Transport for London will "declare itself bankrupt" by end of today (14 May 2020) without emergency finance

[All Line Rover]

Coronavirus: Tube bailout needed 'by end of day', Sadiq Khan says

Sadiq Khan warns Transport for London will effectively go bust without a government cash injection.

www.bbc.co.uk

[TfL] Bosses warned it would declare itself bankrupt without emergency finance by the end of Thursday [today, 14 May 2020].

Speaking on LBC Radio the Labour mayor [Sadiq Khan] said: "At a time when the government is wanting us to increase services to get into the recovery phase, we might be required to cut services because the Government is failing to give us the grant support we need... If we don't get the deal done today, the [chief financial officer] of TfL has legal duties that he has to follow."

If no deal is agreed, TfL said, it would have to publish an unbalanced budget under the requirements of the Local Government Act.

It would also be forced to issue a Section 114 notice - the equivalent of a public body going bust - which would ban it from spending any new cash.

An emergency board meeting would be called, after which the government would have to step in or services could be wound-down, TfL said.

Why not let TfL and associated entities go "bankrupt"? It could be a prime opportunity for a replacement organisation to cut staffing costs, cut rolling stock costs, etc. Regardless of whether employees are unionised, and regardless of whether assets such as rolling stock are owned (but mortgaged) or leased (from ROSCOs), a replacement organisation would, in present circumstances, be in a very strong negotiating position vis-a-vis unions, lenders, etc.

If anyone is aware of a publicly-accessible document that details TfL's operating costs in meaningful detail, I would be grateful if you could provide a link. TfL's accounts are... how shall I put this? Opaque.

 

[MotCO]

But didn't TfL have financial issues before Coronavirus? No bus fares increase for a number of years, reducing number of passengers, presumably higher cost of contracts requiring electric buses = financial shortfall. Convenient to blame Coronavirus?

 

[PeterC]

But didn't TfL have financial issues before Coronavirus? No bus fares increase for a number of years, reducing number of passengers, presumably higher cost of contracts requiring electric buses = financial shortfall. Convenient to blame Coronavirus?

True but I suspect that better mangement earlier would only have put this off by a few weeks.

 

[Bayum]

But didn't TfL have financial issues before Coronavirus? No bus fares increase for a number of years, reducing number of passengers, presumably higher cost of contracts requiring electric buses = financial shortfall. Convenient to blame Coronavirus?

But a considerable decrease in the amount of income due to coronavirus, surely? So any financial problems that there were have just been worsened, surely?

 

[telstarbox]

Ruddy hell!

 

[ainsworth74]

I'm not sure this is the ideal time for a massive reorganisation of TfLs services...

 

[Bessie]

I assume the government will then take over. I‘m sure Boris will enjoy the irony of rescuing this from Sadiq who replaced him as mayor.

 

[Bletchleyite]

It'll get bailed out, but I wouldn't be surprised if this came with some increased central Government control.

 

[LNW-GW Joint]

Grant Shapps has just spent 15 minutes in the daily ministerial briefing not saying anything about TfL.
After announcing a £2 billion project to upgrade infrastructure of road and rail, he mentioned filling in road potholes, but was then silent about rail.
Except he doesn't like the fact we are all still using paper tickets.
Baffling...
The DfT press release doesn't elaborate either.

Multi-billion pound road and railway investment to put nation on path to recovery 

Infrastructure upgrades will mean smoother and safer journeys with better connections.

www.gov.uk

• investment across road and rail will support the country’s economic recovery and continue to level-up infrastructure.
• fast tracked construction works worth £175 million will ensure networks get vital repairs while fewer passengers are using transport system.

 

[joncombe]

I agree that TFL finances were probably not in great shape before this started and I think the fare freeze is probably part of that (I know there were quite a number of cuts to bus routes, for example). But I also agree with PeterC that it might buy a few more weeks but little more than that.

I think the problem is quite simply that running profitable public transport with social distancing in force is impossible. Running a service at a maximum of 15% of capacity means you simply get 100% of the costs but a tiny fraction of the revenue (and I suspect the revenue is actually below 15% because there is no longer a requirement to touch in on buses so many people will be having a free ride on the buses too).

The Government published 5 stages do suggest "Social Distancing" will east at level 3 and largely be eliminated at level 2. How long that will be I don't know (a few months)? So I do think TFL will be able to balance the books in future, but with social distancing it's impossible. So maybe just some sort if temporary financing to keep them going for a few months.

I also believe that good public transport is absolutely vital to the functioning of a large city like London. It's simply not possible to get the number of people that are normally in central London there without public transport. Even if more people work from home in future those offices will be replaced by something and the people in them will still need to get around. In fact this might well help TFL if in future there is less of a "rush hour" and demand is more even accross the day.

