What are the implications of a ‘managed decline’ for TfL?

The current round of emergency funding for Transport for London (TfL) is set to expire on 4 February. While talks are still ongoing between the central government and the mayor of London, Sadiq Khan, for further financial assistance, the capital’s transport agency has warned that if this does not come to fruition, it will have to nurse a "managed decline" in order to drastically reduce costs. So far, during the pandemic, TfL has received more than £4 billion worth of emergency funding from the central government. However, TfL estimates it requires a further £245 million in the current financial year and £1.1bn in the 2022-23 financial year in order to stay afloat. A report published by TfL’s finance committee in December laid bare the implications for motorists if a "managed decline" is introduced. For Autocar Business webinars and podcasts, visit Autocar Business Insight "Moving to managed decline on enhancements would mean that only projects already under way or those required to be compliant with safety and other statutory regulations would continue – meaning no new investment by TfL at all in the transport network. Major outcome areas for TfL would be impacted, with no proactive progress towards safety improvements, decarbonisation, improving air quality or active travel,” it said. "Any schemes which progress air quality improvements beyond the ULEZ, including the mayor’s Air Quality Fund and electrification of TfL’s vehicles, would be stopped." The report added: "The road network would continue to decline, leading to more restrictions and closures. Such assets at risk of closure include Rotherhithe Tunnel and Gallows Corner. Restrictions and closures [would be] highly likely – creating congestion on the rest of the road network, which will worsen safety outcomes, and disrupt freight and deliveries as well as affecting bus performance/costs." Since March 2020, TfL’s main revenue stream – income from underground and bus passengers – has collapsed due to far fewer passengers using its services since the first national ‘stay at home’ message was imposed. During that month, tube usage fell to a low of just 4% of an equivalent day in 2019 and fluctuated for the rest of the year, recovering to only around 40%. Even now, the number of people using its services is far below pre-pandemic levels. Data for 24 January 2022 shows underground ridership was at 49% of an equivalent day in 2019 and bus ridership has only recovered to 72%. Before the pandemic took hold, around 72% of TfL’s total income was derived from fare revenues, and its financial situation is made worse as London is one of the few capital cities in the world that doesn't receive funding from the central government to support its operating costs, after a £700m-per-year grant was axed in 2015 by then-chancellor George Osbourne and Boris Johnson, who was London mayor at the time. TfL and the mayor of London’s office declined Autocar’s requests for interviews and comments for this piece on the basis that negotiations with the government are ongoing. However, we were able to speak to Leon Daniels, who served as managing director of surface transport at TfL between 2011 and his retirement at the end of 2017. He warned that if TfL were to have to move to a managed decline, it would create havoc for motorists in the capital. “TfL won’t have the money for essential maintenance and local authorities won’t have the money for their local roads, either. That will produce worse-quality roads, last-minute closures for emergency repairs and the safety improvements that should take place will be lost,” he told Autocar. Daniels also said the problem is exacerbated because roads have been modified to provide more room for those cycling in recent years: “In my time in TfL, and subsequently together with the London boroughs, we constrained traffic volumes and reduced road space in favour of walking and cycling. Because of coronavirus, the car has led the return to travel ahead of public transport,” he said. “Add DPD and Amazon delivering parcels and a large growth in private hire vehicles, we are seeing worsened congestion. Bus speeds are at the lowest for two years.” In some ways, the writing has been on the wall for TfL for a while and it has just taken a global pandemic to kill its finances. In 2018, all non-essential roadworks were paused for two years, while TfL’s then commissioner, Mike Brown, admitted the organisation was having to use tube revenues to fund road repairs. “We are in the ridiculous situation where those buying a ticket to travel on the tube are cross-subsidising the maintenance of the strategic road network in London, because I have no other income by which to fund it,” he said at a conference attended by Autocar on 26 April 2018. “That, from any transport economic perspective, is clearly insane.” Daniels dismissed arguments that TfL should become more efficient by sacking staff and instead suggested the crux of the issue lies in the high costs of running decent public transport services. “The truth is you could sack the entire admin staff of TfL and not cure the deficit. The cost is not people in offices. If underground track costs £1m a mile and underground drivers get paid £55,000 a year, then someone has to pay,” he said. It is claimed that pre-pandemic TfL’s bus network lost around £750m a year, while the underground broke even. “The yield on the bus network was about 84p per journey and frankly, you can’t pay a bus driver £40,000 a year and you can’t buy a new bus for £350,000, you can’t have London real estate to park them and then pay for it all from 84p a journey. It’s not enough. Someone has to pay. It’s either the farepayer or the taxpayer. You can have an argument about where it sits but the answer is not advertising or property or sacking the cleaner,” Daniels added. Daniels said that every 20 or so years, the taxpayer versus farepayer argument comes to a head. “You can trace that cycle back to 1933. It is either higher fares or higher taxes. But both of these options are political suicides,” he said. “This is about one thing: who is going to pay. It’s either the passenger, taxpayer or a blend of the two.” Manchester pushes for more government funding ahead of Clean Air Zone roll-out Another region pressing the central government for further funding is Manchester, with a Clean Air Zone set to be introduced in phases from May. However, the Greater Manchester Air Quality Administration Committee – which is made up of the 10 councils in the city – called on the government to launch a review, as well as to pause and review the current financial help, amid fears businesses may not be able to source or afford vehicles that meet the requirements of the CAZ. According to the group, global vehicle supply chain issues, rising inflation and post-Covid economic recovery were making it difficult for businesses to source greener vehicles. The government has already committed £120m worth of funding to help people upgrade from non-compliant commercial vehicles, but Transport for Greater Manchester said the government did agree to funding a £10m hardship package, which would have helped those who need support most. “We remain resolutely committed to cleaning up our air without losing a job, a business or putting anyone into hardship,” said councillor Andrew Western, leader of Trafford Council and the city region’s Clean Air Lead. “We have considered this latest evidence, which is also reflected in the concerns we’ve heard from those businesses and individuals impacted and who are worried about their ability to upgrade. We need to have the right package of financial support to meet the targets set by the government and are open to any solutions that can help us achieve that. “We stand ready to work with the government on the right solution for our people, our businesses and, more importantly, the health of each and every one of us in Greater Manchester." Daniel Puddicombe