Five year funding settlement for Transport for London
- The 1999 Greater London Authority Act established the Mayor of London who is now responsible for London's transport strategy. Transport for London (TfL) is the executive body which runs most of London's transport and reports to the Mayor. As well as strategy TfL are directly responsible for London's strategic roads, it's bus services, the London Underground system, the Docklands Light Railway, Croydon Tramlink, taxi regulation and river services.
- TfL currently has an income of approximately £5 billion per year. Of this slightly over 50% comes from fares and congestion charge income, council tax precept and other sources. The rest comes from a central government block grant known as the GLA Transport Grant.
- Following the 2004 spending review in July 2004, the Secretary of State announced a five-year funding settlement for TfL (2005/06 to 2009/10) setting out the level of central government grant over the period. Planning and investment in transport infrastructure is a long term business and this settlement has allowed TfL to plan and prioritise its investment priorities for the rest of the decade with certainty about government funding levels.
- The settlement was announced ahead of other transport spending review allocations in order to meet the timetable required for London's Olympic bid. TfL are required to provide guarantees to the International Olympic Committee that the planned transport schemes in the bid document would be delivered. TfL needed to know what level of resources would be available in order to provide those guarantees in time to meet the bid deadline.
- London's Transport Commissioner Bob Kiley has said that the settlement is a "groundbreaking agreement" which will allow TfL to "make a step change in its approach to investment in London's transport infrastructure". As a result TfL have now been able to publish a financially balanced five-year business plan consisting of a £22bn operating plan and a £10bn capital investment programme [lhttp://www.tfl.gov.uk/tfl/reports-businessplan05.shtml]. The business plan includes proposals to borrow £3 billion for investment under the new prudential borrowing regime.
- TfL are planning to take forward a number of major transport schemes, particularly in support of London's Olympic bid and Thames Gateway, including:
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- East London Line Extension (phase one);
- DLR enhancements - extension to Woolwich Arsenal, 3-car upgrade, conversion of the North London Line between Canning Town and Stratford;
- East London and Greenwich Waterfront bus transits;
- Major congestion relief works at Covent Garden, Holloway Road, Kings Cross and Vauxhall London Underground stations.
- Details of the settlement were set out in an exchange of letters [See attached] between Robert Devereux (DfT Director General for Roads, Regional and Local Transport) and Jay Walder (TfL Managing Director of Finance and Strategy). This includes details of the amount of expected grant for each of the 5 years.
- Approximately 50% of all TfL spending relates to London Underground. Although this funding is included in the 5-year settlement the actual amounts payable are subject to an earlier agreement between TfL and the Department for Transport relating to the tube PPP.
- In December 2002 and April 2003, London Underground Ltd signed 30-year PPP (Public Private Partnership) contracts with two companies (Tube Lines and Metronet) to provide maintenance and renewal for the Underground infrastructure (trains, track, stations and signalling). With an investment of £16 billion over the first 15 years of the contract, the PPP will reverse the long term under-investment on the Tube and the system will be modernised over the course of the contract. Tube capacity will increase by 12 per cent by 2012 and by 15 per cent a few yea-rs later and 249 stations will be improved, modernised or refurbished. There will be new or refurbished trains on all lines by 2020. [See London Underground modernisation].
- The Government has given an unprecedented long-term commitment to funding the Tube - averaging more than £1 billion up to 2010-11. In December 2002, before the London Underground PPP contracts were signed, David Rowlands (then Director General of Railways in DfT) wrote to Bob Kiley (Commissioner of Transport for London) setting out the Government's long term funding package (2002/03 to 2009/10) in support of Tube modernisation.
- David Rowlands subsequently wrote to Jay Walder (TfL Managing Director of Finance and Strategy) in February 2003 setting out the Secretary of State's intentions in relation to the funding of London Underground, how he would review the GLA transport grant in advance of the 2004 spending review and his intended approach at subsequent spending reviews. This agreement still stands and remains part of the current 5-year funding settlement.
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