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INSIDE THE

LONDON MAYORALTY
Financial & Structural Analysis Report
for The Reclaim Party
March 2021
Contents

1. Organisational Structure
2. Responsibilities, Powers & Accountability
3. Funding & Budgets
4. Further Analysis of Key Funding Sources
5. Borrowing
6. Transport for London
1. Organisational Structure

Greater London Authority (GLA) - established by Greater London Authority Act 1999. GLA Group currently composed of:
Mayor of London (Executive)
London Assembly (25 elected members - 14 constituency/11 London-wide - purpose to scrutinise and hold Mayor + advisers to account)
5 functional bodies:
Mayor’s Office for Policing and Crime (MOPAC)
London Fire Commissioner (LFC)
Transport for London (TfL)
London Legacy Development Corporation (LLDC) - time-limited Mayoral Development Corporation (MDC)
Old Oak & Park Royal Development Corporation (OPDC) - time-limited Mayoral Development Corporation (MDC)
2. Responsibilities, Powers & Accountability
Mayor’s three principal statutory purposes are the promotion in Greater London of:
Economic development and wealth creation; social development; and the improvement of the environment.
Section 30 of GLA Act gives a general power to the GLA, exercisable by the Mayor, to do anything which the GLA considers will further any one or more of
these purposes.
Powers and duties include:
▪ acting as the GLA’s executive;
▪ appointing the 13-strong Mayoral team in the GLA;
▪ making appointments to senior roles in the GLA’s five functional bodies;
▪ setting the GLA Group budget and the GLA council tax precept;
▪ discretionary allocation of council tax and retained business rates income across the GLA Group;
▪ setting London’s transport fares on an annual basis;
▪ making planning decisions in respect of significant applications;
▪ producing a Police and Crime Plan which sets the direction for the Metropolitan Police Service;
▪ publishing seven statutory strategies: The London Plan; Transport Strategy; Housing Strategy; Environment Strategy; Economic Development Strategy;
Health Inequalities Strategy; and Culture Strategy.
Some key mayoral appointments/roles:
▪ Chairs the board of TfL personally and appoints its board members;
▪ Appoints the London Fire Commissioner;
▪ Convenor of the London Resilience Forum;
▪ Chairs the London Health Board;
▪ Appoints the MPS (Police) Commissioner (with Home Secretary);
▪ Chairs the London Enterprise and Action Partnership (LEAP);
▪ Responsible for London’s share of the Adult Education Budget (AEB);
▪ Convenes the Cultural Strategy Group for London and appoints Chairman and three members of Arts Council England’s London Area Council;
▪ Supervision in the Greater London area of the Local Air Quality Management (LAQM) process;
▪ Appoints Deputy Mayors for key objective areas (10 currently).
“Beyond the requirements of the GLA Act, much of the Mayor's activity is discretionary and relies on the office’s electoral mandate, status and influence. A
central aspect of the Mayor’s role is leadership, bringing together stakeholders - including the London boroughs (33, including Corporation/City of London),
national government, health and other public sector organisations, businesses and civic society - to deliver policies, initiatives and programmes which benefit
London and Londoners.”
Education, social and health service (NHS) policy and funding are excluded from the Mayoral brief; Mayor cannot duplicate activities within the remit of the
five functional bodies.
Certain decisions require Mayor to consult Assembly or obtain its consent. Mayor must consult Assembly before producing statutory strategies and the budget
for the GLA Group. Assembly can reject Mayor’s strategies (e.g. London Plan) and amend the draft budget by a majority of two-thirds (never actually happened
in practice).
Assembly questions the Mayor 10 times a year at Mayor’s Question Time; cross-party committees cover core areas including transport, policing, housing and
planning, the economy, health and the environment. Assembly can press for changes to national, Mayoral or local policy.
Mayor must also hold a State of London Debate between April and June each year (and publish an annual report in the run-up) and hold People’s Question
Time twice a year. MoL and Assembly elections take place every four years (Covid-postponed 2021 elections being for reduced 3-year term to 2024). Elections
overseen by the Greater London Returning Officer (GLRO) - currently also the Chief Officer of the GLA.
Relevant Secretary of State can limit or veto expenditure either deemed outside of Authority’s functional remit or inconsistent with national policies.
3. Funding & Budgets
Principal sources of mayoral funding are:
▪ Central government grants (general & specific)
▪ TfL fares & passenger income
▪ Retained business rates (mayoral discretionary)
▪ Consolidated council tax precept (= mayor’s portion of London’s council tax base - mayoral discretionary)
▪ Borrowing & reserves
▪ Locally raised taxes and charges (e.g. Congestion Charge, the Crossrail Business Rate Supplement, Mayoral Community Infrastructure Levy)
All of the important ones are subject to current constraints/limitations/uncertainties, either inbuilt or circumstantial (see under section 4. below).

