Transport for London: funding

What makes up TfL’s funding?

TfL is funded from five main sources:

• Fares income;
• Other income, including advertising income, property rental and income from the Congestion Charge;
• Grant funding from the DfT and Greater London Authority (GLA);
• Crossrail funding (from a combination of sources, including grant from the DfT, GLA funding financed through the Crossrail Business Rate Supplement, the Community Infrastructure Levy and developers’ contributions); and
• Borrowing and cash movements

How much has its funding changed since 2010?

Over the period 2009/10 to 2014/15, TfL income from the DfT fell by more than a third. Over the same period, income from other sources rose by 40%

What does TfL spend on different modes of transport?

Road transport spending is aggregated, as it is impossible to quantify what proportion of spending for e.g. upgraded roads should be allocated to each mode of road transport (motor vehicles, bicycles, etc.).

TfL has committed to spending £913m on cycling specific projects by 2020/21. The 2014/15 budget anticipated a total spend of £107m on cycling.

How will the 2015 Spending Review affect TfL?

In the Spending Review the Government said it would phase out the resource grant made to TfL (which represents 6% of TfL’s annual budget) and support over £11bn of capital investments in London transport. It said that the reduction would save £700m in 2019-20, “which could be achieved through further efficiency savings by TfL, or through generating additional income from the 5,700 acres of land TfL owns in London”. It also said it would provide TfL with “additional financial flexibility, and over time will consider transferring the funding for the TfL Capital Grant as part of the Business Rate Retention reforms”. [para 2.90]

In evidence to the London Assembly Transport Committee on 10 December the TfL Commissioner, Mike Brown, said that the capital settlement amounts to approximately £1.7bn per year, which will be spent on road improvements, rail modernisation (including signalling) and cycling infrastructure (Superhighways). From 2019 TfL’s objective is to cover all operational costs through non-DfT grant sources of income: this has been planned for some time, TfL has already taken 15% of its costs out of the business in recent years. He admitted that the revenue grant has been cut faster than anticipated, amounting to a £2.8bn cut over the Business Plan period. In terms of future financial flexibility, TfL is in conversation with the Treasury about how to invest in infrastructure using devolved Business Rates; making the case that the London portion of Vehicle Excise Duty should be devolved to pay for TfL road maintenance (existing road income streams are insufficient to cover costs); and that Stamp Duty should be shared with City Hall to pay for transport to new housing developments. All this would reduce TfL’s direct dependency on DfT grant funding.

How are other major transport systems funded?

Paris: Roughly 40% of the Ile de France region’s public transport operating revenues come from the ‘versement transport’ – a dedicated transport tax levied on employers and based on payroll mass; farebox revenues account for another 40%. Disbursements are contractually set between the regional transport authority (STIF) and public transport operators. Some new infrastructure paid for by a re-allocation of existing tax-based revenue streams (e.g. tax on office space).

Berlin: Income from 4 main sources: farebox; advertisements and retail rental income; ‘compensation payments’ by the federal state(s) (rules for payment are laid down in the transport contracts between the operators and the state(s)); and special grants/investment schemes for infrastructure and (partly) vehicles.

New York City: Federal, state and city funding; the MTA is funded by a petroleum business tax (PBT) which is levied on any company that produces, refines, or imports petroleum for use in the state of New York, a New York MTA Corporate Tax Surcharge, a 0.25% sales tax in the New York City region, and a Long Lines tax. 

Further reading

Public Transport, New York State Public Transit Funding [accessed 10 December 2015]

TfL, How we are funded [accessed 10 December 2015]

Road cc, “What does the Comprehensive Spending Review say about cycling?”, 25 November 2015

HMT, Spending Review and Autumn Statement 2015, Cm 9162, 25 November 2015

Wall Street Journal, “New York City, State Reach Deal on Transit-Projects Funding”, 10 October 2015

HC Library briefing paper, Transport 2015 (CBP7177), 14 May 2015

TfL Budget 2014/2015, March 2014

China Council for International Cooperation on Environment and Development, Financing Public Transport in Germany Part C: Case Study Berlin, November 2013

International Transport Forum, Funding Urban Public Transport: Case Study Compendium, May 2013

Mayor of London/TfL, The Mayor’s Vision for Cycling in London, March 2013

Gühnemann, A (2009) Current Practice in Funding of Urban Transport: The Case of Germany (Unpublished)

HC Library briefing paper, Transport in London (RP08-36), 21 April 2008