Tyne and Wear Metro services are set to avoid cuts next year despite the threat posed by enormous energy bills – but are in a “precarious” spot.
Transport chiefs have agreed plans to plug a gap of more than £10m in Metro operator Nexus’ finances next year without needing to slash train services. But there remain worries about the future funding of the network, with its electricity costs having shot up dramatically amid the global energy crisis and expected to remain high for years to come.
Nexus is predicting a £10.6m budget shortfall in 2023/24, which will be covered by increased payments from local councils in Tyne and Wear and by spending £8m of its cash reserves. But with critical energy bill relief from the Government due to expire soon and major pressures as a result high inflation levels continuing, councillors were told on Tuesday that using Nexus’ limited reserves to solve the crisis was “not a sustainable position”.
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A rise in Metro fares of up to 13.9% for some tickets is also due to come into force on April 1. Gateshead Council leader Martin Gannon warned before Christmas that the Metro would be at risk of being mothballed if bosses were forced to cut services and reported to colleagues this week that it remains in a “precarious” state.
Coun Gannon told the North East Joint Transport Committee (JTC): “The income situation is improving and energy costs are beginning to decrease, nowhere near back to what we anticipated but certainly falling from that peak. That [budget deficit] position is beginning to narrow, probably to manageable proportions. Therefore the Metro is not under immediate threat.
"But it is a precarious situation and very subject to increases in energy costs or any unanticipated spikes. It is heavily reliant on the use of reserves of £8m. I am happy and content that we have a stable situation, but it is something we need to be aware of and monitor into the future.”
The cost of the high voltage power used to run the Metro has spiralled this year from an estimated £8m to more than £21m – and a report to the JTC states that the electricity bills are expected to stay at far higher rates than had been predicted this year until 2026. Almost £16m of funding support from the Government, including £6.2m in energy relief, has meant that Nexus has been able to avoid dipping into its cash reserves in the current financial year.
But Coun Gannon reported on Tuesday that the Metro had been deemed ineligible for continuing help with its energy bills and therefore expects to have to spend reserve money in the coming years. The transport levy that the five local Tyne and Wear councils contribute to Nexus is also being increased by 4% – from £65.2m to £67.8m.
Coun Gannon added: “Local authorities are already battling overstretched budgets however once again, we have little choice here but to step up to increase the money we put forward to fund our transport system. We are committed to delivering an excellent transport network for our communities however reduced budgets and inflationary pressures are alarming, and more clarity is needed from Government on a longer-term solution.”
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