Budget timetable/process/precept calculation:


▪ Mayor publishes (non-statutory) guidance in summer of prior year, to provide context and support for the organisations that make up the GLA Group
to prepare their budgets for the financial year ahead;
▪ A consultation budget and a draft capital spending plan are published in December
▪ After consultation has closed in January, Mayor publishes a draft consolidated budget
▪ A final consolidated budget (still amendable) follows in February
▪ Mayor then publishes late February his capital spending plan and the approved final draft budget for the financial year ahead
For the seven “constituent bodies” (Mayor, Assembly + five functional bodies), the Mayor puts forward separate “component budgets” relating to the amounts
needed to balance each body’s respective revenue expenditure, after allowing for revenue grants from the Government (once the various local
government/fire/police finance settlements have been finalised) and for retained business rates, where relevant. This is known as the “component council tax
requirement”. The aggregate of these seven “component” budgets gives the GLA Group Budget and the proposed figure of the GLA precept, known as the
“consolidated council tax requirement”. Council tax and business rates forecasts are received from the 33 London “billing authorities” (= the 32 boroughs +
City of London).
What follows are key financial extracts from the Mayor’s final draft 2021-22 Consolidated Budget, incorporating the inputs for and calculation of the
consolidated council tax precept. Some of the headline numbers herein may vary slightly from those extracted from earlier draft versions.
FINAL DRAFT CONSOLIDATED BUDGET 2021-22 (approved without amendment by the London Assembly on 25 February 2021)

Estimated Expenditure

(£m) GLA Mayor GLA Assembly MOPAC LFC TfL LLDC OPDC Total
Estimated expenditure 1,742.9 8.0 3,968.2 489.3 7,530.0 59.3 6.7 13,804.4
Estimated reserves to be raised* 214.1 959.0 1,173.1
Estimated total expenditure 1,957.0 8.0 3,968.2 489.3 8,489.0 59.3 6.7 14,977.5
13.1% 0.1% 26.5% 3.3% 56.7% 0.4% 0.0% 100.0%
* (for meeting future expenditure/to meet a revenue account deficit)

Estimated Income and Calculation of Council Tax Requirement

(£m) GLA Mayor GLA Assembly MOPAC LFC TfL LLDC OPDC Total
Estimate of non-government grant income -231.1 0.0 -290.1 -41.2 -4,542.2 -32.0 -0.3 -5,136.9
Estimate of specific government grant income -363.4 -0.5 -612.9 -40.2 -14.4 0.0 0.0 -1,031.4
Estimate of general government grant income -0.1 0.0 -2,158.5 0.0 -2,934.8 0.0 0.0 -5,093.4
Estimate of Retained Business Rates income -1,180.6 -4.9 -27.9 -228.1 -862.1 -27.3 -6.4 -2,337.3
Collection fund deficit for council tax 0.5 0.0 6.3 1.4 0.1 0.0 0.0 8.3
Estimate of reserves to be used -116.7 0.0 -80.2 -9.4 -83.9 0.0 0.0 -290.2
Estimated total income after use of reserves -1,891.4 -5.4 -3,163.3 -317.5 -8,437.4 -59.3 -6.7 -13,881.0
Total consolidated council tax requirement/Precept 65.6 2.6 804.9 171.8 51.6 0.0 0.0 1,096.6
N.B. Council Tax Base = £3,021m
+29.6% vs. prior year

N.B. Mayor will also approve the borrowing limits and prudential indicators for 2021-22 for each functional body strategy as part of a separate Mayoral Decision in March 2021.
Final Statutory Capital Spending Plan