 

[bramling]

It'll get bailed out, but I wouldn't be surprised if this came with some increased central Government control.

Yes there’s a game of political football being played between Shapps and Khan. A perfect opportunity to wrestle some power away from Khan, and do a bit of political damage in the process.

 

[Mikey C]

Grant Shapps has just spent 15 minutes in the daily ministerial briefing not saying anything about TfL.
After announcing a £2 billion project to upgrade infrastructure of road and rail, he mentioned filling in road potholes, but was then silent about rail.
Except he doesn't like the fact we are all still using paper tickets.
Baffling...
The DfT press release doesn't elaborate either.

Multi-billion pound road and railway investment to put nation on path to recovery 

Infrastructure upgrades will mean smoother and safer journeys with better connections.

www.gov.uk

Because the announcement was about quick and easy infrastructure expenditure, like pot holes and painting cycle lanes. not about bailing out operators which is a completely separate discussion...

 

[An_Engineer]

It'll get bailed out, but I wouldn't be surprised if this came with some increased central Government control.

I hope not. Despite some dislike of Tfl from some commentators on these forums, it is quite popular with Londoners, and it has shown that it is willing to invest far beyond normal TOCs would (or would be allowed to). I think them coming more under the control of dft (or even worse, the treasury) would be a disaster, especially as finances will be tight post-Covid.

In the current circumstances, the drop in revenue must be crippling, especially as it is still required to put on services yet with passenger loading much lower than normal (approx 80% less passengers at the beginning of the crisis). Central government even criticised the mayors office for reducing services, so it really is a no win scenario!

 

[CeeJ]

I'm not sure anyone could expect TfL to survive this unscathed. A drop of 95% of Tube travel and 85% bus travel would kill any transport organisation - and that's why the government (rightly) bailed out the TOCs. However, as the Mayor of London is unable to raise funds themselves (unlike the Scottish and Welsh Governments) they are simply unable to do it themselves. Any bailout should therefore be based on a repayment schedule at the same/similar interest to the Govt's own borrowing, and not by placing arbitrary restrictions on TfL.

 

[Class83]

Are National Rail TOCs likely to be in any better a financial situation, revenue has been at best 10% for the last 6 weeks and costs mostly the same, maybe some savings on fuel, track access charges and some staff have been furloughed?

If they actually went bankrupt it could allow a broader reset on all costs, which might be necessary if lower revenue is going to be a long term issue. ROSOCs will join shopping centre owners in being things I don't want shares in, unions might not have the leverage they once did.

 

[telstarbox]

TfL also has the loss of Congestion Charge revenue to deal with, as it was suspended in March.

 

[CaptainHaddock]

Are National Rail TOCs likely to be in any better a financial situation, revenue has been at best 10% for the last 6 weeks and costs mostly the same, maybe some savings on fuel, track access charges and some staff have been furloughed?

If they actually went bankrupt it could allow a broader reset on all costs, which might be necessary if lower revenue is going to be a long term issue. ROSOCs will join shopping centre owners in being things I don't want shares in, unions might not have the leverage they once did.

Well exactly. Unfortunately Londoners in general and Sadiq Khan in particular seem to think they're the centre of the universe and the rest of the country doesn't matter.

 

[Domh245]

Are National Rail TOCs likely to be in any better a financial situation, revenue has been at best 10% for the last 6 weeks and costs mostly the same, maybe some savings on fuel, track access charges and some staff have been furloughed?

If they actually went bankrupt it could allow a broader reset on all costs, which might be necessary if lower revenue is going to be a long term issue. ROSOCs will join shopping centre owners in being things I don't want shares in, unions might not have the leverage they once did.

TOCs have been put on Emergency Measures since the start of the crisis whereby they're paid a set fee to operate services with DfT taking all fares.

 

[Mojo]

Deal agreed as reported live on the 6 o Clock news just before 7pm.

£1.1bn cash and £505m loan.

Conditional upon
- Plan to return to 100% of normal LUL timetables
- 'Stay alert' advertising across the TfL estate
- Staff absences of TfL and LUL directly employed staff to be regularly reported to government
- A review of TfL finance and corporate structure
- Government officials to sit on the board.

 

[thenorthern]

it's getting political but I think at the moment central government is reluctant to spend a lot of money on London for anything. Scotland, Wales Northern Ireland and London are seen to be getting a lot more funding than parts of England and the current Conservative government is wanting to make people think that isn't the case.

Khan also wants more powers for London which given he is not able to responsibly use the powers he has the Government will start asking questions.

 

[WatcherZero]

The bailout out for the light rail systems was only around 75% of each networks weekly operating costs and the money for that ends in June.

 

[WatcherZero]

Deal agreed as reported live on the 6 o Clock news just before 7pm.

£1.1bn cash and £505m loan.

