Transport for London heading for £1 bn operational deficit


Transport for London is heading for an operational deficit of nearly £1bn next year following a fall in passenger numbers, raising concerns that the city’s transport system is being pushed to its limits.

In an internal email, Patrick Doig, finance director for TfL’s surface transport division, told staff the £968m “loss” was “clearly not a sustainable position to be in as an organisation”.

TfL’s operational deficit has swollen from £171m in 2012/13 to £458m in 2016/17. The transport body expects the deficit to be £785m this year, and hit £968m in 2018/19.

The rising deficit has been blamed on several factors, including the removal next year of a revenue grant from the UK government, which was once as high as £700m a year but has been falling since 2015.

Sadiq Khan, London’s Labour mayor who oversees TfL, has also frozen fares — a move that is estimated to cost about £640m over four years.

TfL has also seen a drop in passenger numbers, which has been blamed on more people working from home or using ride-hailing apps, such as Uber. Alex Williams, director of city planning, has also suggested that the decline is due in part to safety concerns following last year’s terror attacks in London and Manchester.

David Begg, a former TfL board member, said the transport body was “in a crisis”.

“There’s a genuine concern that the organisation is starting to creak,” he said. “I’m starting to
worry about TfL and its ability to deliver against this financial background.”
TfL’s funding squeeze has already seen a number of projects shelved, including the scrapping of
upgrades to the Northern and Jubilee lines on the London Underground, and a failure to fulfil a
promised extension of the Metropolitan line.
Tony Travers, director of the LSE’s Institute of Public Affairs, said: “TfL’s financial future looks
pretty bleak if the boom in public transport passenger growth has come to a halt”.
Caroline Pidgeon, a Liberal Democrat member of the London Assembly, said TfL had struggled to
understand that lifestyle changes were changing how much people travel, with more people
working from home, shopping online or using ride-hailing apps.
“It’s the biggest financial challenge that TfL has ever faced,” said Ms Pidgeon. “If they don’t find
ways to manage their expenditure we are going to see a crisis because we will see more transport projects being cut.”
In 2014, TfL predicted that there would be 1.44bn passenger journeys on the Underground by
2018/19. But by March 2016, the transport body had downgraded its projection by more than 7 per cent, to 1.34bn.
The most-recent figures show passenger numbers fell 1 per cent last quarter, compared to the previous year.
At the same time, TfL has slashed its predicted income from fares by hundreds of millions of pounds.

Transport for London heading for £1bn operational deficit
December, however, it predicted just £4.79bn in fare revenues for next year.
City Hall believes that the fall in passenger numbers would have been even worse without Mr
Khan’s fare freeze.
But Gareth Bacon, a Conservative member of the London Assembly, said there was now “serious
cause for concern” about Mr Khan’s “cavalier” financial stewardship of TfL.
“His expensive promises might have won him cheap headlines but they have cost Londoners vital
investment in their buckling transport system,” he said.
A spokesperson for TfL said the mayor had made a “big push” for the transport body to reach an
operating surplus of £78m by 2021 under a recently-agreed business plan. But the prediction is
based on passenger income rising 30 per cent, from £4.6bn to £6bn, in the current financial year.
TfL is hoping to boost income through property development, and has laid out plans to raise
£850m over the next five years by developing housing and office space above or beside its stations.
A cost-cutting programme is also already under way. The TFL spokesperson said the transport
body’s day-to-day operating costs fell by £153m in the last financial year and an additional £194m
in savings were found in the current financial year.