One of the odd things to come out of the massive fare increase on buses and tubes two days back is the meme that it’s partly justified by filling in some unspecified (£700m is often quoted by the highly intriguing Twittering Boris cheerleader Einy Shah who spends her evenings giving me dubious advice about how to research stuff I’m perfectly capable of doing myself, thanks) black hole in the TfL accounts left by Evil Ken and his communist profligates with their suspicious enthusiasm for low fares.  From this week’s reannouncement:

The need to raise fares resulted from the huge financial pressures on TfL caused by the collapse of former Tube maintenance company Metronet, a recession-linked fall in Tube ridership and the fares policy of the former administration.

Or back when they were first announced in October:

Mayor Boris Johnson yesterday announced a new fares package to ensure the future of critical improvements and the protection of frontline services on the transport network in the face of huge financial pressures on Transport for London (TfL).

These include the collapse of Metronet, a recession-linked fall in Tube ridership, and the former administration’s fares policy

Or, in the November 2009 TfL stakeholder’s newsletter:

Mayor of London Boris Johnson has announced a fares package for 2010 to ensure vital improvements to Londons transport system continue to be delivered, and frontline services are protected, in the face of huge financial pressures on TfL

These include the collapse of Metronet and a recession-linked fall in Tube ridership.

What’s missing there, then?  It’s strange how this stuff about the previous administration gets inserted by the PR department along with an explanation of what ‘TfL’ stands for, but I suppose the 14.8 full time employees in the GLA press office (brutally slashed down from, er, 15 previously) have to do something.

Anyway, what’s interesting to me in the latest performance report [PDF] is this:

London Underground: During the quarter, passenger demand on the Underground continued to fall as a result of the economic climate. Underground passengers made 236.0 million journeys, 13.0 million (5.2 per cent) lower than last year and 6.6 million (2.7 per cent) lower than target.

London Buses: Demand for bus services also declined during the quarter. Bus passengers made 511.5 , 2.3 million (0.4 per cent) lower than the previous year and 10.4 million (2.0 per cent) million journeys below target.

The recession effect there, in black and white.  What about the financial effect of this?

Financial performance: In the year to date, operating income was £56 million lower than budget…

Cripes.  Better jack the fares up.  Oh, wait:

… offset by operating expenditure of £108 million lower than budget and group items expenditure of £14 million lower than budget.

Hmm?

Capital income was £35 million higher than budget and capital expenditure after third party reimbursements and overprogramming was £44 million lower than budget.

Now, I’m not a financial expert so feel free to correct me, but if TfL’s managing to cut its operating and capital expenditure faster than its income is falling due to the recession surely it has scope to *cut* fares to try and sustain ridership, or at least freeze them?  What’s the benefit of pricing people off the system when you’re actually ahead of the curve anyway?  Perhaps the real reason why there’s an apparent PR attempt to deflect attention from this is the last section:

Efficiencies: The scope and ambition of TfL’s savings programme has now more than doubled since last year and is set out in the recently published Business Plan, with £1.3bn in savings now assumed 2011/12, and more than £5bn in total over the period of the Plan. Targets for 2009/10 have now been aligned to the published plan.  Savings of £255 million are now forecast to be delivered in 2009/10 against a target of £259 million.  In quarter two, savings of £65 million (year to date) have been delivered relating to Operating Cost Review (OCR) and Continuous Savings Exercise (CSE) initiatives.

That suggests to me that there are indeed three pressures on TfL here, but not the ones in the press releases:

  • Recession income shortfalls
  • Metronet administration costs
  • Boris trying to knock billions of pounds off the budget while simultaneously pushing projects with highly dubious business cases.

Oops.  Better blame the guy who’s been out of office nearly two years, really.

P.S. While being Einy’d to death earlier, I had cause to look up the ridership figures for LU over the last few Performance Reports:

  • 2005/6 – 971.1m
  • 2006/7 – 1014.3m
  • 2007/8 – 1072.5m
  • 2008/9 – 1089.5m
  • 2009/10 – 1052.7m (estimated)

So this year’s estimated total is the worst Underground ridership figures since, er, 2006/7.  Perspective time.  In financial terms TfL are estimating £83m less Tube fare income over the year than the forecast, but when compared to last year’s fare income we’re only £4m down.  Meanwhile, on the buses the forecast is a shortfall of £13m against the budget but an actual increase of £37m since last year, which makes the bus fare hike even less comprehensible.

P.P.S. Boris is fond of trumpeting river transport as the wave of the future.  In the current year this Mayoral backing results in a forecast of 3,738,000 trips annually, or 10% of the forecast yearly decline in tube travel alone.  This in a year when the river service has often been the only way to get east due to DLR and Jubilee closures.

P.P.P.S.

The operating expenditure shortfalls break down thus:

  • LU – £50m so far in 2009/10, estimated £43m in total
  • Surface – £45m so far in 2009/10, estimated £85m in total, much of it from scrapping the QIC2 bus quality programme and cutting £23m from the bus network (fuel costs, staff costs are included in this, indicating the the bus network has got cheaper to run due to the recession lowering inflation).  Also £13m is knocked off for scaling back speed camera enforcement.  However, there’s £10m extra on the Cycle Hire scheme ‘following appointment of the contractor’.
  • Rail – £23m so far in 2009/10, estimated £28m in total, due to things like Oyster on NR being cheaper than expected and the late delivery of Class 378s.
  • Group Directorates are unique in spending more on operations, £10m so far, £20m more in total, because of ‘unrealised savings’ in Finance.  However, Planning has underspent, partly because of project delays to things like the WEZ removal, which must therefore have an actual up-front cost associated with it that has to be paid for somehow.

The capital expenditure shortfalls break down as follows:

  • LU – £15m less so far, £48m for the year
  • Surface – £14m less so far, £33m for the year
  • Rail – £60 more so far, £58m for the year
  • Crossrail – £86m less so far, £35m for the year
  • Group Directorates – £13m less so far, £1m for the year
  • Capital *income* is £35m higher so far, £33m estimate for the year.  This includes the flogging of East Thames buses for £5m.

P.P.P.P.S. That balance sheet in full:

Transport for London Group Balance Sheet at end of Quarter 2
£m
Variance to
Budget
Fixed Assets – (higher) / lower than budget 18
Stocks, Debtors and Payments in Advance – (higher) / lower than budget 143
Cash – (higher) / lower than budget (967)
Creditors and Receipts in Advance-higher / (lower) than budget 52
Prudential Borrowings – higher / (lower) than budget 684
Deferred Capital Grant – higher / (lower) than budget (166)
Provisions – higher / (lower) than budget 1
Total Net Assets – (higher) / lower than budget (235)

So, when Boris was pleading Ken-induced poverty, TfL had nearly a billion pounds more cash than it expected, due to taking advantage of favourable interest rates to borrow more and because of the aforementioned underspends.  The expected extra cash floating around at year end is £238m, for a total stash of north of £1.3bn.  Now, where’s that black hole?

 
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