Board
Date: 20 March 2018
Item: Draft TfL Budget 2018/19
This paper will be considered in public
1 Summary 1.1 This paper seeks the approval of the draft TfL Budget 2018/19. 1.2 The members of the Finance Committee informally reviewed the financial summaries and analysis on 5 March 2018.
2 Recommendations 2.1 The Board is asked to: (a) approve the draft TfL Budget 2018/19; and (b) delegate to the Acting Chief Finance Officer the authority to make any editorial or other minor changes prior to its publication.
3 Background 3.1 The draft Budget 2018/19 sets out in detail the strategies outlined in the December 2017 Business Plan to deliver the Mayor’s plans for improving transport and reducing our operating costs in the financial year beginning 1 April 2018. 3.2 The document highlights the programmes and milestones that will see the most significant developments or progress over the next year. 3.3 The financial schedules, scorecard measures and key performance indicators are based on the forecast outturn position for 2017/18 as at period 11.
List of appendices to this report: Appendix 1: Draft TfL Budget 2018/19
List of background papers: None Contact Officer: Simon Kilonback, Managing Director Finance (Chief Finance Officer) Number: 020 3054 8941 Email: [email protected]
Document title over one or two lines
TransportWith the possibility offor a sub-heading London running Budgetover one or two 2018/19 lines Draft Draft Draft
About Transport for London (TfL) Contents Part of the Greater London Authority We are moving ahead with many of family led by Mayor of London Sadiq London’s most significant infrastructure Khan, we are the integrated transport projects, using transport to unlock authority responsible for delivering the growth. We are working with partners Mayor’s aims for transport. on major projects like Crossrail 2 and the Bakerloo line extension that will deliver We have a key role in shaping what the new homes and jobs London and life is like in London, helping to realise the UK need. We are in the final phases 4 Commissioner’s foreword 30 Underground the Mayor’s vision for a ‘City for All of completing the Elizabeth line which, Londoners’. We are committed to when it opens, will add 10 per cent to 6 Our scorecard 36 Elizabeth line creating a fairer, greener, healthier London’s rail capacity. and more prosperous city. The Mayor’s Transport Strategy sets a target for Supporting the delivery of high-density, 10 Budget at a glance 40 Buses 80 per cent of all journeys to be made mixed-use developments that are on foot, by cycle or using public planned around active and sustainable transport by 2041. To make this a reality, travel will ensure that London’s growth 12 Financial summary 46 Rail we prioritise health and the quality of is good growth. We also use our own people’s experience in everything we do. land to provide thousands of new affordable homes and our own supply 16 Debt and cash 52 Streets We manage the city’s red route strategic chain creates tens of thousands of jobs roads and, through collaboration with and apprenticeships across the country. the London boroughs, can help shape 18 Approach to forecasting 60 Other operations the character of all London’s streets. We are committed to being an employer These are the places where Londoners that is fully representative of the travel, work, shop and socialise. community we serve, where everyone 20 Financial trends 66 Commercial development Making them places for people to walk, can realise their potential. Our aim is cycle and spend time will reduce car to be a fully inclusive employer, valuing 22 Operational trends 70 Capital investment dependency and improve air quality, and celebrating the diversity of our revitalise town centres, boost businesses workforce to improve services for all and connect communities. Londoners. 26 Customer focus 74 Appendices
We run most of London’s public We are constantly working to improve transport services, including the the city for everyone. This means London Underground, London Buses, freezing fares so everyone can afford the Docklands Light Railway, London to use public transport, using data and Overground, TfL Rail, London Trams, technology to make services intuitive London River Services, London Dial-a- and easy to use, and doing all we can Ride, Victoria Coach Station, Santander to make streets and transport services Cycles and the Emirates Air Line. The accessible to all. We reinvest every quality and accessibility of these penny of our income to continually services is fundamental to Londoners’ improve transport networks for the quality of life. By improving and people who use them every day. expanding public transport, we can make people’s lives easier and increase the None of this would be possible without appeal of sustainable travel over private the support of boroughs, communities car use. and other partners who we work with to improve our services. We all need to pull together to deliver the Mayor’s Transport Strategy; by doing so we can create a better city as London grows. Transport for London Budget 3 Draft Draft
Commissioner’s foreword All our investment decisions are based on delivering the Mayor’s Transport Strategy.
