First savings found to fund Mayor’s fares freeze on TfL services

08 June 2016

First savings found to fund Mayor’s fares freeze on TfL services

First savings found to fund Mayor’s fares freeze on TfL services

  • Mayor and TfL Commissioner announce major savings programme at TfL including organisational restructuring, cuts to expensive agency staff and better value procurement
  • Further action underway to identify savings to fund the TfL fares freeze for the full Mayoral term
  • Fares freeze will not impact investment on transport infrastructure
  • Freeze will benefit millions of Londoners who travel on the London Underground, TfL rail services, buses and trams

The Mayor of London, Sadiq Khan, and London’s Transport Commissioner, Mike Brown, today announced a major efficiency savings programme to enable fares on Transport for London services to be frozen until 2020 without impacting vital investment on the transport network.

On the instruction of the Mayor, TfL is carrying out a root-and-branch review of its business to eliminate unnecessary duplication in its operations, obtain greater value from its vast procurement activity, significantly cut reliance on expensive agency staff and stop IT projects which only deliver limited benefits. This has already identified savings to cover the first two years of the fares freeze on TfL services through:

  • A fundamental review of TfL’s organisational structure to review management layers and eliminate wasteful duplication across all its functions, including bringing together engineering operations and IT departments (estimated saving £20-25m).
     
  • Improved procurement and renegotiation of contracts from suppliers and other third-party spending which accounts for over two thirds of TfL's total budget (estimated saving £50-60m).
     
  • The reprioritisation and consolidation of IT projects which delivered relatively low benefits (estimated saving £20-30m).
     
  • Freezing recruitment for all but the most essential roles and significantly cutting the most expensive of the existing circa 3,000 agency contractors currently engaged by TfL.  A reduction of over 100 IT contractors alone will save around £2m.

The value of a fares freeze – until May 2020 – is estimated by TfL to be around £640 million over four years. To tie in with this, the base pay of the Commissioner and other senior staff (around 70 in all) will be frozen for the full Mayoral term.  The Mayor will personally review any future appointments with a base salary over £100,000 a year and has ordered a review of free travel for the nominees of staff earning a base salary over £100,000 a year.

TfL will now work with the Mayor and TfL Board to deliver a new, balanced ‘Transport Plan for London’ covering his full term that grips costs, will not impact on the delivery of TfL's huge £2 billion-a-year investment programme and looks for further ways in which to raise other revenue. This plan will deliver the Mayor's manifesto commitments and include taking forward Crossrail 2, upgrades of London Underground lines, more investment in cycling and improving London's road network. This plan will be published in the autumn.

The fares freeze on TfL services will put money back into the pockets of Londoners. An average household will save around £200 over the four years. For example, regular users of the bus and tram 7-day pass will save around £400 over the four year term.  In 2020, a bus journey will still cost £1.50 and a Tube journey from Finsbury Park to Oxford Circus will still cost £2.90 in the peak and £2.40 at all other times.

The Mayor of London, Sadiq Khan, said: “Londoners currently pay some of the highest public transport fares anywhere in the world. My fares freeze on TfL services will make life easier for millions of people and will ensure that London becomes a more affordable city for all.

"To deliver this, I am working with London’s Transport Commissioner, Mike Brown, on a root-and-branch savings and efficiencies review of TfL, cutting duplication and waste while continuing to improve the transport network for everyone.”

London’s Transport Commissioner, Mike Brown, said: “The Mayor has instructed us to ensure that TfL is the most efficient and effective organisation it can be. By changing the way we are organised, by driving efficiency in every part of our business and by looking for further ways in which to generate more non-fares revenue, we will deliver a transport network that continues to meet the needs of a rapidly growing London while keeping transport affordable.”

Earlier this month, the Mayor announced that his other key fares pledge – the one-hour “Hopper” bus fare – will be introduced this September. The Hopper fare will automatically apply to anyone who uses 'pay as you go' on Oyster cards or contactless payment cards to make an additional bus or tram journey for free within one hour of when they first touched in.

For the vast majority of customers, this will mean an end to having to pay two fares when changing bus routes within an hour and will benefit Londoners on lower incomes who often rely on the bus network to get around. The ability to make unlimited bus transfers within an hour will be delivered by the end of 2018, but with an aim of doing so sooner.

Notes to editors

  • The four year fares freeze on TfL services will cover all single journeys made on London Underground, buses, London Overground, TfL Rail, Docklands Light Railway, London Tramlink and the Emirates Air Line.
     
  • As TfL assumes responsibility for more suburban rail services, particularly in south London, these fares will also be covered by the freeze. The freeze will not currently cover suburban rail fares charged by non-TfL operators. Santander Cycles fares will be frozen for the Mayoralty as well.
     
  • While the Mayor only has the power to set fares on TfL services only, nearly everyone who travels into London will benefit from the freeze.
     
  • Every month at least seven million customers will benefit all the time as they do not reach ‘caps’ on pay as you go fares or do not use Travelcards where the fare is set by the Department for Transport according to national Government fares policy. Each month a further four million customers will benefit from the freeze whenever they use TfL services for part of their journeys.
     
  • The calculation of the value of the fares freeze is determined by forecasts of a number of variables, including inflation (where a basket of official forecasts have been used) and passenger growth.
     
  • Using official forecasts for inflation (1.9 per cent in 2016 and 3.5 per cent thereafter) and passenger growth set out in the previous Mayor's TfL Business Plan, it is estimated that the value of freezing TfL fares over the four year period of the Mayoralty (until May 2020) will be up to £640m.
     
  • However, this can only ever be an estimate.  The actual impact will depend on what actually happens to inflation and passenger growth. In recent years, inflation has tended to come in lower than official forecasts.