Transport for London (TfL) is being forced to find more than £20m in savings over the coming year due to the Government’s increase in employers’ National Insurance (NI) contributions.
It emerged at a City Hall meeting on Thursday that despite ministers providing significant support to public bodies to help them cover the NI hike, TfL is facing a shortfall of £23m.
Neil Garratt, leader of City Hall Conservatives, said the cost of “Labour’s jobs tax” was “hammering” TfL. Sources within the transport authority insisted that the funding gap does not require any reduction in staff, though it remains unclear at this stage exactly how the necessary savings will be made.
Speaking to the London Assembly’s budget and performance committee, Sir Sadiq Khan’s chief of staff, David Bellamy, admitted that the Government has “not provided as much money as we would have hoped for”.
While grant funding has been provided to cover the complete cost of the NI increase at the Metropolitan Police, the same has not been true for TfL or the London Fire Commissioner (LFC) – the City Hall body responsible for governing the capital’s fire brigade.
The LFC’s shortfall is only £2.5m, a funding gap which mayor Sir Sadiq Khan has plugged using money from business rates. But it remains unclear how TfL will plug its own, much larger, £23m funding gap.
Mr Bellamy said: “There’s clearly an issue, and we’ve spoken to the Government about this and they understand it, that the model they used for allocating funding was very much based on a local authority [i.e. council] view of the world, where local authorities tend to have relatively restricted sources of income, other than council tax and business rates.
“Whereas, with TfL, it clearly has billions of pounds worth of income from fares, and that didn’t factor into the Government’s formula. It will affect transport authorities across the country as well – it’s just the decision the Government took on how to assign the available funding.”
Mr Bellamy added that TfL had already “significantly reduced costs going into next year” with London Underground staffing, “because of the progress made on the cost of the pension scheme”.
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The chief of staff was referring to the fact that, thanks to some high-performing investments, TfL has successfully reduced the proportion it directly pays into staff pensions, from about 27.3 per cent down to 10.5 per cent. TfL hopes that this saving will help with covering the extra £23m NI cost.
However, in a video posted on X, Mr 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.”
It is understood that TfL remains in talks with the Government and hopes to receive additional support ahead of the new financial year in April.
A TfL spokesman said: “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 organisation’s budget is due for publication in March, and will include details of any savings made to cover the £23m cost.
A spokesman at the Ministry of Housing, Communities and Local Government said: “We recognise the challenges that councils are facing, which is why despite the inheritance we have been left, we are providing an additional £2bn of grant funding, including £502m to manage the impact of employer National Insurance contributions changes.
“This is part of making available £69bn 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 £3.2bn next year.”
