Sadiq Khan warns TfL will run out of cash today without government bailout
London’s mayor Sadiq Khan has given the government an ultimatum saying that if Transport for London does not receive a bailout today the operator will have to cut tube and bus services.
Speaking to LBC, Khan said: “Being blunt, today is the last day. Unless the government gives us confirmation of the grant we need, then the consequences could be quite severe and the ramifications for all of us will be huge.
“Because we are required to keep two months’ money to pay for services, we’ll have to start reducing services”.
However, political opponents said that the mayor was more to blame for TfL’s financial situation than the coronavirus outbreak.
Under government law, TfL will have to issue a Section 114 notice if its cash reserves fall under £1.2bn, which will happen today, Khan said.
This notice is the equivalent of a public company going bust and means strict spending restrictions will be implemented.
A TfL source said: “Every hour that goes by, we get closer to the point of having to issue a 114.”
A government spokesman said that it was in “advanced negotiations” with TfL:
“It is absolutely vital that the priority is reaching an agreement that keeps critical services running for those passengers who must use public transport to get to work, ensuring we keep London moving safely.
“That means protecting key routes, rapidly increasing the number of services available and protecting the interests of taxpayers in the long-term.”
Rail workers union the RMT said that it “would be nothing short of a scandal” if the government did not plug the gap in TfL’s budget immediately.
TfL fare revenue down 90 per cent
Over the weekend it was reported that TfL was in negotiations with the government over a bailout worth up to £2bn.
The coronavirus has decimated the network’s finances, more than 80 per cent of which come from passenger revenues.
Khan added: “Over the last two months we’ve lost more than 90 per cent of our fares and advertising’s down, so is the congestion charge.
“We’ve been spending £600m a month paying for services and getting nothing back for our customers or very little. At the start of this crisis we had a cash reserve of north of £2.1bn, but that’s running out”.
However, London Assembly conservative spokesman Keith Prince said the mayor’s comments were “unhelpful and alarmist”:
“Transport for London will inevitably need a bailout to continue operating during this crisis, but TfL has £1.2bn in reserves which is enough to run the network for two months”, he added.
Conservative mayoral candidate Shaun Bailey said that Khan had “failed in his job as chairman of Transport for London”:
“Coronavirus highlighted existing structural flaws within TfL’s balance sheet – it is not the primary cause.
“The past four years have proven Khan cannot be handed a blank cheque. As a condition for any bailout, Khan must show Londoners how he will rebuild TfL’s finances once the virus recedes.”
TfL set for £4bn loss this year
According to papers from an emergency finance committee earlier this week, TfL is on course to make a £4bn loss this year as a result of the crisis.
The operator has prepared an emergency budget in an attempt to balance its finances, but the government needs to plug a funding gap of £3.2bn across 2020.
The crunch talks come as public transport providers have been asked by the government to increase service levels to aid the UK’s first steps into its coronavirus recovery plan.
In order to allow passengers to safely socially distance while travelling, TfL has said it will only be able to run services at 13 to 15 per cent of passenger capacity.
Khan said: “Ironically, at a time when the government is wanting us to increase services, we may have to cut them because the government is failing to give us the grant support we need”.
TfL is the only public transport operator in western Europe that operates without a government grant, the mayor added.
Speaking at Tuesday’s meeting, deputy mayor for transport Heidi Alexander said the situation was “now critical”:
“We have to reach an agreement with the government on this in the next 48 hours,” she added.
The Times reported that any bailout was likely to come with conditions, such as the curtailment of projects such as the long-planned Bakerloo line extension.