LondonUnlocked

Research & Stats | TfL accounts breakdown

LondonUnlockedEditor

From ConservativeHome, Cllr Phil Taylor has posted an exhaustive breakdown of the holes in TfL's finances. I repost the entire article below, which is well worth your time. The issues raised from this article are ones which LondonUnlocked wishes to see the incumbent Mayor, and challengers for the job, address in the coming months.

At the end of July Transport for London's (TfL’s) Annual Report and Accounts was published without fanfare on the their website. TfL was formed, along with the GLA and the London Mayor, by the 1999 GLA Act and is in charge of all public transport in London except for mainline rail services. In July 2003 London Underground, the Tube, became a part of TfL. TfL's 2003 figures were restated to include the Tube so we now have 5 years worth of comparable figures to pore over, an audit trail that makes it increasingly hard for the Mayor to hide the bodies. In this article I try to unearth them.

Subsidy

The complaints about London's public transport are many and loud. It is way too expensive, the Tube is overcrowded and dilapidated, buses are vandalised with drivers who often don't drive well and are unable to control the behaviour of hordes of young people travelling for free and adults who refuse to pay. At the same time the system is massively subsidised. The scale of this subsidy is quite shocking. In the last five years London's public transport system has swallowed £12 billion of external support.

The amount of subsidy that TfL has spent over the last five years is simply awesome. The main source of this funding is the Treasury, which provide both revenue and capital grants. There are some other minor sources of grants plus a small contribution from the GLA precept although the Mayor has been giving TfL less and less cash each year. It is only £12 million per annum now. The idea that chancellor Alistair Darling is going to keep sending this wave of money to London in the face of a tight Comprehensive Spending Review in 2008 is a little unlikely so a crunch will come unless Darling decides that London's votes are worth the price.

The Mayor does not talk much about this subsidy but then he almost never talks about the cost of anything unless he is forced to. He talks about his historic 5 year funding deal with the Government and the extra buses he has bought and Tube renovation projects. But the idea that this subsidy is funding capital spending is largely a myth. Pretty much £8 billion of the £12 billion of subsidies have gone in supporting the running costs of TfL leaving only a third of the cash available for capital projects.

Costs too high, income too low

TfL has a structural deficit. For four years running TfL has wasted £1.6 billion each year in subsidising its continuing operations. Although the Mayor has made us all pay much more for our travel over the last four years with revenue up 53% across the organisation most of this progress has been squandered in rising costs, up 46%. It is particularly noteworthy that staff costs have risen 52% in four years and much of this increase has been driven by an explosion of highly paid managers. 450 earned over £50,000 in 2004 a number that more than trebled to 1,411 in 2007.

With the buses the Mayor claims a success. More people use the buses. Yes, he is right, bus ridership is up 23% in the four years. Great. Only costs leapt by 64%. So in spite of ramping up bus fares horribly the Mayor has seen cost per journey increase faster than revenue per journey leading to increasing subsidy. The bottom line with the buses is that TfL have a consistent record of losing 30p or more for every bus journey. Just to be clear an operating loss of 30p per bus journey and the capital costs of the system have to be paid for on top of that.

What is quite glaring is that way too many people are not paying the stated fares, the headline cash fare is £2 - probably as many as half of all journeys do not generate a fare. It is easy to see the way out of this pickle. It is quite obvious from the numbers. In addition to controlling bus costs TfL needs to make sure that it collects £1 every time someone gets on to a bus. Doh!

The Tube is looking a little healthier with cost per journey actually falling in the last 3 years. Could it be that the PPPs that the Mayor rails against have actually delivered cost control in the area of operating costs even if the capital programmes have gone off track? In 2006/7 it still cost TfL 55p every time someone jumped on a Tube so there is still massive scope to improve here. Just to be clear again an operating loss of 55p per Tube journey and the capital costs of the system have to be paid for on top of that.

Again it is clear that way too many people are not paying the stated fares, the headline cash fare is £4 on the Tube – how many of these journeys do not generate a fare? Again all TfL have to do is actually collect £2.10 every time someone gets on a Tube and it would make an operating profit.

As I have written elsewhere the Mayor has taken £930 million off Londoners for the Congestion Charge and spent all but £14 million of it on out of control set up and running costs.

Culture of let them ride and waste

The big picture at TfL is that on the one hand too many people get to ride for free and on the other costs are out of control. Put to one side older people and the disabled whose fares are paid for by ordinary council taxpayers via their local authorities who fund the Freedom Pass. What about all the GLA, Metropolitan Police, TfL, London Underground and bus company employees and their partners who ride for free? What about all the tailgating Tube riders and bendy bus back door riders? You can see from TfL's own revenue per journey figures that the fare you pay is not paid by a good proportion of your fellow passengers. The Mayor is happy to buy votes with these free rides and staff don't feel there is any relationship between their job security and actually collecting cash from passengers.

You have got to wonder whether Darling will want to keep bailing TfL out. It has comprehensively lost control of costs across its whole operation. Although he might feel the need to support a Labour London Mayor it is hard to see how TfL can be reformed by just letting it burn £1.6 billion a year. The Mayor is embarrassed by these numbers, which is why TfL let them slip out quietly during the summer holidays. Three calls to the TfL press office have failed to get an answer as to why there is no press release to go with the glossy document. That is simply because the document is embarrassing and it underlines the Mayor's unsuitability to run any enterprise let alone a £5 billion a year transport enterprise on which all Londoners depend.

Note all figures in this article are taken from the last four TfL Annual Report and Statement of accounts.