40CT Transport Ldn5%

TIDM40CT

RNS Number : 4098A

Transport For London

01 June 2021

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.

Transport for London ("TfL")

1 June 2021

Government support package

TfL announces that a funding and financing package (the "Funding Package") has been agreed between TfL and the Department for Transport ("DfT") to support transport services in London for the period from 29 May 2021 to 11 December 2021 (the "2021 Funding Period"). The Funding Package will contribute towards TfL's revenue loss due to reduced passenger numbers using TfL services as a result of the pandemic.

The Funding Package comprises an Extraordinary Support Grant of GBP1.08bn payable under section 101 of Greater London Authority Act 1999, paid in six instalments commencing on 7 June 2021. In addition, the Funding Package recognises that there are material factors beyond TfL's control that give rise to a high level of uncertainty in forecasting passenger revenue during the 2021 Funding Period, particularly as Government guidance on dealing with the pandemic develops. Therefore, the Government will "top up" TfL's revenues with additional grant payments if they are lower than a pre-determined passenger revenue forecast. Conversely, if TfL's revenues are higher than the pre-determined passenger revenue forecast, TfL will be required to repay that excess at the end of the 2021 Funding Period. This provides TfL with certainty that it will receive income equivalent to GBP1.78bn in passenger revenue over the 2021 Funding Period in addition to the Extraordinary Support Grant of GBP1.08bn. This pre-determined passenger revenue scenario is broadly consistent with the revenue forecast in the TfL Budget for 2021/22, published in March 2021.

As part of the Funding Package, TfL commits to deliver savings and/or new income of at least GBP300m in 2021/22. However, when taking into account the amount of funding available to TfL in the Funding Package, there remains a funding shortfall compared with the TfL Budget for 2020/21. This means that TfL will, in practice, need to deliver savings and/or new income of around GBP900m over the course of the year. This is expected to be met through a combination of measures, including utilising cash reserves, additional non-passenger income and reduced or deferred costs. These additional savings are incremental to TfL's existing efficiency plans.

The Funding Package assumes that TfL will maintain useable cash reserves of GBP1.2bn throughout and at the end of the 2021 Funding Period, in line with TfL's current liquidity policy.

Over the course of the 2021 Funding Period, TfL will be supported by the DfT in implementing a programme of work that would allow TfL to reach a financially sustainable position as soon as possible, with a target of no later than April 2023 and a declining trajectory in the meantime of temporary Government grant support. TfL will also be required to make progress on longer term reforms which are likely to be implemented beyond 2023.

The programme of work will include the following initiatives (among others):

   --    identification and consultation on new or increased income sources for the value of between GBP0.5bn-GBP1.0bn per annum from 2023; 

-- a joint review of demand to inform future service level requirements and potential changes from 2022/23 onwards;

-- preparation of a revised medium-term capital investment programme, which will be confirmed with Government through the 2021 Spending Review;

-- a review of TfL's pension scheme and potential reform options with the aim of moving TfL's Pension Fund into a financially sustainable position;

-- a DfT led joint programme on the implementation of Driverless Trains on the London Underground;

   --    a TfL plan for housing delivery through a dedicated commercial property company; and 

-- a joint review of options for longer term reform of the funding framework for TfL, including governance and oversight.

For further information, please contact:

Transport for London

5 Endeavour Square

London E20 1JN

Email: GroupTreasury@tfl.gov.uk

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June 01, 2021 04:32 ET (08:32 GMT)

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