than they did in 2016”. That was false then. It continues to be false now. This is a decision that you made to raise the fares. It predates ‑‑

Photo of Sadiq Khan Sadiq Khan Mayor of London

You are reading a script. Come on. Ask a question and listen to the answer.

Photo of Shaun Bailey Shaun Bailey Conservative

Why are you now trying to make it look like the Government asked you to raise these fares when you had already --

Photo of Sadiq Khan Sadiq Khan Mayor of London

I published the conditions, Chair. I know that the Government was not keen for me to publish the conditions.  I have published the conditions so that Londoners can see in black and white what the conditions were. Londoners will not be taken for fools. It is really important for Londoners to see who is responsible not least for the Congestion Charge rising, for fares going up, for under-18s paying fares, but also for the conditions for those over 60 as well.

Photo of Shaun Bailey Shaun Bailey Conservative

Mr Mayor, you are saying that your management of TfL has put TfL in a strong place when TfL has a record amount of debt, Crossrail needed a £3.35 billion bailout, 22 out of 26 major projects have been paused or cancelled and you do not believe that your poor management --

Photo of Sadiq Khan Sadiq Khan Mayor of London

Let us deal with each of those things that he is reading out. In relation to debt, the previous Mayor borrowed more than £7 billion. I have not borrowed more than £7 billion. I have been paying back the debt of the previous Mayor. In fact, the £2 billion we borrowed is to invest in infrastructure.

Photo of Shaun Bailey Shaun Bailey Conservative

Mr Mayor -- you are wasting my time --

Photo of Sadiq Khan Sadiq Khan Mayor of London

In relation to operating costs, I am the first Mayor to reduce the operating costs of TfL. In the 16 years before I became Mayor, including the previous eight when [The Rt Hon] Boris Johnson [MP, Prime Minister] was the Mayor, operating costs went up year-on-year, a good example of waste that I have managed to reduce as Mayor. When the previous Mayor gave me the reins of TfL, our deficit was £1.5 billion. It did not increase. It went down year-on-year and so it is £200 million, a reduction of more than 71%.

Cash balances we have managed to increase as well and so we have more than £2 billion worth of cash balances. In fact, we have spent £1 billion of our cash balances paying for TfL or passengers using TfL.

That is the very opposite of inefficiency. That is very opposite of financial mismanagement.  I am sorry it does not go with the script he has written or has been written for him. That is the reality.

Photo of Shaun Bailey Shaun Bailey Conservative

Chair, the Mayor is deliberately filibustering and wasting our time. Let us be clear, Mr Mayor. The 30% of TfL staff you laid off do not think that you have done something efficient. You have ruined their --

Photo of Sadiq Khan Sadiq Khan Mayor of London

Hold on a second. Let us deal with the staff. We managed to reduce non-permanent staff by more than 57%. That is a massive saving to TfL. I am sorry if he is in favour of us taking on more non-permanent staff. I am not. I would rather have permanent staff who are committed to TfL and who are cheaper and more professional in the long term.

Photo of Shaun Bailey Shaun Bailey Conservative

Chair, could you stop the Mayor, please? He is deliberately wasting our time and refusing to answer questions. We all know that he has run TfL into the floor and he should take responsibility for that.