What we know about the DfT’s capital funding offer to TfL

The Department for Transport’s (DfT) offer of a £3.6bn capital funding settlement for Transport for London (TfL) is for a period of 20 months and is filled with “wide ranging and complex conditions” according to papers from last week’s emergency meeting of the TfL board.The DfT has provided over £5bn in bailout cash for TfL since the start of the pandemic to ensure that London’s public transport can continue operating on a day-to-day basis. However, TfL is also in need of a capital funding settlement to help it pay for more long-term costs, such as maintaining and upgrading its infrastructure and pushing ahead with bigger projects such as Crossrail 2 and the Bakerloo line extension.An offer of a £3.6bn capital funding agreement from the DfT arrived late on the evening of Friday 22 July following on from long-running negotiations.TfL has not hastened to accept it, and deliberation has now stretched longer than three weeks.In fact, the board papers reveal that the offer is so complex that TfL has not received a final draft of the settlement, so a recommendation to the board cannot yet be made. The board papers say that TfL sent back some revisions to the initial draft funding settlement but, at the time of the meeting, had not had a response.In the interim, the board papers say that the offer has been “subject to intense discussions with Her Majesty’s Government (HMG) officials over the intervening period”.It adds: “TfL officers have been engaged in multiple collaborative clarification discussions with HMG officials. There have also been detailed discussions on multiple elements of the proposal, some of which are still ongoing.”The 20-month offer would last until April 2024, the end of the 2023-24 financial year. The DfT is likely to want TfL to return to self-sufficiency and require no further funding from central government after this point.Central government removed funding from TfL about five years ago, and prior to the pandemic the transport operator was managing to survive on its own revenue. However, speaking at NCE ’s Future of Rail conference, TfL commissioner Andy Byford said “in good times, that model just about worked”.The lack of funding from central government makes TfL is unlike any other major transport operator in the world, but Byford would like to return to a place where cash is provided by the government on a long-term basis similar to Network Rail’s Control Periods and National Highways’ Road Investment Strategy periods. He said he would ideally like a 10-year settlement, but would settle for five or even three.The 20-month settlement offer on the table is the equivalent of £2.16bn per year. Transport secretary Grant Shapps stated that the settlement “matches the Mayor’s own spending plans from 2019”, but the reality is certainly more complex.The mayor’s TfL budget for 2020-21, published in December 2019, said that TfL would spend £2.7bn on major projects in the financial year, including the Elizabeth line. This was to be followed by £1.95 capital funding for 2021-22, and there was to be £1.9bn spent on major projects in each of the financial years 2022-23 and 2023-24.On the surface this would suggest the offer from the DfT is sufficient for TfL to pick up its plans from 2022 onwards. However, without having had capital funds to spend in the last two and a half years, TfL has missed out on investment in its infrastructure. The DfT has provided cash to continue working on schemes that were in-progress before the pandemic, most notably the Elizabeth line, but billions of pounds of expected investment has not been possible, leaving TfL years behind schedule on some major operations.For example, the mayor’s 2020-21 budget outlined £191M of capital funds to be spent on modernising the Circle, District, Hammersmith & City and Metropolitan London Underground lines. This has not been able to happen.Instead, the infrastrcuture has begun to degrade. TfL has repeatedly said that without reaching a capital funding agreement, it will have to enter a period of managed decline. This will see services reduced and assets falling into disrepair.If an agreement is reached, immediate priority will be renewing the assets that have degraded, and retroactive upgrades and maintenance will account for a significant chunk out of the offer from the DfT.Byford has also warned that infrastructure including (but not limited to) Rotherhithe Tunnel, the A40 Westway and Gallows Corner Flyover are currently subject to special measures that are just about keeping them safe to use. “If we can’t maintain them as safe structures, there’s no question we will put people’s safety at risk – we will take them out of service,” he said.Byford also commented on other projects that have stalled due to the lack of capital funding. “What’s a nonsense is that we are building brand new Piccadilly line trains [but] at the moment we do not have the funding for the signalling in the envelope,” he said. “So we will end up with a farcical situation of brand new trains operating over time-expired fixed block signalling – it’s crazy.”In terms of long-discussed capacity upgrades, he said: “Camden Town, Holborn, all those other crowded locations for now would have to go on ice.”On top of the capital funding agreement, TfL is looking for a final £1.2bn revenue agreement to see it through the 2022-23 financial year.Mott MacDonald global railways & transit leader Chris Dulake commented: “I have no doubt that Andy Byford is factually correct in the public statements that he’s made and issues that he raises. Engineering-led decision making should be trusted when managing safety critical infrastructure investment.“Asset maintenance is not as exciting as major project delivery however delivering a state of good repair and enhancing asset performance improve our network efficiency and reliability. In a sustainable low-carbon economy we should focus investment on efficiency and availability of existing assets before the construction of new ones.”Like what you’ve read?