The UK’s poor economic performance is hitting passenger growth and threatening Transport for London’s target to break even on day-to-day spending in 2025/26 for an unprecedented third year in succession, the TfL board heard last week, with the network’s operating surplus for next year now forecast to be just £5 million.
Detailed budget papers presented to the board highlighted the impact of a cocktail of sluggish GDP growth – just 0.2 per cent in January and now forecast at just 1 per cent for 2025 – plus a fall in retail sales, inflation and interest rate pressures and increasing global uncertainty all contributing to passenger numbers and all-important fares income coming in below original forecasts.
With fares making up some two-thirds of TfL’s total annual income of almost £9.6 billion, ridership levels were the network’s “biggest financial risk”, the board heard. The forecast had been that total journey numbers across rail, the Underground, buses and trams would rise by six per cent this year, on top of a nine per cent increase in 2023/24. But the actual increase was just 1.3 per cent, meaning 139 million fewer journeys and £209 million less in fares.
Bus ridership in particular is flatlining, at around 84 per cent of pre-pandemic levels, with no growth in demand now expected in 2025/26. And overall public transport demand is now forecast to grow only by the same 1.3 per cent as this year, to some 3.7 billion journeys over the year, boosted primarily by the continuing and increasing popularity of the Elizabeth line.
Break-even in the 2024-25 financial year would effectively be achieved due to £226 million of savings in TfL’s contributions to staff pensions. These are down from 27.3 per cent to 10.5 per cent for the coming three years following this year’s triennial review of the fund’s performance, the board heard. And next year’s break-even plans, with operating costs held at £8.4 billion, remain underpinned by a £350 million City Hall guarantee, as well as an estimated £29 million contribution from TfL’s expanding property development business, Places for London.
TfL’s performance since its grant from government for day-to-day spending was removed in 2015, including weathering the Covid storm which had virtually destroyed its revenue base, was nevertheless a cause for celebration, Sir Sadiq Khan told the TfL board, which he chairs. On operational spending, he said, “I am really pleased that we as a city, unlike almost any other city, pay for it ourselves”.
And despite the continuing Covid hangover, there was better news for TfL’s capital budget, with £485 million funding from Whitehall boosting planned spending on maintenance, network improvements and new projects to £1.9 billion in 2025/26. That would include spending on step-free tube station access, more zero-emission buses, new Piccadilly line and Dockland Light Rail (DLR) trains, Metropolitan line improvements and work on the Superloop 2 outer London bus network, the board heard.
Work with the boroughs would also continue on plans for major new schemes, aiming to get them “shovel-ready”, said TfL chief strategy officer Alex Williams. They include the proposed Bakerloo line extension to Lewisham, the new West London Orbital rail link and the DLR extension to Thamesmead. The latter scheme is now at the stage of amassing “several thousand pages of evidence” to support an application to Whitehall for the required approval under the Transport Works Act, Williams said.
With TfL’s total borrowing already approaching £14 billion, those major schemes, between them “unlocking” thousands of new homes, remain dependent on government funding. But TfL chiefs were optimistic, reporting “constructive” and “productive” conversations with ministers on the prospects of what Mayor Khan has called the “big prize” of a multi-year funding deal.
TfL Commissioner Andy Lord also confirmed that the long-awaited upgrade to the Piccadilly line signalling system was on the shopping list he submitted to the government’s comprehensive spending review, the outcome of which is expected in June. Recent Heathrow airport announcements of improvements to its terminals had reinforced the need for greater capacity on the line, which upgraded signalling would provide, even before the third runway materialised, Lord said.
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