Peter Hendy’s Statement on the Spending Review


Setting our future direction – Outcome of the Comprehensive Spending Review

I am writing to brief you on the outcome of the Comprehensive Spending Review (CSR), which was announced by the Chancellor in Parliament this afternoon, as it affects Transport for London (TfL).

The headlines are that vital investment in London’s transport infrastructure and frontline services have been secured during one of the most turbulent economic times in living memory. Crossrail will go ahead, the Tube will be upgraded and we will be able to maintain our existing bus services.

However, as I said in my previous messages, we are facing a significant cut in our funding due to the steps the Government is taking to reduce the budget deficit.

Our funding settlement

After negotiations, the overall funding provided to us by the Department for Transport (DfT) is to be reduced by £2.17 billion over the four years to 2014/15.

This represents a 21 per cent real terms reduction in our DfT funding in 2014/15 compared with the current year.

This reduction has, in part, been covered by higher than anticipated fare revenue from ridership on the Tube, bus and rail network, which has recovered more strongly than we assumed last year. Our funding also comes from fares, borrowing and other sources such as advertising and commercial partnerships, but the reduction in grant from the DfT still represents a significant eight per cent reduction in our overall budget.

So while the settlement represents a very good outcome for us in protecting all of our top transport priorities, it also means that we must take further action to absorb the impact of this cut.

Implications for TfL

A high level summary of what our new funding position enables us to continue to deliver and how we intend to deal with the funding cut is attached. Given that the settlement has only just been confirmed, we now need to work through the implications for our activities in detail as part of our business planning.

I understand, of course, that you will be concerned about what this means for jobs and the projects you are working on.

All of this needs careful assessment as part of that business planning process and will be influenced by the outcome of Project Horizon, which is taking a root and branch look at how TfL operates and is structured. Our aim remains to complete Horizon by April 2011, including a detailed plan for implementation.

However, it is already clear that we will be doing less in a number of areas as a result of absorbing these cuts and that, in any case, we must deliver efficiencies to protect investment and our frontline services. This means that further reductions in the number of jobs at TfL are likely to predominantly affect management, administrative and support functions while we protect Tube and bus mileage and the quality of our frontline services.

I will, of course, communicate more details as we work through the detailed business plan and as the outcomes of Project Horizon emerge.

The Chief Officers and I are committed to ensuring that staff and trades unions are consulted and change is implemented fairly.

Looking forward

Today’s announcements are the culmination of months of hard negotiations and it is good news that we have been able to secure funding for our top transport priorities. We have an enormous programme of delivery ahead of us, and we need to continue to ensure that every penny is well spent and that we deliver value for money for fare and tax payers.

Thank you for all your hard work and commitment.

Peter Hendy

TfL’s funding settlement

Delivering a 21st century transport system

Transport for London (TfL)’s funding settlement means that the Mayor and TfL can continue to deliver our top transport priorities, including:

– The upgrade of the Tube, including major congestion relief schemes at Victoria, Bond Street, Tottenham Court Road, Paddington and Bank, and building Crossrail. Together these will add 30 per cent additional capacity to the transport network, boosting the UK economy and improving the reliability of services. Funding beyond 2014/15 has been guaranteed for Tube upgrades and Crossrail.

– London’s extensive and accessible bus network, of such social and economic importance particularly in outer London, is protected.

– TfL’s commitments for the London 2012 Games will be delivered.

– Barclays Cycle Hire will be extended before the 2012 Games and all 12 Barclays Cycle Superhighways will be delivered by 2015.

– The Western Extension of the Congestion Charging zone will be removed by Christmas.

– The East London Line extension to Clapham Junction will go ahead and will be delivered by the end of 2012.

– Fare increases for 2011 will be maintained at the level announced last year – RPI plus two per cent – while free travel and concessions for Londoners are protected.

Meeting the challenges of the new funding settlement

We already have a massive programme of savings and efficiencies of over £5bn, but further measures to deliver savings and efficiencies are required. TfL will meet the challenge of this new funding settlement in broad terms as follows:

– Project Horizon will ensure the organisation is as efficient as possible and fit for the challenges of managing and operating London’s transport for the next ten years.

– Following a review undertaken by Crossrail management, over £1bn in savings to Crossrail construction will be delivered. A more efficient construction timetable will mean the Crossrail central section now being completed in 2018 and a phased introduction of the other sections and stations.

– For many months now, London Underground (LU) has been looking to make significant savings as it focuses on the core priorities of a reliable service, the line upgrades and schemes to relieve congestion at major stations. The end of the PPP means LU can look for synergies across the line upgrades to deliver them more efficiently and with less disruption to Londoners, for example, between the planned Piccadilly and Metropolitan, Circle, District and Hammersmith & City line upgrades. Through a combination of these measures and of further paring back cosmetic works at stations and deferral of non-essential civil works, over £300 million will be saved over the period.

– Some areas of expenditure will be reduced, and we will focus on core priorities. TfL must also look at ways of increasing revenue and delivering further efficiencies. The following measures will therefore be introduced, resulting in over £300 million over the period:

– The funding provided to boroughs for small scale projects will be reduced to reflect the new profile of the general grant we receive from the DfT.

– As less funding will be available, some areas such as walking and road safety campaigns and smarter travel initiatives will be scaled back. For those that remain, we will deliver in a more efficient way and will be seeking to partner with other organisations to seek sponsorships and other funding for such initiatives.

– TfL will reduce road maintenance spend and investment on the TfL road network, but seek to preserve the state of good repair of the roads through greater operational efficiency.

– It remains the Mayor’s vision that London is Europe’s leading city for electric vehicles, but we will seek to replace a TfL funding reduction with partnerships and alliances with manufacturers and others.

– Charging for parking on the Transport for London Road Network, currently generally free

– TfL has been working hard to realise savings and efficiencies and, at the same time, the London economy has proved to be remarkably resilient to the economic downturn. Ridership on Tube, rail and bus services has bounced back with much greater strength than was originally assumed. This demonstrates that it is London that is leading the UK back into growth, and this must be harnessed for the benefit of the country as a whole. The combination of these efficiencies, which have already been identified and are being implemented, as well as stronger fare revenue, means that TfL’s Business Plan will be boosted by an additional £800 million over the period.This accounts for well over a third of the reduction in our DfT funding.

– As previously proposed and now consulted upon, the Congestion Charge will also increase to £10, or £9 if paid through Auto Pay, from 4 January 2011. The Mayor will also keep under review the effectiveness of the charge on congestion in central London.

Written by John Bull
John Bull is the Editor of London Reconnections. A transport journalist and historian, his writing often focuses on the political or strategic challenges facing London's transport network and beyond.