Sir Sadiq Khan’s chief of staff admitted that the Labour Government has ‘not provided as much money as we would have hoped for’
Transport for London (TfL) is being forced to find more than £20 million in savings over the coming year due to the Government’s increase in employers’ National Insurance (NI) contributions.
At a City Hall meeting on Thursday, it emerged that despite ministers providing significant financial support to public bodies to help cover the NI hike, TfL faces a substantial shortfall of £23 million.
Neil Garratt, leader of the City Hall Conservatives, criticised the increase, branding it as Labour’s “jobs tax” and claiming it is “hammering” TfL. However, sources within the transport authority have assured that the funding gap does not require staff reductions, though the specific savings measures remain unclear.
Shortfall in funding for TfL and emergency services
During a budget and performance committee session, Sir Sadiq Khan’s chief of staff, David Bellamy, conceded that the Government has “not provided as much money as we would have hoped for.”
While the Metropolitan Police received grant funding to fully cover the cost of the NI increase, TfL and the London Fire Commissioner (LFC) have not been as fortunate. The LFC, responsible for governing London’s fire brigade, faces a smaller funding gap of £2.5 million, which Mayor Khan has plugged using business rates revenue. However, TfL’s £23 million deficit remains unaccounted for, raising concerns over its financial stability.
Bellamy explained that the Government’s approach to allocating funds was based on a “local authority view of the world,” meaning that transport authorities like TfL, which generate substantial income from fares, were not prioritised in the funding formula.
“This will affect transport authorities across the country,” he said. “It’s just the decision the Government took on how to assign the available funding.”
TfL’s cost-saving measures
TfL has already made significant cost reductions for the upcoming financial year. One major saving has been in London Underground staffing costs, largely due to improved performance of its pension scheme investments.
Bellamy highlighted that TfL has successfully reduced its direct pension contributions from 27.3 per cent to 10.5 per cent, easing some financial pressures. However, whether this reduction will be enough to cover the £23 million NI shortfall remains to be seen.
Political disputes over ‘jobs tax’
The issue has become a political flashpoint, with City Hall Conservatives accusing Labour of imposing an unfair tax burden on London’s transport network.
In a video posted on social media platform X, Neil Garratt said:
“Labour’s jobs tax is hammering TfL… They [the Government] said when they announced it that they would cover the cost for public sector bodies.
“You might think that would cover TfL. It definitely doesn’t cover business, which is getting whacked by this… This is Labour’s cost in London – it just keeps rising.”
Despite these concerns, TfL remains in discussions with the Government and hopes to secure additional funding before the new financial year in April.
Government response and future funding
A TfL spokesperson acknowledged the funding challenge but reiterated that discussions with the Government are ongoing.
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“We continue to discuss this with Government and will provide a further update on how we would cover any shortfall as part of our annual budget.”
The annual budget, set for release in March, will outline specific savings measures required to address the £23 million funding gap.
Meanwhile, a spokesman for the Ministry of Housing, Communities and Local Government defended the Government’s approach, stating:
“We recognise the challenges that councils are facing, which is why, despite the inheritance we have been left, we are providing an additional £2 billion of grant funding, including £502 million to manage the impact of employer National Insurance contributions changes.”
“This is part of making available £69 billion of funding to councils across England to help them drive forward the Government’s Plan for Change, including a 3.1 per cent increase for the Greater London Authority, taking Core Spending Power to £3.2 billion next year.”
What next for TfL?
With a budget deadline approaching and a significant shortfall to address, TfL will need to identify savings without impacting services. The lack of clarity over how the deficit will be covered leaves uncertainty for Londoners who rely on the transport network daily.
While additional Government support may still emerge, TfL’s funding predicament highlights the wider financial pressures facing public bodies as they grapple with rising costs and evolving funding models.
