Extraordinary Funding and Financing Agreement for Transport for London

Question for Short Debate

Asked by

To ask Her Majesty’s Government when they will announce the details of any further Extraordinary Funding and Financing Agreement for Transport for London for the period after 11 December.

My Lords, I should perhaps mention, in the interests of full disclosure, that I live in London and am the proud holder of a Freedom pass.

My Question is of course highly topical; the deadline is tomorrow for the Government and TfL to reach an agreement on the future funding of transport in London. That is not just the Underground and the buses; it is the roads and the whole transport system for London.

My intention in raising the matter is not so much to discuss the details of a possible agreement as to ask about the process and timing by which such agreements are reached. In short, what my Question is really asking is whether the Minister agrees that there must be a better way of doing this and, if so, what the Government propose to do to bring it about. Perhaps there has been some news since I last checked, by my Question still stands. Even if an agreement is reached tomorrow, we still need the Government to tell us what steps they will take to improve the system by which such agreements are reached.

By way of background, in addition to the excellent brief produced by the Library, it is worth emphasising that this will be the fourth in this series of deals for relatively short periods since we were struck by the pandemic. There was May to October 2020; there was October 2020 to March 2021, subsequently extended to May 2021; and, most recently, there was May to December 2021, which expires on Saturday. Obviously, part of the reason for this pattern has been the unknown and unknowable progress of the pandemic, emphasised most recently by the Government announcing yesterday that everyone should, where possible, work from home. We simply do not know how people will react and how this will affect ridership.

I therefore welcome the Statement made to the Evening Standard by Paul Scully MP, the Minister for London, that the Government remain committed to make up TfL’s loss of fare revenue from Covid. It would be good and appropriate if the Minister could make a more formal commitment to that policy from the Dispatch Box.

The problem, however, is that short-term fixes to cover lost fare revenue simply do not work for Londoners. Those who travel on TfL services deserve something more certain in the longer term in terms of both revenue and capital. It is important to understand that TfL’s budget does not just cover day-to-day running of services; it must cover the capital needed to maintain and, where necessary, update services to deal with the changing needs of both Londoners and the visitors whom we welcome to our great city. For example, some of the rolling stock is near or at the end of its working life and its replacement simply cannot be deferred.

The practical difficulty is that TfL is, in effect, a local authority and is bound by the rules that govern local authority finance. What this means in practice is that it cannot budget for a deficit and is legally required to plan for the worst-case scenario. Consequently, unless and until a formal agreement is reached on additional funding and signed on the dotted line, TfL has to plan for substantial cuts in expenditure, both in services and capital, in case a deal fails to materialise.

My Lords, it is a pleasure to follow the noble Lord, Lord Davies of Brixton. I will follow his excellent example by also declaring my interest as a resident for the whole working week in London for many years and a regular user of the District and Circle lines and the cheerful 507 bus service from Waterloo.

That said, and to pick up the noble Lord’s last point and the point he made about how important London is to the national economy, I think the Government have stepped up to the plate, keeping TfL running not with Londoners’ money but with more than £4 billion and counting of taxpayers’ money, gathered from all over the country—national money, in other words. So it is to me a considerable paradox that Members of our national Parliament cannot usually put down, say, a Written Question about TfL, because we are rightly told by the Table Office that it is independent and nothing to do with Parliament. Shedloads of money is going into London and TfL, but we cannot even have a Written Question such as the one noble Lords have tried to table in recent weeks on what is happening about the wearing of face coverings in London, because that is said to be something that is not for Parliament. So it is very hard for us to know, on behalf of national taxpayers like me, what is going on within the Bermuda Triangle that seems to me to characterise TfL accountability.

It is clear that the mayor should have done much more about the wearing of face coverings on the London Underground over the last few months and encouraging it. It is equally clear that the mayor and his team have made scant efforts to attend even to the basics in TfL, such as seeing that fares are properly collected and that fare dodgers are reasonably, properly and carefully brought to account. I hope that is something that everyone in this House would agree with.

The money to keep services running is being provided by national taxpayers, so the mayor now needs to show much more leadership and to take more financial responsibility himself. He needs to look at everything that could raise more funds to help run TfL from, for example, road users paying per mile to widening the congestion zone, however unfortunate and unpopular that might be to some, lest we be stuck into infinity with an annual round of campaigning from the mayor to cover up bus signs and shut down Tube lines in a fashion that even the late Dr Beeching would not have dared to do.