The Mayor’s Transport Strategy has to our network of Quietways and Cycle This has helped us manage some of now been formally presented to the Superhighways. the headwinds we have faced from the London Assembly, after extensive public removal of the grant and lower than consultation. At the centre of this On the Tube, we plan to place an order forecast revenue. strategy is a bold vision for 80 per cent of for new trains on the Piccadilly line, and journeys to be made by walking, cycling begin switching on the first sections of We will continue this focus on cost and and public transport by 2041. the new automatic signalling system revenue in 2018/19 as we modernise our on the Circle, District, Hammersmith & business. This will put us on the way to As we work towards that goal, we will City and Metropolitan lines, which will generating an operating surplus for the make travel healthier, easier and more first improve reliability and then the first time in our history by 2021/22. affordable for everyone in London. frequency of train services. We will use our own land to create This Budget also reflects what we thousands of affordable homes and Next year we will bring land to market believe to be cautious income forecasts dozens of new developments. By that will deliver more than 3,000 given recent trends. Just like any other delivering new infrastructure, we will new homes, including a significant business, we will proactively manage any support thousands of jobs and bolster opportunity in Morden where we are variance to forecast. the city’s economic growth. working in partnership with the London Borough of Merton. This adds to the There are consequences from losing Our Business Plan, approved in 3,500 homes we have already brought to more than £700m a year in operational December 2017, sets out a fully funded market. We are committed to ensuring grant funding in the Government's 2015 five-year plan for delivering that strategy. that will take the most dangerous that 50 per cent of the homes built Spending Review. Despite driving record This 2018/19 Budget explains in detail what vehicles off our roads by 2020. across our portfolio will be affordable. efficiencies, we have had to suspend we will achieve in the first year of the our programme of proactive road Business Plan. Making London an even more attractive Government grant funding for the cost maintenance on both borough and our place in which to do business, to live and of operating London's transport network roads. We will continue to ensure our Safety is our top priority. This year, we to visit is also a core priority. The first has reduced significantly. From 2018/19, it routine road maintenance keeps them are again setting ourselves challenging section of the Elizabeth line will open will be more than £846m per year lower safe. It cannot be right that London is targets for reducing the number of through central London in December, than it was in 2015. denied access to the dedicated road injuries among our customers, staff and we intend to begin the first phase of funding that the rest of the country and suppliers. transforming Oxford Street, which will To help address this, the first thing I enjoys and we will continue to make the make the area a world-class space for did when I became Commissioner was case to Government to correct it. Every injury is unacceptable, and we are residents and visitors. initiate a wholesale review of our cost committed to the Vision Zero approach base and how we are organised. This in the Mayor’s Transport Strategy, which Londoners will see real evidence of management focus has produced real seeks to remove all death and serious the Healthy Streets Approach in action, results and, in 2016/17, we reduced our injury across all transport in London. with record levels of investment in the operating costs by £153m. We expect to This year we will, among other things, boroughs, major new street schemes reduce like-for-like costs again this year, begin to bring in new safety requirements beginning across the city, including in Old with operating costs £200m lower in bus contracts and introduce a Direct Street and at Walthamstow gyratory, new than Budget. Mike Brown MVO Vision Standard for heavy goods vehicles Low Emission Bus Zones, and extensions Commissioner Transport for London
4 Commissioner's foreword Transport for London Budget 5 Draft Draft
Our scorecard The measures in our scorecard are aligned with the objectives of the Mayor’s Transport Strategy
Our Budget and our scorecard, which we Therefore, the measures are directly use to track performance throughout the linked to the overall Mayor’s Transport financial year, go hand in hand. Strategy objective for 80 per cent of journeys to be made by walking, cycling The Mayor’s Transport Strategy or public transport by 2041, and the provides our overall strategic direction strategy’s three key themes of Healthy through to 2041. This feeds into our Streets and healthy people, a good public Business Plan, which is a fully funded transport experience, and new homes plan for how we will deliver the next five and jobs. years of the strategy. These are also assessed against the This Budget is our financial promise for four key organisational areas of Safety 2018/19 and details how we will deliver and Operations, Customers, People the first year of our Business Plan. and Financial. Each area has a 25 per cent weighting, reflecting their equal Approved by the TfL Board, the scorecard importance to our delivery for London. has been developed to provide a clear line of sight between the Mayor’s Transport Strategy, our Business Plan, our Budget and how we monitor and drive our performance.
