Financial Sustainability Plan

1 Financial Sustainability Plan11 January 20211 Contents Commissioner s Foreword 7 Executive Summary 81 Chapter 1: Strategic Context 8 2 Chapter 2: Impact of the pandemic and potential future scenarios 9 3 Chapter 3: Economic fundamentals of TfL business areas 12 4 Chapter 4: Becoming an economic and efficient operator and the public service obligation 16 5 Chapter 5: Achieving Financial Sustainability 17 6 Chapter 6: Bridging the gap 20 Context21 Chapter Summary21 TfL s vital role in London21 TfL and the London economy22 Benefits of London and TfL to the wider UK economy24 TfL s key role in supporting wider Government objectives27 Consequences of underinvestment and risks of increased congestion30 A critical period for transport and London and the wider UK economy30 of the pandemic and potential future scenarios32 Chapter Summary32 Pre-COVID-19 pandemic funding and financing position32 Impact of the coronavirus pandemic on demand and

2 revenue in 2020/2135 Scenarios for medium to long term demand and revenue37 Future scenarios for the Financial Sustainability gap41 fundamentals of TfL business areas51 Chapter Summary51 Buses and streets52 Rail, Tube and Elizabeth line59 Property and Land68 an economic and efficient operator and the public service obligation 73 Chapter Summary 73 Introduction 74 The current TfL funding model and the need for change 74 A clear set of objectives for structural reform 75 Creating enhanced statutory public service obligations 76 Conclusion 78 2 5.

3 Achieving Financial Sustainability 79 Chapter Summary 79 Service levels 79 Operating efficiencies 83 Pay, benefits and pensions 88 Prioritisation and efficiency of capital investment 89 Commercial development activities 93 Existing funding levers 95 Other potential funding sources 100 Debt, liquidity and reserves 106 6. Bridging the gap 111 Introduction 111 Target dates for implementation of recommendations 111 Next steps 114 Indicative timeline for future activity 115 3 Figures and Tables Figures Figure 1: Number of jobs supported by London Underground s supply chain and amount of funding generated by region 25 Figure 2: Government funding history (excluding Crossrail and one-off funding) 32 Figure 3: Debt profile 32 Figure 4.

4 TfL Group net cost of operations 2015/16 to 2024/25 (2019 Business Plan) 33 Figure 5: Impact of the coronavirus pandemic on demand levels across TfL services 35 Figure 6: Bus service operation costs per actual revenue vehicle hour 55 Figure 7: Indicative profile of zero emission bus transition programme 56 Figure 8: Indicative profile of zero emission bus transition programme alternative delivery 57 Figure 9: London Underground & DLR Recovery ratio 2018/19: international comparison 60 Figure 10: London Overground Recovery ratio 2018/19: international comparison 60 Figure 11: London Overground cost per revenue train km 63 Figure 12: Lost customer hours attributed to Rail defects by Line and Year 63 Figure 13: Operating Income and Asset Value Growth in the Housing Growth Plan: 68 Figure 14: Homes delivery from project start date 69 Figure 15: Net and Cumulative Net Capital Cost of Housing Growth Plan 69 Figure 16.

5 London Underground and bus proportion of variable costs over different time horizons 78 Figure 17: Comparison of TfL s funding arrangements to other urban transport authorities 103 Tables Table 1: TfL Financial Sustainability Plan scenarios 12 Table 2: TfL Group position for Decarbonise by 2030 13 Table 3: TfL's proposals for achieving Financial Sustainability 18 Table 4: TfL Group net cost of operations (2019 Business Plan) 33 Table 5: Impact on 2020/21 revenue compared to the expectations under the 2020/21 Budget 36 Table 6: Forecast of demand changes for rail and bus 37 Table 7: Comparison of operating income to 2029/30 39 Table 8: Long term capital planning scenarios 41 Table 9: Financial Sustainability under Decarbonise by 2030 scenario 45 Table 10: Financial Sustainability under Limited Recovery scenario 46 Table 11: Financial Sustainability under Managed Decline scenario 47 Table 12.

6 Financial Sustainability under Rapid Decline scenario 48 Table 13: Main sources of revenue as per GLA Budget 52 Table 14: Main elements of expenditure as per GLA Budget 52 Table 15: Buses & streets account for Decarbonise by 2030 net cost of operations 53 Table 16: Income source analysis 54 Table 17: Variable cost recovery 61 Table 18: Forecast savings and risk analysis 62 Table 19: Rail and Tube account for Decarbonise by 2030 net cost of operations 64 Table 20: Property and Land account for decarbonise by 2030 net cost of operations 66 Table 21: Forecast of demand changes for rail and bus in 2031 78 Table 22: Operating efficiencies identified in the 2021/22 GLA Budget 82 Table 23: Deliverability of operating efficiencies 83 Table 24: Strategic criteria for renewals and enhancements 87 4 Table 25: Renewals - breakdown by category - provisional 88 Table 26: Enhancements breakdown by category - provisional 88 Table 27.

7 Total Capital Programme Commitment Status provisional 89 Table 28: Overview of RUC schemes 96 Table 29: Greater London Boundary Charge 97 Table 30: S&P Criteria 105 Table 31: Indicative target dates for implementation of Financial Sustainability recommendations 109 5 Glossary BAU Business as Usual BRR Business Rates Retention BSOG Bus Service Operator Grant CAZ Central Activity Zone CBI Confederation of British Industry CCZ Congestion Charge Zone CIPFA Chartered Institute of Public Finance and Accountancy CPOS Compliance.

8 Policing and On Street DaR Dial-a-Ride DfT Department for Transport DLR Docklands Light Railway DVS Direct Vision Standard ECPL Earls Court Properties Limited EV Electric vehicle FTE Full-time equivalent GDP Gross Domestic Product GLA Greater London Authority HIF Housing Infrastructure/Innovations Fund HMT Her Majesty s Treasury HR Human Resources KAD Keolis Amey Docklands LEZ Low Emission Zone LU London Underground MHCLG Ministry of Housing, Communities and Local Government MoTiON Model of Travel in London MTS Mayor s Transport Strategy NPL Non-permanent labour ONS Office for National Statistics ORR Office of Rail and Road PCN Penalty Charge Notice PFI Private Finance Initiative PPP Public P rivate Partnership PTI Platform Train Interface PWLB Public Works Loan Board RAB Regulated Asset Based RCF Revolving Credit Facilities RIS Road Investment Strategy RP Road Period RUC Road User Charging SCADA Supervisory control and data acquisition SFA Step Free

9 Access SITS Surface Intelligent Transport Systems SHE Safety, Health and Environment TfL Transport for London TIES Transport Infrastructure Efficiency Strategy TLRN Transport for London Road Network 6 TOC Train Operating Companies TOL Tram Operations Limited TPH Taxi Private Hire TTLP TTL Properties Limited ULEX ULEZ Expansion 2021 ULEZ Ultra Low Emission Zone VAT Value-added tax VED Vehicle Excise Duty 4LM Four Lines Modernisation programme WLC Whole Life Cost 7 Commissioner s Foreword Transport for London (TfL) is one of the world s best known and most successful integrated transport authorities.

10 In just 20 years, TfL has gained global respect for its innovative and progressive approach to the identification of customer needs, delivery of high-quality service and use of mutually beneficial partnerships to maximise stakeholder and consumer value for money. The global coronavirus pandemic has brutally exposed the vulnerability of TfL s current funding model, specifically, its unusually high dependence on revenue generated through the fare box, notwithstanding the huge progress in recent years in driving down cost through careful Financial stewardship and progressive organisational change.