Transport for London (TfL) faces near £1bn operational deficit as revenue raising efforts run into trouble

Transport for London (TfL) faces a near £1bn operational deficit next year, as it looks to secure new revenue raising options amid a surprise dip in passenger numbers and the loss of government funding.

The organisation said in its most recent business plan that it expects a £784m deficit this year, which will then hit £968m for 2018/19. It is aiming to turn that around to an operating surplus by 2021.

It is looking to seek out new revenue streams to plug investment into the capital’s transport network, with the formation of a consulting arm, in an effort to monetise the process of sharing its expertise with operators around the world. But the organisation suffered a new blow with the news last week that the transport secretary has intervened to block its planned rise in motorist penalties in the capital.

That had been set to bring in an additional £80m in income over TfL’s business plan period up to 2021/22, but Chris Grayling said the change would have been “excessive”.

Read more: Crossrail at “worrying stage” with Elizabeth Line opening under pressure

Concerns over cashing in on Crossrail

TfL is also looking to cash in on the Elizabeth Line, which is forecast to bring in £3bn over the next five years, and is offering six brands the chance to become exclusive sector advertisers on the new line to tap more advertising revenue.

The opening of the new railway however, is also giving TfL troubles, as it faces rising cost and schedule pressures after hiccups including delays at Woolwich station. Construction costs are £172m over budget at present.

London’s deputy mayor for transport has said a delay to the Elizabeth Line is the biggest revenue risk facing TfL, so key is its opening to providing the necessary boost to TfL.

Time is ticking in its hunt to bolster revenue, as the Tube is the only part of the network to make a profit, and that has come with the headache of the surprise fall in passenger numbers.

The mystery of falling passenger numbers

TfL says fares income is expected to rise as train frequencies increase and employment growth continues, but the London Assembly has expressed concern that the transport body does not fully understand why passenger numbers are falling.

It said that if the dip is due to lifestyle changes such as people working from home, and using the likes of Uber more often, an expected upswing “may not materialise”.

A January report noted TfL experiencing financial difficulties, with the London Assembly warning this will impact on services as passenger numbers and fares revenue “well behind budget”.

TfL has revised its fares expectation for 2017-2018 down by £240m on the year before’s budget.

It had previously blamed the unexpected fall on “economic factors affecting the whole of the UK, including the uncertainty of Brexit”.

A TfL spokesperson said:

Through our recently published budgeted and balanced business plan, we are continuing to invest record amounts in the transport network to deliver a wide range of improvements and make London a fairer, greener, healthier and more prosperous city for everyone.

Our extensive efficiency programme has already helped reduce operating costs this year by £194m and is ahead of budget and more than offsets any reduction in revenue. The introduction of the Elizabeth Line later this year will further improve ridership across the capital and transform journeys for millions of people.

Upgrades shelved and bus services cut

As a result of the fall in fares revenue and the end of its government subsidy, TfL has cut its local implementation plan funding to boroughs, and suspended its programme of renewals on the road network.

There are plans to cut bus services by seven per cent over the next five years, and upgrades to the Jubilee and Northern Lines have been shelved, though TfL has said it can improve the Underground services by sweating its assets.

A new timetable has been introduced on the Northern Line to double the length of the highest frequency evening peak services in the central London section.

Critics however, have said the mayor’s partial fare freeze has added pressure onto the transport organisation.

London Assembly Conservative member and chair of the Transport Committee Keith Prince said previously: “In just 12 months, Sadiq Khan’s con of a ‘fares freeze’ has eluded millions of travelcard users and cost TfL hundreds of millions of pounds.”

TfL though, says the freeze has helped it prove more resilient and cushion the blow from slipping passenger numbers, which have also been felt across National Rail services in London.

Read more: TfL dealt blow by Grayling as he blocks “excessive” motorist fine hike