TfL’s funding context
1.3 The coronavirus pandemic in March 2020 had a catastrophic impact on TfL’s finances and exposed TfL’s funding model, which had been in place since 2015 following the withdrawal of the operating grant, as one of being highly reliant on fare revenues.
1.4 Coronavirus-related government support to TfL culminated with the August 2022 Funding Settlement which ended on 31 March 2024. In December 2023, government awarded TfL £250m of funding for the 2024-25 financial year to enable TfL to continue to deliver its current capital programme and its committed major capital projects, prioritising the Piccadilly Line Upgrade Phase 1. On 14 June 2024 TfL was awarded £220.5m by the government in relation to ten additional Elizabeth line trains, with £77.2m provided in the 2024-25 financial year.
1.5 In the Autumn Budget 2024, published on 30 October 2024, an award of £485m of capital funding for 2025-26 was made as part of Phase 1 of the Spending Review to enable TfL to continue to deliver its current capital programme and its committed major capital projects. This was confirmed in a funding settlement letter to the Mayor on the same day. A copy of this funding settlement and earlier agreements can be found on TfL’s website. In addition to this funding, TfL will continue to apply for funding streams for which it is eligible for, including Major Road Network Fund and the Public Sector Decarbonisation Scheme
1.6 The 30 October 2024 funding settlement letter confirmed the government’s understanding of “the importance of long-term funding certainty to enable investment in critical upgrades to major capital projects” and stated that the Department for Transport (DfT) would “continue to work with TfL with the aim to place it on a long-term financially sustainable footing as part of Phase 2 of the Spending Review”. A long-term capital funding settlement is critical for TfL to plan and deliver its major capital projects effectively and efficiently. Therefore, providing a long-term capital funding settlement to TfL in Phase 2 of the Spending Review would 6 support TfL in delivering efficiencies and allow the award of contracts which will, in many cases, support jobs across the UK. This would bring TfL in-line with the capital funding arrangements for Network Rail, National Highways and other major city regions across the country.
1.7 TfL is now working with the DfT to develop its case for Phase 2 of the Spending Review, which demonstrates how capital investment in TfL can support the government’s missions to kick start economic growth across the country, make Britain a clean energy superpower and break down barriers to opportunity.
1.8 With Phase 2 of the Spending Review just beginning, and the uncertainty over its capital funding beyond 2025-26, TfL has not produced its own medium-term business plan this year. For this budget submission, TfL has completed a focused update on 2025-26, with a lighter touch approach to the years 2026-27 and beyond, retaining key investment assumptions made in the 2024 TfL Business Plan. A more comprehensive update will be made in autumn 2025 following the outcome of Phase 2 of the Spending Review in spring 2025.
1.9 As TfL is obliged to prepare a budget that is balanced over both the short and medium term, TfL has developed its financial plans for the period from 1 April 2025 to ensure that TfL continues to be financially sustainable.