I suspect that if there had been a prize for guessing the first publicly owned institution to fail because of the coronavirus crisis few would have chosen Transport for London (TfL) as the prime candidate. But with the power of hindsight it was always going to be in trouble.
With 90% of people not travelling and TfL now being funded almost entirely by fares and advertising, and there being a continuing need to supply transport services for those who have had to continue to travel to get to work in places like hospitals, care homes and the government daily news conference press centre, it was simply bound to hit a wall sooner or later. It just happens to have been sooner.
But what the government is doing to it is indicative of its economic incompetence.
The upside is that it has been told there can be a bailout.
Thereafter nothing makes sense.
Fir example, there will be substantial conditions attached. Which is odd, because EasyJet did not get any. Nor have any of the one million businesses now furloughing staff had conditions attached. And the bounce back and other loans seem to be remarkably condition free. And yet TfL gets them.
TfL have also got to put up fares. That can simply be described as a tax increase on London to pay for coronavirus.
And the bailout money is being provided as a loan, not a grant. So it will have to be repaid. Which means that there will be more fare rises in future for an event that was beyond anyone's control and from which no one gained.
So the question is, why is this happening?
Obviously, first of all to punish London for electing Sadiq Khan and not a Tory who ran a nastily racist campaign to be mayor. That's the overwhelming reason.
But then there's, deep down, a level of incomprehension of how the economy works amongst the Tories in office that explains the rest.
They do not realise that losses do not indicate a capacity to repay: they represent lost capital that needs replacing, and not with more liabilities. TfL needed grants and not loans. But it will not get them.
And thereafter, Tories don't understand that fare increases right now are inflationary: which is not what we need.
And they don't realise that they behave like tax increases by taking disposable income out of the economy, which is again the last thing that we need right now.
And nor do they appreciate that this move simply increases inequality, because it is those on lower income who travel most on TfL, and travel furthest too because the cheapest housing is further out.
All of that passes them by.
And the reason? That's their paranoia about deficits. If they call this debt it does not go on the deficit and that's all that matters to them. That real people might suffer? Who cares about that? Not ministers who never use the tube. The books will be easier to balance and that's the real issue of concern to ministers.
Watch out all other public services, then: this is the bailout you're going to get too. So expect loans to the NHS, schools and others: all to be repaid out of future budgets, and quite impossibly. Because that way the Tories can push all of this into the future when they hope that they wont be in office to have to deal with it.
The coronavirus crisis is real. What we do not need is a government intent on dragging its economic consequences on for as long as possible. But it is now very clear that this is what we've got.
You really could not make up this scale of incompetence. We just have to witness it instead.
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I’m sorry but this is going to go on all the way to the next election which is so far into the future that the country will be a diseased totally trashed wasteland by the time it comes around. Even without covid-19 it looked depressing but we are enroute for a dystopia the like of which none of us have ever witnessed. So a big thank you to all of those ex-labour voters who were gullible enough to believe Mr Blobby despite what they and their parents had suffered under the Blessed Margaret.
Tories don’t understand that fare increases right now are inflationary: which is not what we need.
Don’t you mean deflationary?
How is a fare increase deflationary?
Or they want the final destruction of anything in the public service and make everything private.
Local Authorities are heading the same way – lost income and being told they have to contribute to the costs of the support they have been undertaking to those members of the public who have the audacity to need it. Oh and making payments to businesses etc
Aren’t they simply following the example set by Major and (with spades) by Brown? PFI kept it off the balance sheet too. And handed public services with huge debts stretching years ahead.
And how are they going to deal with the Care Home disaster, compounded by private companies loading them with debt while executives help themselves to the loot. (See Source this morning) This is a cancer growing throughout modern capitalism and needs to be excised. But will Tories wield the scalpel? Do pigs have wings?
I heavily criticised Brown for this….
Indeed you did. Perhaps it’s privatisation by stealth – “privatise” the finance (by imposing the kind of conditions that private finance would impose) then start privatising the assets somewhere further down the line. Hasn’t this happened with aspects of the NHS & Education in England?
Yes
Four legs good.Two legs better.
It’s the Tory way. When we want different we have to vote differently. The penny will drop eventually perhaps. Memories are short and e’en as we speak Team Cummings will be working out how best to spin the failure of the NHS to keep the nation open during this ‘little crisis’ as the reason to further privatise it. The NHS is emphatically not safe with this government and Brexit, we know, puts it on the negotiating table if we are to have trade deals with the US.
No matter what stupidity and mendacity the government displays, the majority of the public is determined to keep their heads buried in the sand. I’m finding it hard not to sink into despair.
How will we pay for all this?
Let’s take this opportunity of a once in a lifetime crisis (for many of us) to totally destroy society because, like, Brexit wasn’t enough. Absolutely brilliant. That’s how we’re going to pay.
There is some background from a TfL/Transport studies viewpoint (a couple of days ago) at https://www.londonreconnections.com/2020/tfl-the-impossible-finances-of-fighting-a-pandemic/
You note the lack of conditions attached to the furlough scheme and other forms of business support.
As a commercial lawyer I never really like giving something, without getting something back. Making support through things like furlough on a debt basis was never going to work. But why make it a gift? My purely commercial instincts are that it should have meant an equity stake, based on realistic valuations of the companies involved: presumably based either on net assets or a (low) multiple of profits.
There would presumably have needed to be something to prevent businesses simply getting rid of staff to avoid having to access the scheme, and other protections to protect the investment, but it seems to me wrong that the state’s contribution should be ignored.
That would have been my wish
I want a National Wealth Service, made upon from these equity stakes
It is religious. Examples are countless. We have to accept this fact, and try to come up with a solution. My advice to business is to move somewhere more sensible. A recent telling survey in Europe found Merkel the most trusted world leader. The least trusted? You got it, Boris, Donald and Xi.
Lets be entirely honest. This policy is almost entirely political. A labour mayor in charge of London transport. Create an opportunity for a former mayor in Johnson to criticise that labour mayor for an unavoidable collapse of the transport system. Hey presto the next London mayor is a Tory. Only it won’t be because I hope we are not that stupid.
The other point of interest is who exactly is paying for those ‘commercial’ buses that have been passing my door so regularly for the last couple of months with anything from 0-3 passengers on board. Stagecoach must be being subsidised and I cannot imagine that local authorities have sufficient money to do it for the length of time it has been continuing. First is rumoured to be receiving some of the Bank of England secret corporate bond money – though as they have been trying to sell most of their operations for the last year I find it difficult to see how they qualify.
If it is the case that the commercial bus companies are being directly subsidised then it poses the question of why Transport for London should be treated any differently.
Agreed
Treat all rail services the same
The cynical side of me says yes they do want this to go on until the end of the year to disguise how bad Brexit will be.
‘TfL have also got to put up fares. That can simply be described as a tax increase on London to pay for coronavirus.’
Why should the rest of the country pay for it? London can easily afford to pay for TfL, so why should the poorer parts of the country subsidise the wealthiest city? Why do you want to increase the gap between London and the rest of the country?
If Khan hadn’t frozen fares since 2016 (a ludicrous policy), TfL’s finances would be in a much better shape. The trouble is, he cynically but correctly saw it is a vote-winning policy in a city where there are millions of commuters.
You are aware that transport everywhere else is being subsidised through this, aren’t you?
The exceptionalism is in London