My Lords, I entirely agree with the noble Lord that, once we know what the new normal is, we need to think boldly and creatively about the long term. However, everyone accepts that we have no idea what the new normal will be at the moment, because we are still in the pandemic. We have just gone into another wave, which is having a further negative impact on traffic levels.

It is utterly ludicrous for the Government to be forcing TfL into short-term, acrimonious funding agreements, as they have been doing every three or six months, when everyone knows that the problem is the pandemic. It is rather like denying a heart replacement patient blood on the grounds that they do not have a long-term plan for improving their fitness. Until they have survived the operation—got through the pandemic, in this case—we cannot look at these longer-term issues.

My noble friend’s strictures at the beginning were well made. Unless the Government want to kill the national economy, which I do not think they do, they simply will agree to roll on the funding; there will be an agreement tomorrow and it will be similar to the one that went before. This is wasting a huge amount of time and energy among the senior management of TfL and in the Department for Transport, where I know officials are at their wits’ end, having to go through this charade of negotiations, knowing that the status quo will be the status quo ante until we get to the end of the pandemic.

When we get to the end and know what the new normal is, some very hard questions will of course need to be asked. But we need to know what the new normal is in terms of traffic levels, and these are very hard to predict; I have seen a whole range of potential traffic levels. The report done for the mayor, the TfL independent review of a year ago, suggested we might get to about 80% of traffic levels. I have looked at the sourcing for those estimates and, to be frank, this is fingers in the air stuff—the Minister will probably agree with that. We simply do not know what the new normal will be.

Cycle lanes are the problem.

My noble friend says that priority cycle lanes are a problem; we can debate that issue, but there needs to be much better joining up and we should encourage the mayor to look at that as a key priority.

The second issue has to be the future of congestion charging and road pricing in London. At the moment, we have a hybrid system of a low emission zone and a small congestion zone for which prices have gone up a lot. We need to join up and look at the longer-term role of congestion charging.

I will mention two other points and will be very brief, because my time is nearly up. We need to look at reform of council tax arrangements as part of future arrangements. There is a very strong argument for an additional council tax band, given what has happened to property values in the capital over the last 30 years, and that could help to fund Transport for London.

Finally, when Crossrail and the Elizabeth line open, I hope, next year—we are looking forward to it—a big issue will be the interaction between the transformational additional capacity of Crossrail, with its 10% of additional transport capacity in London, and new housing, which will also produce new council tax revenue. So, there are four big things that should be looked at, but not this short-term, ludicrous funding crisis that we have been going through during the pandemic.

My Lords, I live in London. I have a 60-plus Oyster card. I was a TfL board member for eight years and deputy chairman for half that time. I have great affection for Transport for London. Nobody wants to see a long-term settlement for it more than I do, but, as the noble Lord, Lord Adonis, just explained, it is impossible to put one in place at the moment.

A comparison is sometimes drawn with the train operating companies, which have been funded. Politically, constitutionally and legally, they are agents of the Government. The difference is that, politically, constitutionally and legally, TfL is an agent of the mayor. To understand the Government’s anxiety about entering into a long-term settlement with the mayor, one needs a forensic understanding of his financial responsibility over the past four years. He was elected in May 2016. The pandemic hit in March 2020, almost exactly four years later. I want to concentrate on those four years.

Before the pandemic hit, the mayor came into office with two dangerous pledges. One was a fare freeze at a time when public transport was heaving with people and there was money for him to collect. As he has accepted, the cost of that fare freeze over a four-year period was £600 million; that is £600 million forgone. He added to that the Hopper fare on buses, allowing people two rides in an hour. TfL budgeted £35 million per annum to fund that, only to find after a year that there were 100 million usages at £1.50 a pop. That is a top figure; TfL will not give an estimate. It is a bit complicated—some people might have hit the daily cap, for example—so let us be generous and say that this represented only £130 million forgone per year. That means another £600 million forgone over four years, adding up to £1.2 billion left on the table by the mayor in the fat years. The result was a subsidy for the buses, which hit £600 million under Ken Livingstone. Under Boris Johnson, that was brought down to £450 million with no loss in bus mileage. Under Sadiq Khan, before the pandemic, it rose to £750 million a year, with a 7% cut in bus mileage to go with it.

My Lords, the debate so far has been very interesting, but it all started because the income that TfL gets from its passengers has gone down due to Covid. There is no argument about that. What is worrying is that it has affected TfL much more than it has transport in other cities. London First has said that 70% of TfL’s income in London comes from fares, compared with 38% for authorities in New York and Paris, so it is much more reliant on fares. As noble Lords have said, there is not a lot that we can do about it at the moment.

