Sadiq Khan’s partial fares freeze could cost him about £500m over the next four years, Transport for London’s commissioner has revealed.
The mayor announced last month that single pay-as-you-go Tube and bus fares would be frozen at current rates until March 2025.
He said he would be plugging the gap in TfL’s finances with £123m from City Hall, funded from higher than expected income from council tax and business rates.
Now TfL commissioner Andy Lord has revealed that he expects to receive a £123m annual payment from the mayor on an ongoing basis to ensure TfL’s income from fares matches its business plan.
Asked by Caroline Pidgeon, a Lib-Dem member of the London Assembly, about the financial implications of the fares freeze to TfL, Mr Lord said: “My expectation is a recurring £123m. It’s not just for one year – it’s moving forward as well.”
Mayor @SadiqKhan has committed to give @tfl nearly half a billion pounds over the next four years to cover on-going lost revenue from latest fares freeze
— Tim Donovan (@BBCTimDonovan) February 20, 2024
He said that TfL’s budget planning assumed that fares would rise one percentage point above the RPI rate of inflation each year.
Mr Lord added: “Our assumptions on revenue remain unchanged. The £123m is a recurring payment to TfL to offset the decision of this year.”
A previous four-year partial fares freeze, introduced in 2017 by Mr Khan, was said by TfL to have deprived it of £640m of income.
Mr Khan, asked about the new fares freeze during an appearance before the assembly on Tuesday afternoon, said the previous freeze did not lead to an annual grant from City Hall to TfL.
He suggested the new fares freeze would have to be funded on an ongoing basis by “savings and efficiencies” at TfL - even though it is already required to find £600m of savings over the next two years, according to Mr Lord.
Mr Khan said: “If it’s not possible to provide the savings and efficiencies, we will have to look at the contribution we give to TfL.”
Mr Khan’s chief of staff David Bellamy confirmed to the assembly that there was a “recurring allocation of business rates every year to TfL” in the mayor’s budget to reimburse it for any shortfall in fares income.
Mayoral sources said that the latest fares freeze could encourage more people to travel by public transport, thus reducing TfL’s loss of income.
Seb Dance, the deputy mayor for transport, said Mr Khan’s first fares freeze meant that fares were currently 14 per cent cheaper than they would otherwise have been.
Mr Lord’s revelation came as a row broke out over the mayor’s decision to allocate £123m for his latest fares freeze rather than invest it Tube infrastructure - at a time the Central line is in crisis due to a shortage of working trains.
Neil Garratt, leader of the City Hall Conservatives, said: “That could have been £123m going into the capital programme for the future.”
But Mr Dance said the £500m Central Line Improvement Programme (Clip), which is refurbishing five or six trains at a time up to 2029, had been delayed by the pandemic and a lack of Government funding.
“The money that is required for the Central line refurbishment needed to be put in before now by central Government,” he said.
“It was the pandemic that suspended Clip and put the Clip behind schedule. Money from City Hall would not have changed at all the rate at which the Clip could have progressed.”
Mr Khan also wants to scrap peak Tube and train fares on Fridays for a 12-week trial period from March 8 but needs the approval of the capital’s commuter rail firms before this can start.
Mr Lord said: “Discussions are ongoing. I’m hoping they will be concluded in a matter of days and we can get some clarity on when the trial can start and what it will look like.”
