Londoners face inflation-busting fare rises as TfL is 'given £1.6 billion bailout' to help fill a black hole

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Londoners are facing inflation busting bus and rail fare rises after the Mayor was forced to accept a government rescue package for the transport network.

Ministers imposed a series of conditions on Sadiq Khan after agreeing a £1.6bn bailout for Transport for London.

The mayor’s flagship policy of freezing some fares was one of the biggest casualties of the deal. Future fares increases will reflect RPI+1%.

The coronavirus crisis has seen TfL’s income from fares, advertising and the Congestion Charge drop by 90%.

Without reveune the organisation is haemorrhaging £600m a month.

Details of an agreement to bankroll TfL’s immediate future came after the mayor issued an ultimatum to ministers saying bus and tube services were facing the axe.

Government sources accused the mayor of ‘mismanagement’ and creating a financial ‘black hole’.

Mr Khan has accepted a government a review of TfL’s finances and the appointment of government representatives to TfL’s board,

Ministers also expect TfL to restore rail and bus services to ‘maximum levels’ as part of the easing of lockdown measures.

Mr Khan will be expected to endorse the government’s ‘Stay Alert’ message.

City Hall sources said Londoners would pay a heavy price for the rescue package.

But Mr Shapps said it was “very important” that as part of a rescue package “we don’t end up in a situation where people from outside the capital are unfairly carrying the burden”.

He warned that consistent fare freezes mean “more money isn’t going into the system”, stating: “You can’t then have an unfair settlement, where other British taxpayers are effectively bailing out the system.”

Mr Shapps said at the time that he was “optimistic” a “solution” would be reached for TfL.

Earlier, Mr Khan told LBC radio that TfL was legally treated like a local authority, which meant “we have to” balance the books.

“We’d have to reduce the bus services we provide, we’d have to reduce the Tube services we provide, to save money,” he said.

Mr Khan continued: “At a time when the Government is wanting us to increase services to get into the recovery phase, we might be required to cut services because the Government is failing to give us the grant support we need.”

TfL has been using its cash reserves to meet the £600 million monthly bill of operating services.

A decline in passenger numbers of 95% on the London Underground and 85% on buses due to the coronavirus lockdown has caused a 90% fall in income.

Mr Khan said TfL had been negotiating with the Government for around six weeks.

“I’m unclear about why the Government are waiting until the 11th hour to agree a deal,” he said.

“It is really bad form.”