A breakthrough in the funding of Transport for London was announced on Friday when it agreed a new Covid bailout deal with the Government.
The latest deal gives TfL an additional £200m and will run until June 24.
The new deal “also includes the potential for a longer-term capital investment settlement for TfL”, the Department for Transport announced.
But it could lead to more Tube strikes as Mayor Sadiq Khan remains under Government orders to reduce the costs of TfL’s staff pension scheme.
Mr Khan said : “While I welcome and am relieved about this funding, once again the Government has just provided a short-term funding deal that will only enable TfL to continue running transport services for a few more months.
“This agreement makes reference to future capital investment for TfL, but it’s essential that this quickly turns into a concrete commitment from the Government.
“The only way we will be able to avoid significant and damaging cuts to tube and bus services is if the Government steps up and provides the longer term capital funding TfL urgently needs.”
It is the fourth Government bail-out for TfL and takes the total amount of help to almost £5bn – money that has effectively replaced income lost by TfL as a result of the collapse in travel during the pandemic.
The DfT said the aim was to finalise a deal on TfL’s capital funding – money for long-term investment projects such as new Tube trains, signalling systems, new buses and road and bridge upgrades – before the current financial year ends at the end of March.
However this “will be dependent on the Mayor and TfL’s cooperation with the Government”, including providing sufficient information regarding its capital investment plans and meeting conditions set out in last June’s settlement.
Mr Khan had already outlined plans to generate around £500m a year by introducing a £2 a day “clean air charge” by May 2024 or expanding the ultra-low emission zone (Ulez) from the suburbs to the Greater London boundary - or potentially doing both.
He would them follow this by scrapping the Ulez and congestion charge and replacing them with a London-wide system of road user charging by the end of the decade.
A Greater London boundary charge, costing out-of-town motorists from £3.50-a-day to drive into the capital, also remains on the table - though is opposed by the Government - while an extra £20 a year is being levied on council tax bills for the next three years.
The DfT said the £200m was on top of a pledge in last October’s Spending Review to provide over a billion pounds of capital investment every year.
Today I agreed a fourth emergency funding deal with TfL, bringing the Government's support to almost £5bn. Now it's time for the Mayor to follow through on his promises to keep TfL on the path to financial sustainability by 2023 - in a way that is fair to taxpayers across the UK.
— Rt Hon Grant Shapps MP (@grantshapps) February 25, 2022
Transport Secretary Grant Shapps said: “Over the past two years, the Government has repeatedly shown its commitment to London and the transport network it depends upon, by providing close to £5bn in emergency funding.
“These support packages must be fair to all taxpayers and the settlement agreed today provides enough to cover lost revenue from the pandemic while the mayor follows through on his promises to keep TfL on the path to financial sustainability by 2023.”
TfL commissioner Andy Byford said he was “grateful” for the extra funding and pleased that a deal had finally been struck.
He said: “The mayor has already set out a range of proposals that will help support TfL’s financial sustainability in the future but it is essential that agreement is reached with Government on longer term capital support during this funding period.
“This is crucial for the coming years if a period of the ‘managed decline’ of London’s transport network is to be avoided.
“We will be meeting regularly to work towards agreement on the Government funding of the capital investment priorities shared by them, us and the mayor.
“The Government has confirmed in this agreement that they support the operation and maintenance of essential and safe transport services in London, enabling us to continue our full and vital contribution to economic recovery and to support the Government’s priorities on decarbonisation, air quality and making transport better for users.”
Caroline Pidgeon, chair of the London Assembly transport committee, said: “We welcome today’s extension – but these continued delays to a long-term solution are not useful, and Transport for London is not a political football. For the sake of TfL’s capital and revenue, a permanent deal needs to be in place.”
Under the latest deal, Mr Khan will put his options for raising extra cash out to consultation before the end of June.
He will also outline options to save “up to £400m” in the 2022/23 financial year – which appears to be less than the £730m TfL feared it would have to cut by 2024/25.
Mr Khan is also required to make “significant progress” in moving TfL’s pension funding into a “financially sustainable position” – which could mean more Tube strikes.
The RMT union has already confirmed two 24-hour walkouts next week, on March 1 and 3, in part because of the perceived threat to staff pensions, and more action could now follow.
Prior to Friday’s announcement, TfL’s most recent deal had been first agreed in June last year.
This was due to run out on December 11, but was extended to February 4, then February 18 and then to today, February 25 - allowing TfL a week to decide whether to accept its terms.
Earlier this month Mr Byford revealed he had rejected a draft deal because it contained “unacceptable” conditions thought to relate to extra cuts that TfL would have to make in return for the cash.
TfL was seeking more than £1 billion until April next year to keep Tube and bus services running — by which time it is required to break even on a day-to-day basis — plus a longer-term capital funding.
The June deal required Mr Khan to increase Tube and bus fares by 4.8 per cent – with the new prices being introduced next Tuesday.
