London transport faces £1.7 billion funding gap

By staff

The London transport network is facing one of its biggest financial challenges yet, with a potential £1.7billion funding gap by 2018, the London Assembly has warned.

The Assembly’s budget and performance committee said likely negative inflation in July 2009 will mean the mayor will have to either freeze or reduce fares in 2010 in line with the formula he committed himself to last year.

Reductions in passenger numbers mean Transport for London (TfL) is already facing a shortfall in fares income of as much as £112 million in 2009/10 and a fares freeze will add to the problem.

John Biggs, chair of the London Assembly budget and performance committee, said: “Depending on the length and severity of the recession, the next few years will be very challenging for the mayor and Transport for London. Finding ways to plug the gap that do not impact on services or place a large financial burden on fare payers will be difficult.

“The mayor is not required to consult with Londoners about the fares, but we feel it is essential that he does so. Londoners need to know what the options are, especially since they will have to bear the burden of any increase.”

Depending on the length of the recession and the speed of recovery, the committee estimated the loss of income could spiral up to £1.7 billion by 2018.

The report says the funding problems will leave the mayor and TfL with difficult decisions to make.

Analysts expect a combination of increased fares well above the rate of inflation, reduced services, mass-cancelling of improvements and a desperate search for further efficiency savings.