U.K. Government Threatens to Take Over London Subway Manager

(Bloomberg) -- The U.K. government threatened to take control of London’s subway manager if Mayor Sadiq Khan doesn’t accept a package of measures in return for rescue funding, according to a person with knowledge of the matter.

Transport Secretary Grant Shapps wrote to Khan earlier this month warning that if a deal couldn’t be struck, the government would use its powers to manage the transit system, the person said, asking not to be identified as the matter is private. The Financial Times reported on the letter earlier.

The government wants to charge higher fares on the subway and buses, to extend the central London congestion charging zone, and to increase the local-government council tax to shore up Transport for London’s finances, according to a statement from Khan on Wednesday.

“I simply cannot accept this government plan, which would hit Londoners with a triple whammy of higher costs at a time when so many people are already facing hardship,” Khan said. “The government should be supporting Londoners through this difficult time – not making ill-advised and draconian proposals which will choke off our economic recovery.”

London’s main public transport operator has become a focus for political tension between Khan, the city’s Labour mayor, who oversees TfL, and the Conservative Party, which has a majority in the national parliament. The transit manager’s revenues have plunged as many workers stay at home rather than travel to offices.

On Wednesday Prime Minister Boris Johnson, who preceded Khan as mayor, didn’t rule out scrapping free travel for children in the capital or extending the congestion charge area. He instead repeatedly accused Khan of financial mismanagement of the network.

“It was the Labour Mayor of London who bankrupted TfL’s finances, and any changes that he brings in are entirely his responsibility,” Johnson told Parliament.

Khan accused the prime minister of lying and said he has reduced the operator’s deficit by 71% since taking over from Johnson in 2016. The coronavirus pandemic was the only cause of the network’s funding crisis, the mayor said.

“Before Covid I was fixing his mess at TfL,” Khan said on Twitter. “Covid-19 is the sole cause of TfL’s challenges.”

The government’s demands in return for helping TfL contrast with the 18-month bailout granted to private commuter-rail services that stretch out into London’s hinterland, where the population tends to vote Conservative.

While the funding spat reflects horse-trading over who shoulders the added costs of the crisis, a more drastic move would strip Khan from oversight of a system that moves some 5 million people around London each day in normal times.

The Department for Transport has agreed an extension to funding the transit manager to allow more time for a deal to be agreed, a spokesperson told Bloomberg News late Tuesday, adding that it would be inappropriate to disclose further details at this stage.

Transport for London is seeking a 5.8 billion-pound ($7.5 billion) bailout after the coronavirus outbreak led to a collapse in commuter travel. The government gave the transport authority 1.6 billion pounds to ensure the subway continues to run.

©2020 Bloomberg L.P.