Capacity Enhancement Projects (Supplementary) [17]

Session date: 
December 6, 2006
Question By: 
Tony Arbour
Organisation: 
GLA Conservatives
Asked Of: 
Peter Hendy (Commissioner, Transport for London)

Question

All of that is entirely dependant on the goodwill of Government. At the end of the day, you are going to have to seek to find the funds yourself. There are three alternatives which you set out in Transport 2025.

There is the option of increasing fares, and I would like you to set out precisely what your proposals are for increasing fares over the period because you indicate that you can keep down the increase in fares over the period to an increase in the Retail Price Index (RPI) but, as I have indicated, for you to meet all the projects which you think are desirable that is not nearly going to cover the costs. I want to find out from you what Plan B is; if the Government is not going to cover that cost, how are you going to raid the fare box?

The second thing that you have only just touched upon for raising money is increasing your borrowing but, as you rightly say, the cost of the borrowing has to be again reflected in the fare increases which you are going to have to levy to cover the cost.

The other option is the most interesting one of all. You talk about innovative sources of funding such as the business rate, which you just mentioned now, and land value capture. I would be glad if you would explain, proportionately, how much of the money is going to come from those three sources?

Answer

Answer for Capacity Enhancement Projects (Supplementary) [17]

Answer for Capacity Enhancement Projects (Supplementary) [17]

Answered By: 
Peter Hendy (Commissioner, Transport for London)

As far as fares go, you correctly noted what the 20 year outlook assumed in terms of fares growth. Now, as you know, fares are not determined by TfL. The Act reserves the power to determine of fares to the Mayor. He said that fares are high at the moment and it is not realistic to expect them to contribute significant additional income in the long term without impacting on social inclusion or mode share. I think that is why we have made that assumption in this Plan; it is not realistic to suppose that you can just keep jacking fares up, and you can see what the result of doing that is on the national railway network when commercial train operators acting commercially try so to do.

In terms of borrowing, I think there is a natural limit, and the natural limit to it is the commitment that borrowing makes on the long term repayment of the debt and the interest payments. This Plan is not suggesting that there is a large, further increase in borrowing.

The references to other ways of raising money are actually all references which are being looked at by the Lyons Inquiry into local government. That is why, not only does this Plan have within it Crossrail and the PPP, which are clearly subjects, as I have already said, which we expect to be dealt with on a different and ring fenced basis, but my understanding is that is why the Secretary of State is reserving decisions on funding Crossrail until the Lyons Inquiry is reported, because the Lyons Inquiry is about to what extent there are innovative and different ways of raising funding.

The point that you are actually getting at is that if there is not sufficient funding to do all this Plan, you will not be able to do all of it. As you will read in it, if that is the case, and if the population still keeps increasing, two things happen; one is that the network does not merely stay the same in capacity, in particular if there is not enough funding to pay for its capital renewal, it actually reduces in efficiency. As you will have seen as Councillor Coleman referred to in relation to the Northern Line this morning, if the signalling is clapped out and you do not replace it, it breaks down, and you cannot run such a good service. So we believe there is a very strong argument for the sorts of levels of expenditure we are talking about.