London needs emergency bailout to keep Tube and bus services running, Sadiq Khan warns

Grant Shapps hints at fare rises for capital's transport users as price of government rescue deal

Mayor of London Sadiq Khan speaks (Reuters)

London Underground, train and bus users look set for a hike in fares as the price of a government rescue deal to save the network from financial collapse as a result of the coronavirus crisis.

London mayor Sadiq Khan has warned that public transport in the capital will have to be stripped back to a bare-bones service if the government does not step in urgently with an emergency rescue package to see it through the coronavirus crisis.

He said that Thursday was "the last day" for a deal to avoid severe cuts to trains and buses, as Transport for London’s £2.1bn cash reserve was “running out” as a result of massively reduced income from fares, advertising and the congestion charge during lockdown.

As the clock ticked down to Mr Khan's deadline, transport secretary Grant Shapps said he was "optimistic" of getting a deal and "confident that in the short term TFL Underground and buses - and indeed trains and buses around the country - will continue to run". He urged the mayor to return the network - hugely pared back in recent weeks - to 100 per cent operations to cope with the return of passengers under social distancing conditions.

But he left big question marks hanging over longer term support, telling the daily Downing Street press conference: "We don't know what would happen if this lasted for very much longer and went on for more than a few months."

And he signalled that he expected London transport users to shoulder some of the cost through ticket prices, saying: “On higher fares, it is very important I think in providing a rescue package for TfL that the London mayor can work with that we don’t end up in a situation where people from outside the capital are unfairly carrying the burden.”

Mr Khan, who last year promised a freeze on fares in 2020, set out the financial problems facing TFL in an interview on LBC radio: “Over the last two months we’ve lost more than 90 per cent of our fares and advertising is down and so is the congestion charge.

“So we’ve been spending £600m a month, paying for services and getting nothing back from our customers, or very little. Although we had at the start of this crisis a cash reserve of north of £2.1bn, that is running out and we’re required by law to keep two month’s worth of money in reserve to pay for services.”

Mr Khan said he had been involved in weeks of negotiations with the government, but added: “It’s really hard getting support from them.

“Being blunt, today is the last day. Unless the government today gives us confirmation of the grant that we need then the consequences could be quite severe and ramifications for all of us will be huge.

“So I’m hoping the government today agrees on a grant for TfL to help us do our bit [to stop the virus spreading] but if they don’t I’m very concerned about the consequences going forward.”

Asked what will happen if no bailout funds are made available, Mr Khan said: “The only way to balance the books is to cut services. So ironically at a time when the government’s wanting us to increase services, ramp up services to get into the recovery phase, we may be required to cut services because the government is failing to give us the grant support we desperately need.”

He added: "We’d have to reduce the buses we provide, reduce the Tube service we provide to save money. That’s how we save money – by reducing the service we provide.

“We provide London Overground, the trams, the Tubes, the buses and to reduce the money we spend, we reduce the service we provide.”

Passenger numbers have reduced dramatically due to the coronavirus lockdown (PA)

Mr Khan said: “It beggars belief that we have been negotiating for five, six, seven weeks now and the government is still delaying agreeing the grant. There’s no other way that we can pay for public transport, with there being so few passengers.

“So I’m unclear why the government is waiting until the eleventh hour to reach a deal and if we don’t reach a deal today then it is really bad, not just for people who want to use public transport, but the businesses the government claims they’re so desperate to support will suffer hugely if we don’t get this deal today.”

If the organisation is unable to produce a balanced budget, the chief financial officer for TfL has a legal duty to issue a Section 114 Notice. This will bar the organisation from committing to any spending beyond statutory obligations.

This would reduce the capital’s public transport network to a bare-bones service. But it is not expected to happen overnight, as the TfL board would meet first to decide the next steps.

Labour's shadow transport secretary Jim McMahon said the problems with the Tube were "a mess of ministers' own making".

"It’s extremely worrying that despite repeated requests, the government is doing a papering-over-the-cracks style rescue package at the eleventh hour to protect Transport for London in the short term," said Mr McMahon.

A government spokesperson said: “We are in advanced negotiations to agree a funding and financing package which will support Transport for London. Clearly, we will not prejudice those discussions by providing details of those negotiations at this time.

“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.”