Jorge Narezo Balzaretti

Shannon Dargan

March 4th, 2023

Transport for London (TfL) Governance and Funding

0 comments | 1 shares

Estimated reading time: 10 minutes

Jorge Narezo Balzaretti

Shannon Dargan

March 4th, 2023

Transport for London (TfL) Governance and Funding

0 comments | 1 shares

Estimated reading time: 10 minutes

Stephen Glaister CBE FICE FCGI
Professor Emeritus of Transport & Infrastructure
Imperial College London

In summary, the governance structures of TfL have at times been too complicated, but there are examples of successful public-private structures in the past. Linked to complex governance structures are issues of financing arrangements. Distinct from finance is the issue of funding. Depending on government funding undermines the independence of TfL/ the mayor. There are funding options that could avoid this including road use charging and an increased charge on council tax. Alongside more independent funding, there should be better structures to test the robustness of the mayor’s transport plans and spending.

We were delighted to welcome Professor Stephen Glaister to speak about “TfL Governance and Funding”. His vast professional experience includes having been a member of the Government’s first Advisory Committee on Trunk Road Assessment, Specialist Advisor to the Parliamentary Select Committee on Transport and the Department of Transport, he was a non-executive director of London Regional Transport. He is also a member of the London First Transport Initiative and a Board Member of Transport for London.

To start Professor Glaister highlighted the importance of understanding the conceptual differences between the terms ‘financing’ and ‘funding’. Funding is about who pays at the end, whilst financing has to do with lending and paying back money, a distinction that informed the rest of the presentation. TfL, as well as other transport systems, have to concentrate on how they fund the building and operation of their networks. In order to address this issue, it is important to know the difference between government and governance. While government is a group of people with the authority to govern, governance can be defined by asking: who is in control and what are the rules of the game?

Professor Glaister reviewed how the governance structure of TfL has changed over time. He identified the creation of three to five year contracts from 1984 for bus operating routes as one of the key successes, as this minimised the paperwork and allowed greater enforcement of the operational rules. Consequently, he showed, London’s unit costs are below the average by international standards and that this has been an unrecognised success. He contrasted this to how the Public Private Partnerships, created to operate the London Underground in 1998, were a great failure. Here he argues that the number of private companies involved (three), the length of the contracts (30 years) as well as the responsibilities from each side (the public sector was in charge of operating the trains whilst the private sector supplied the infrastructure) represented the perfect combination for an “interesting story of catastrophic failure”. He adds that because there was no proper management of the contracts, the governance under the Greater London Authority was confused and no one ever knew who was meant to be in charge. Further, there was no proper competition.

Turning to funding, TfL’s financial issues have escalated as the Department for Transportation has gradually decreased grants after a change in policy. The operating subsidies have been reduced, and then removed. As a result, the mayor started borrowing money, which amounted to about 700 million pounds per year. There was a crisis first, because of increasing debt to the point where they could not borrow anymore, and, second, because of Covid.

Professor Glaister then set out possible responses. It is not possible easily to reduce the cost base or raise fares. The domestic tax base warrants revisiting. Across the UK, the charge for transport on domestic residents is very low compared to other countries.

Other proposed recommendations included introducing a road usage charge, an increase in the VAT receipt either through a London supplement or slice (giving London a bigger proportion of the national total) on London transactions, or a government grant for major renewals and specific projects.

He argues that for London, simply receiving more grant from the central government is undesirable in terms of devolution. He proposed that the mayor should produce a transport strategy that focuses on funded delivery and that is subject to review by an independent advisory group to hold the mayor accountable for how the projects will be funded. This would avoid mayors producing a “shopping list,” as Professor Glaister puts it, without ever stating how the ideas will be funded.

He proposes a similar process to the regulated utilities and the Office of Rail and Road: There is a well-defined legal process that involves the government setting out a funded “shopping list” of things to be done for the next five years, with specified investments, liability requirements, etc. Under this model, the government must specify the funds available, the Office of Rail and Road, as an independent statutory body, assessing whether the proposals are efficient. They ask for example, how much a project should cost if the government is efficient? Whether the statement of funds match the requirements? If the answer to the latter question is “no,” the process cannot continue and the government must renegotiate.

Finally, he noted that all-too-often, the government stops maintaining assets, which then deteriorate becoming much more expensive to then bring back up to standard. Given the current funding crisis there is every chance of repeating this mistake by failing to keep the existing assets in decent condition.

About the author

Jorge Narezo Balzaretti

Jorge is a current student on the Msc Regional and Urban Planning Studies

Shannon Dargan

Shannon is a current student on the Msc Regional and Urban Planning Studies.

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