This has got worse because we have many more people using public transport in London than in other cities—about three times as many. However, it is worse than that because, so far, London has been given about three times the income per head of population than other cities in this country have been given. What comes out of this debate and the comments made is the question of who is in charge, and of devolution. Many noble Lords have criticised the present mayor; I could criticise the previous one, who did one good thing in producing more bus lanes but did many other things that I could criticise heavily. We criticise them but, after all, the mayors are elected.

The Government are now saying that there will be more devolution, particularly for transport in the north and the Midlands—we can debate another day whether it is the northern powerhouse or something else—but if these organisations, including TfL, are elected or come about as the result of an election, we have to allow them to get on and win or fail, depending on what the electors think.

What really got me about this debate was the letter from the Secretary of State for Transport to the mayor, dated 1 June this year. It set out six months of settlement and was 20 pages long, with enormous detail about how many driverless trains there should be and all sorts of other things. I will not go through it now, but does a mayor really need a 20-page document with a lifespan of just six months—it will run out tomorrow—telling him in detail exactly what to do for an authority that is supposed to be devolved?

My Lords, the noble Baroness, Lady Kramer, has asked me to present her apologies for not being able to speak this afternoon. However, I think she would agree with me that the problems of TfL have been well reported and debated in recent weeks. From the perspective of the travelling public, the commitment of Ministers in principle to find a long-term agreement that will enable TfL to plan for the future is most welcome.

I do not want to repeat the history of TfL’s financial problems, so clearly explained by the noble Lords, Lord Davies of Brixton and Lord Moylan, and others. Clearly, the huge reduction of journeys from 120 million on London Underground in a five-week period in autumn 2019 to 39.5 million over a similar period a year later means severe financial dislocation, given that fares represent a high proportion of overall income for TfL.

As the noble Lord, Lord Davies of Brixton, suggested I might, I want to broaden the issues a little because the problems of financing in London, while not quite the same, are similar elsewhere in England. Many areas will face managed decline in service provision unless further financial support is forthcoming. In the case of the Tyne and Wear Metro, which I use regularly, the Government have confirmed that emergency Covid-19 payments, which have been paid through the pandemic, will cease at the end of March 2022. If this situation continues, there will be a major shortfall of just over £20 million in the 2022-23 financial year, most of which is caused by the impact of Covid on ridership. Given yesterday’s announcement asking those who can to work from home, ridership will now fall further, having got back to 85%—although not 100%—of pre-pandemic levels in recent weeks.

To make up nearly £21 million on Metro income, support for bus services will have to fall significantly. That means reductions in concessionary bus fares and in secured services, and this will impact in turn on bus company income. Stretching income—which is the intention—will be extremely hard given the long-term nature of the pandemic and its impact, and use of reserves is of course finite.

My Lords, I too declare an interest as a Londoner and a Freedom pass holder. I am also standing counsel to the RMT, ASLEF and Unite, which means that from time to time I advise and represent those unions. I have not been called on in relation to the issue now before the House and, needless to say, I represent nobody but myself.

The interests of the Government, the Department for Transport, the mayor, TfL, Londoners and visitors are obvious. My concern in the present negotiations between the DfT and TfL is: what about the workers? These are the people who, as essential staff, kept Londoners working and travelling during the pandemic. Almost 100 workers on London’s transport died because of Covid, together with an unknown number of cab drivers, private hire drivers and delivery riders.

Uncertainty of funding means uncertainty of employment. We understand that TfL must prepare for the worst as the current funding package runs out, but whether its worst-case scenario of an 18% cut in bus services and a 9% cut in Underground services turns out to be too pessimistic, the staff working the buses and the Tube are left anxious and worried that some of them may lose their livelihoods and others have their hours and/or pay cut. This is no way, as they say, to run a railway. Nor are cuts to jobs in London transport, as the noble Lord, Lord Moylan, implies, any way to build back better or to prepare for a green transition.

Just as TfL—and indeed the Government—needs long-term planning, so do the individual members of its staff and their families. I ask the Minister to assure the House that when agreement is reached for funding past 11 December, the department will then sit down with TfL to agree a long-term plan for funding so that finances do not lurch from one half year to the next. I ask her too to undertake to ensure that the unions are at that negotiating table. Staff are entitled to have their voice heard on long-term strategy as well as day-to-day issues.