Shapps places Gilligan and Moriarty on TfL board

PM and Chancellor to have oversight of Transport for London finance review

A review of Transport for London’s finances will be overseen to the Prime Minister and Chancellor and involve Andrew Gilligan, the PM’s transport advisor, and Clare Moriarty, a former senior Department for Transport civil servant.

The review will be led by the DfT, with support provided by external advisors, DfT’s new special representatives to the TfL board and TfL. The review will report to Transport Secretary Grant Shapps with oversight from Prime Minister Boris Johnson, a former Mayor of London, and Chancellor of the Exchequer Rishi Sunak.

The extraordinary funding and financing agreement reached between the government, the Mayor and TfL included a number of conditions, including a review of its finances.

Grant Shapps wrote to Parliament said: “To help avoid such drastic action in the future work has been underway on the government-led review of TfL’s future financial position and structure, and we have now published the Terms of Reference for that review.”

Shapps has appointed of the two government special representatives to attend the TfL board; Andrew Gilligan and Clare Moriarty. The pair will also attend TfL’s Finance and Programme Investment Committees. “These positions required a specific skillset and have therefore been made through direct Ministerial Appointment,” said Shapps.

Moriarty is a former civil servant and has been Permanent Secretary for the Department for Exiting the European Union (DExEU)) and for the Department for Environment, Food and Rural Affairs (Defra), and was previously Director General, Rail Executive and Director General for Corporate Services in the Department for Transport.

Gilligan advises the Prime Minister on transport matters and worked closely with TfL for three years as former Cycling Commissioner for London.

The Department for Transport has published the terms of reference for its review of TfL's finances:

Inputs to the review will include:

• financial modelling of multiple COVID-19 recovery scenarios against TfL budget for remainder of Business Plan period. DfT, TfL and external advisors will work together to agree the parameters of these scenarios, recognising the high levels of uncertainty
• review of TfL obligations and functions, including statutory and contractual
• review of current operating model and alternative potential models, and assessment of financial sustainability of TfL’s current model pre-COVID-19
• summary of all current and planned capital spending
• review of the balance sheet and financing structure, including financing policy, of TfL
• review of the current fiscal support arrangements and income streams
• review of international and cross modal benchmarks in considering all of the above, and comparison of TfL to these, in particular for operating models (comparison to include commentary on mitigating factors, such as levels of public funding)
• financial assessment of the relative impact of different options on financial forecasts.

The DfT said that Mayor and TfL have been consulted on the terms of reference and will provide views and options into the review. TfL will provide information as reasonably requested by DfT and external advisors as per the scope and methodology.

Scope of review
The review will report with detailed options to the Secretary of State of the choices that could be made to achieve the aims of the review, and deliverability implications of these choices.

The review will consider impacts of the options presented on wider government objectives, including maximising housing supply. While Crossrail is out of scope of the review it will be considered through other commitments made in the Agreement.

Changes to the government’s tax or spending plans are not part of the scope of this review, although the government will consider evidence from the review as appropriate.

There will be three levels to the review, and each level will build upon the results of the preceding stages.

Level 1
Evidence and clear understanding of TfL’s current financial position. To include:

• review of TfL’s current obligations and functions, including statutory and contractual
• review of the current income streams and commentary of how these have been impacted by the COVID-19 pandemic.

Level 2
Evidence and options to strengthen TfL’s financial position over the remainder of the current (2020/21) and next financial year (2021/22). To include:

• development and assessment of options for short-term revenue maximisation and assessment of the potential for raising more non-fare based revenue and commercial income, including TfL’s housing development pipeline
• identification of opportunities to deliver further efficiencies in the short term in relation to operating costs
• review of the approach to prioritising capital spending, including but not limited to asset maintenance and enhancement for rolling stock, network infrastructure and TfL estate.

Level 3
Evidence and options for more fundamental changes that could put TfL in a fully sustainable financial position by the end of the current business plan period (2024/25). To include:

• development and assessment of medium-term options, and identification of potential longer-term options, for revenue maximisation and assessment of the potential for raising more fare and non-fare based income, including TfL’s housing development pipeline, revenue yield choices over time, and changes to road user charging schemes as foreshadowed in the Mayor’s Transport Strategy and further measures
• the identification of opportunities to deliver further efficiencies in the medium term in relation to operating costs, including but not limited to, workforce modernisation, and exploring the feasibility of extending driverless operation from the DLR to other lines which are already automatic
• review of the approach to prioritising capital spending for the remainder of the business plan period and to evaluate long-term sustainability, including, but not limited to, asset maintenance and enhancement for existing and future rolling stock, network infrastructure and TfL estate
• review of the current operating model and whether there are any opportunities that alternative operating models could bring over the longer term, including consideration of structures and governance
• review of the balance sheet and financing structure of TfL, including financing policy, debt sustainability, cash reserves, rating agency engagement, and CapEx vs OpEx choices.