Conditional upon
- Plan to return to 100% of normal LUL timetables
- 'Stay alert' advertising across the TfL estate
- Staff absences of TfL and LUL directly employed staff to be regularly reported to government
- A review of TfL finance and corporate structure
- Government officials to sit on the board.

TfL has reportedly already spent £1bn from reserves and is losing £600m a month operating even the reduced service so all this deal does is buy another month or two.

The rail and metro operators should be looking at ending the perk of removing the morning peak restriction on National Concessionary pass travel they all brought in both to reduce crowding and because that group is more vulnerable to the disease.

 

[Mojo]

Are National Rail TOCs likely to be in any better a financial situation, revenue has been at best 10% for the last 6 weeks and costs mostly the same, maybe some savings on fuel, track access charges and some staff have been furloughed?

It's worth pointing out that TfL provides many functions and services that not only support the Mainline Tocs and Network Rail, but also undertake many functions which the Tocs are just not responsible for; hence the two cannot really be compared.

I will quote a post by another thread which I found interesting.

- National Rail T.O.C’s and Network Rail have effectively had their expenditure guaranteed and underwritten by the government. TfL has had no such source of funding. Accordingly, there are many staff at the T.O.C’s who are on full pay, either doing their job from home or not, because their wages are covered by the gov either way so there’s no need to furlough them.

- TfL provides certain facilities that benefit/are used by Network rail or the T.O.C’s but which are paid for by TfL because it is beneficial at helping London work

- The GLA group doesn’t provide many of its own services but instead uses those provided by TfL in order to be more cost effective

- TfL pays for staff that provide services which outside of London would probably be provided by local councils or other bodies

- TfL controlled rail services convey more passengers than the rest of the National Rail Network combined, and more passengers use London buses than in the rest of England combined

 

[An_Engineer]

Deal agreed as reported live on the 6 o Clock news just before 7pm.

£1.1bn cash and £505m loan.

Conditional upon
- Plan to return to 100% of normal LUL timetables
- 'Stay alert' advertising across the TfL estate
- Staff absences of TfL and LUL directly employed staff to be regularly reported to government
- A review of TfL finance and corporate structure
- Government officials to sit on the board.

Ouch. Running a 100% timetable when Government is still advising avoiding public transport? And review of corporate structure and government on the board? It feels like Tfl/mayor's office have capitulated with no other option, and it certainly feels politically motivated. Not good for Tfl.

 

[Domh245]

Ouch. Running a 100% timetable when Government is still advising avoiding public transport? And review of corporate structure and government on the board? It feels like Tfl/mayor's office have capitulated with no other option, and it certainly feels politically motivated. Not good for Tfl.

It's a "plan" to return to 100% timetable - based on reports from members here about how many staff are shielding, actually accomplishing said plan will be another matter altogether. Also worth mentioning that they're advising avoiding public transport, but at the same time the expectation is that people will still need to use it, particularly as more return to work. The more services are running, the better from a social-distancing point of view.

 

[Bletchleyite]

'Stay alert' advertising across the TfL estate

Ha ha ha. Can't help but giggle. That's clearly a whack at Sadiq who didn't want to go that way.

 

[thenorthern]

TOCs are also private companies they will be able to borrow money much easier or get cash injections from their parent company.

 

[Domh245]

Ha ha ha. Can't help but giggle. That's clearly a whack at Sadiq who didn't want to go that way.

It's by no means a bad thing though. Would be nice if transport more generally actually went with the government advice, rather than making it up as they went along and going over the top ("essential workers only", etc..), although that seems to be happening anyway now

 

[Bletchleyite]

It's by no means a bad thing though. Would be nice if transport more generally actually went with the government advice, rather than making it up as they went along and going over the top ("essential workers only", etc..), although that seems to be happening anyway now

As I said I believe Sadiq was using TfL as a means of pushing his view that the relaxation of the lockdown wasn't appropriate, as he doesn't have the powers the likes of the Welsh and Scottish Governments do.

 

[Mojo]

Full article from “The Sun”

Sadiq Khan hands 'control' of capital's transport to Govt for £1.6bn bailout

LONDON Mayor Sadiq Khan crumbled yesterday after he handed significant control of the capital’s transport system to the Government in exchange for a £1.6billion bailout. Mr Khan had threatened to p…

www.thesun.co.uk

LONDON Mayor Sadiq Khan crumbled after he agreed to hand significant control of TFL over to the Government in exchange for a billion pound bailout.

Ministers have agreed a multi-billion rescue package for Transport for London tonight after the Mayor threatened to cut vital train services in the capital.

Downing Street revealed a long list of conditions the Mayor will have to abide by today to get access to vast amounts of Government cash.

The Mayor was forced to roll over in order to secure the deal - which includes £1.1billion of bailout cash and a £505million loan.