The scorecard guides our people to focus on what is most important and what we need to do over the next twelve months to make sure we stay on course to deliver the Mayor’s Transport Strategy. It focuses on the critical success factors for the year ahead and is an objective method for tracking our performance.
Our scorecard is aligned to the objectives of the Mayor’s Transport Strategy
6 Our scorecard Transport for London Budget 7 Draft Draft
The weighting of each theme and category is shown in brackets in the scorecard.
Long-term objectives 2018/19 scorecard 2017/18 2018/19 Long-term objectives 2018/19 scorecard 2017/18 2018/19 Outcome Measure Forecast Target Category Outcome Measure Forecast Target Category
Healthy Streets and healthy people (18%) New homes and jobs (2.5%)
London’s transport Reduction in people killed or Transport investment The percentage of housing system will be seriously injured on the roads from 44.0 45.4 will unlock the delivery units we take to market in 52 50 safe and secure 2005-09 baseline (%) of new homes and jobs year that are affordable (%) Reduction in people killed or seriously injured on roads from Mode share (5%) 54.1 55.6 2005-09 baseline – incidents 80% of journeys will be 4 out of 4 involving buses (%) Sustainable mode Customers made by sustainable New elements (continued) share improvement 3 Injuries on the public modes in 2041 improve 11,928 11,683 transport network Safety and All Mayor's Transport Strategy themes (7.5%) London’s streets will be Operational improvements operations used more efficiently New tbc1 to sustainable travel (25%) All Mayor's Transport Deliver key investment and have less traffic 77 90 Strategy outcomes milestones (%) London’s streets will Number of London buses Open Elizabeth line central 3,500 6,050 N/A Dec 2018 be clean and green that are Euro VI compliant section on time
More Londoners will Average Healthy Streets scheme assessment New People (25%) travel actively 10% uplift2 A capable and engaged Workforce representativeness A good public transport experience (17%) workforce representative - all staff (%) 69.8 70.7 People of London - director/band 5 (%) 41.3 46.6 (25%) Journeys by public Tube excess journey time (minutes) 4.61 4.50 transport will be Inclusion index (%) New 46 fast and reliable Average bus speeds (mph) 9.3 9.2 Total engagement (%) 56 56
Public transport will Additional time to make New 9 Financial (25%) be accessible to all step-free journeys (minutes) Financial Customers Net operating surplus (£) £309m Budget We are prudent and (25%) Journeys by public Customer satisfaction – percentage (25%) cover our costs transport will of Londoners who agree we care 46 49 Investment programme (£) New Budget be pleasant about our customers (%)
1 This measure is currently being developed and a target will be identified by April 2018 2 10 per cent is based on the average uplift between the assessment score for the current street design and the score arising from the new design on our road intervention schemes of more than £200k 3 The four elements are an increase in public transport, cycling and walking journeys, and a decrease in general traffic levels
8 Our scorecard Transport for London Budget 9 Draft Draft
Budget at a glance
Sources of funds Facts and figures £9.8bn 6,050 975 Total sources of funds Euro VI buses trains running on our network as se of borrowing (hybrid and diesel) in wor ing apital ther assenger the fleet by the end the Elizabeth line rants and ash reserves in o e in o e of 2018/19 (from 3,500 comes into service £2.3bn £0.8bn £1.9bn £4.8bn in 2017/18) (from 940 in 2017/18)
626,000 people carried on London Overground on a typical 900 weekday in 2018/19 (from on-street residential 616,000 in 2017/18) electric charging points to be installed in 73% 27% 2018/19, with support spent on running spent renewing from the boroughs and and operating the and i proving the London councils networ every day networ through one of the largest apital invest ent progra es step-free access stations on the Underground in urope 78 network by the end of 2018/19 (from 74 in 2017/18)
