Transport for London (TfL) operates one of the largest urban transport networks in the world, as well as being responsible for the strategic road network in the capital. TfL is a major investor in transport infrastructure in the UK, with the £18bn Elizabeth Line (Crossrail) and £1bn Northern Line extension being amongst the most high profile projects, especially with the delays and cost-overruns both have experienced.
As illustrated by the #ICAEWchartoftheweek, TfL incurred expenditure of £8.0bn in the year ended 31 March 2019, comprising £6.3bn on operations, £1.0bn in depreciation and £0.7bn on other costs. Operating revenues amounted to £5.7bn, which was supplemented by £1.8bn in revenue grants from its parent organisation, the Greater London Authority (GLA), together with £1.2bn in capital grants, the majority of which also came from the GLA.
The tube, train and tram operations together generated a net £0.3bn positive contribution before depreciation and other costs, but this was offset by negative contributions of more than £0.6bn from bus services, £0.2bn from road spending (in excess of congestion and other road charges), and £0.1bn from other operational activities.
Not shown in the chart is £3.6bn of capital investment by TfL during the year. This included £1.4bn on Crossrail, £0.7bn on other major projects, £1.0bn in new capital investment across the tube, bus and road networks (including new rolling stock) and £0.4bn in capital renewals. This was funded through a combination of £1.5bn of asset sales, £1.2bn in capital grants, £0.7bn in new borrowing and £0.2bn from internal resources.
At 31 March 2019, TfL had net assets of £26.9bn, comprising £46.6bn of assets and £19.7bn in liabilities. This included £11.7bn of debt accumulated by TfL over the last decade or so as it has invested in Crossrail and in upgrading the tube, train and tram networks across the capital.
With TfL close to having ‘maxed out’ its borrowing capacity, the GLA plans to borrow a total of £1.3bn to fund the cost overruns on Crossrail, to be repaid from London’s business rate supplement and community infrastructure levies.
Similar to most urban transport networks around the world, TfL continues to rely on taxpayer support for its operations as well as its capital programmes. In London, funding is principally through local business taxation, but with ambitions to continue to expand public transport in the capital with (for example) Crossrail 2, the GLA is looking for new sources of funding. This could include greater devolution of tax raising powers, a topical subject for the debate about public finances in the UK.