Uses of funds Elizabeth 10.7million £9.8bn cycle hires in 2018/19 (from Total uses of funds line 10.4million in 2017/18) opens in December 2018 734km New capital Capital Operating of rail and Underground routes that we will operate investment renewals costs Financing in 2018/19 (from 680km in 2017/18 owing to the Elizabeth £2.1bn £0.5bn £6.7bn £0.5bn line opening)
10 Budget at a glance Transport for London Budget 11 Draft Draft
Financial summary
Operating account Affordable transport Operating costs are, therefore, broadly We have kept travel affordable by in line with the Business Plan, aside from Budget implementing the Mayor's policy of accounting treatment changes, with Year- variance to freezing all TfL fares and extending the some additional savings identified. The 2017/18 2018/19 on-year Business TfL Group (£m) forecast Budget variance Plan Hopper fare to enable multiple bus and increase from 2017/18 is also driven by tram journeys within an hour. Overall new operating costs when we open the Passenger income 4,653 4,774 3% 0% passenger income is expected to increase Elizabeth line central section. Our cost Other operating income 732 883 21% 5% above 2017/18 levels, as new services reduction programme has helped soften come into operation on the Elizabeth line the impact of the highest inflation levels Total operating income 5,385 5,657 5% 0% in December 2018. Bus services are now since 2011. more reliable than ever and bus speeds General grant 228 - -100% 0% are improving. Capital renewals Business rates 854 947 11% 2% Our operating account includes capital Operating costs renewal expenditure, which is included to Other revenue grants 79 69 -13% 25% We are already making good progress in illustrate our ongoing day-to-day cost of Total income 6,546 6,673 2% 1% turning an operating deficit into a surplus operating and maintaining our network. by 2021/22. In 2018/19, we will realise Operating cost (6,237) (6,661) 7% 1% sustainable savings of £95m by changing The significant reduction in general Net operating surplus 309 12 -96% 0% the size and shape of our operating grant funding means that we will model, save £159m by modernising the suspend our programme of proactive Capital renewals (544) (494) -9% 0% London Underground, including realising capital renewals on the road network in Net cost of operations before financing (235) (482) 105% 0% savings from exiting a private partnership 2018/19, although we will ensure safety is maintenance contract, and save £13m in maintained. We will continue to look for Net financing costs (442) (486) 10% 0% head office costs. new and sustainable funding sources for London's roads. Net cost of operations (677) (968) 43% 0% Working with our suppliers, we will also make significant savings from maximising Other capital renewals will remain in line commercial value in our bus, rail and with Business Plan, including refurbishing The 2018/19 Budget sets out in detail It is largely the same as was published technology contracts. This includes lifts and escalators, replacing track and how we will deliver the first year of in the December 2017 Business Plan, saving £65m by reviewing, retendering modernising traffic signals. This will our five-year Business Plan objective incorporating additional business rates and renegotiating bus contracts. These ensure our assets are maintained in a to turn a net cost of operations into a funding from the Mayor, allocated savings will put us on track to achieve good state of repair. growing surplus that will contribute to to increasing borough transport £1.2bn of annual operating cost savings continued investment in improving our improvements and investment in bus by 2022/23. transport network. driver facilities. This will be the first year that we receive It balances to the net operating surplus no general grant funding for operations of £12m, as in the Business Plan. from central Government. This is reflected in the year-on-year increase in net cost of operations.
12 Financial summary Transport for London Budget 13 Draft Draft
Capital account Capital investment priorities in 2018/19 Deep Tube Upgrade programme This programme will increase capacity Budget Healthy Streets on the Bakerloo, Central, Piccadilly and Year- variance to Using the Healthy Streets Approach as Waterloo & City lines. In 2018/19, we will 2017/18 2018/19 on-year Business TfL Group (£m) forecast Budget variance Plan set out in the Mayor’s Transport Strategy, award the initial rolling stock contract for we will change our streets to make them the Piccadilly line, and prepare contracts New capital investment (1,442) (1,644) 14% 9% work better for people to walk, cycle for the new signalling systems. Crossrail (1,496) (435) -71% -5% and use public transport. These changes will result in a more efficient transport Northern line extension Total capital expenditure (2,938) (2,079) -29% 5% network with a lower environmental We are creating a twin-tunnelled impact, support the economy and help extension from Kennington to Battersea Financed by: people to live more active, healthier Power Station, via a new station at Nine Investment grant 960 976 2% 0% lives. We will continue to improve Elms. This will be a catalyst for the cycling – such as Cycle Superhighways, regeneration of the Vauxhall Nine Elms Property and asset receipts 93 705 658% -19% Mini-Hollands and Quietways – and start Battersea Opportunity Area. In 2018/19, Borrowing 621 802 29% 0% transforming key locations, including we will complete passage works at Highbury Corner, Old Street and, subject Kennington station and begin fitting out Crossrail funding sources 140 324 131% 4% to a final decision by Westminster City Nine Elms station. Other capital grants 189 311 65% 46% Council, Oxford Street. Major stations upgrades Total 2,003 3,118 56% -2% Air quality and environment We are upgrading Bank, Bond Street, Net capital account (935) 1,039 -211% -14% We have a programme of measures Tottenham Court Road and Victoria targeted at all vehicles driving in London stations. In 2018/19, Bank Bloomberg to tackle the impact on air quality and station (Waterloo & City line) entrance Total capital investment climate change. We will prepare to launch will be opened and the northern ticket including renewals (3,482) (2,573) -26% 4% the Ultra Low Emission Zone (ULEZ) on hall at Victoria station, including step- 8 April 2019 in central London and deliver free access, will open. Tottenham Court four more Low Emission Bus Zones. Road station is near completion with Capital expenditure Crossrail construction investment step-free access installed in early 2018. The Budget reflects the latest work declines year on year as the project Surface assets schedules, with some phasing changes comes to an end, reflecting some re- This programme covers safety and Four Lines Modernisation to the Business Plan. We have received phasing since the Business Plan. Other reliability of highway, traffic, bus, S-Stock train roll-out additional capital grant, including funding capital investment reflects the latest coach, and river assets. In 2018/19, Modernisation work on the Circle, to improve the Emergency Services work schedules. we will replace the life-expired District, Hammersmith & City and Network as part of a national upgrade Woolwich ferries with modern, Metropolitan lines will continue, plan, led and financed by the Home cleaner vessels. We will also complete with upgrades to service depots and Office. The investment grant funding the renewal of major structures, associated infrastructure. We will also goes up in line as expected and as such as Highbury Corner bridge. upgrade the Automatic Train Control published in our Business Plan. (ATC) systems. In 2018/19, we will continue to develop the ATC systems and prepare for a new control centre at Hammersmith, which will control the entire sub-surface network.
14 Financial summary Transport for London Budget 15 Draft Draft
Debt and cash
Total value of debt (£m) Cash balances (£m)