(£m) GLA Mayor GLA Assembly MOPAC LFC TfL LLDC OPDC Total % by Source
Total capital grants/ receipts 0.0 0.0 137.5 50.8 2,111.1 185.7 0.0 2,485.1
Total borrowings 833.4 0.0 244.2 6.6 0.0 41.7 0.0 1,125.9
Total capital spending for the year 2,080.7 0.0 385.1 57.6 2,821.5 227.4 0.0 5,572.3
Funding: capital grants and contributions 1,137.1 0.0 56.3 0.0 1,820.2 92.6 0.0 3,106.2 55.7%
Funding: capital receipts/reserves 2.0 0.0 81.2 50.8 201.3 93.1 0.0 428.4 7.7%
Funding: borrowings and credit arrangements 833.4 0.0 244.2 6.8 0.0 41.7 0.0 1,126.1 20.2%
Funding: revenue contributions 108.2 0.0 3.4 0.0 800.0 0.0 0.0 911.6 16.4%
Total funding 2,080.7 0.0 385.1 57.6 2,821.5 227.4 0.0 5,572.3 100.0%
2020-21 Forecast Comparison 1,679.7 333.9 32.8 2,080.1 171.5 4,298.0
+10.6% vs. prior year

(£m) GLA Mayor GLA Assembly MOPAC LFC TfL LLDC OPDC Total
GRAND TOTAL 3,823.6 8.0 4,353.3 546.9 10,351.5 286.7 6.7 19,376.7
19.7% 0.0% 22.5% 2.8% 53.4% 1.5% 0.0% 100.0%

Summary:
▪ Grand Total Revenue and Capital increased +£1,850.0m (+11%) in 2021-22 vs. 2020-21 forecast out turn
▪ Total Gross Revenue +£575.7m (+4%)
▪ Total Capital Spending +£1,274.3m (+30%)
▪ Consolidated GLA Group council tax requirement of £1,096.6m

Below are two further tables of interest, detailing allocation of all funding sources over which the Mayor has direct discretion/control (subject to balancing
books across group) and Mayor’s Directorate Expenditure (= funding of key objectives within the 7 set directorates and increasingly complex sub-Foundations
and Missions - this is where the many and various foundations, initiatives, and projects can be found).
Allocation of funding sources over which the Mayor has direct control

(£m) GLA Mayor GLA Assembly MOPAC LFC TfL LLDC OPDC Total
Council tax 65.6 2.6 804.9 171.8 51.6 0.0 0.0 1,096.6
Collection fund deficit -0.5 0.0 -6.3 -1.4 -0.1 0.0 0.0 -8.3
Business rates 51.7 4.9 27.9 228.1 1,792.3 27.3 6.4 2995.2*
Government grants for income losses 15.7 0.5 0.0 6.9 1.8 0.0 0.0 25.0
Group reserves 0.0 0.0 0.0 0.0 0.0 6.7 0.0 6.7
Total Mayoral funding 132.5 8.0 826.5 405.4 1,845.7 34.0 6.4 4,115.2
* N.B. includes separate BRs allocation to GLA Group
-6.6% vs. prior year

GLA: Mayor - Directorate Expenditure (7 set directorates)

(£m) Good Growth Housing & Land Communities Strat & Comms Resources Corp Man Team Mayor’s Office Elections Total
Directorate Expenditure 69.9 16.6 386.2 19.7 38.8 8.0 4.9 20.9 565.0
12.4% 2.9% 68.4% 3.5% 6.9% 1.4% 0.9% 3.7% 100.0%
-2.4% vs. prior year

It is worth noting that Mayor’s Directorate Budget has gone from £125m in his first year (2017-18) to £579m in the financial year (2020-21) about to end
(marginally down for the year ahead). Over the same period, his overall component budget (i.e. GLA - Mayor) has moved as per below table:

(£m) Revenue expenditure Capital expenditure


2021-22 1,742.9 2,080.7
2020-21 1,687.1 1,679.7
2019-20 669.4 2,112.0
2018-19 391.7 1,528.6
2017-18 324.0 961.3

Whilst there are explanatory factors such as the incorporation of part of Crossrail and the relatively recent addition of the AEB (Adult Education Budget)
funding from Gov (c. £350m in current year), some of this significant rise is likely to stem from other Mayor projects.
4. Further Analysis of Key Funding Sources

Central government settlements/grants/conditions


▪ Set annually (prior to financial year-end), determined by the respective Secretary of State (with prior approval from Treasury and, ultimately,
Parliament);
▪ Subject to a period of consultation, with requirement for Mayor’s prior “consultation” by Gov made explicit in GLA Act 1999, but note qualifications to
the notion that this is a “negotiation” between equals below.
Key recurring settlements are:
1) The Local Government Finance Report (England) - by authority of the Secretary of State for Housing, Communities and Local Government (Robert
Jenrick) under Schedule 7B to the Local Government Finance Act 1988

The local government finance settlement is the annual determination of funding to local government. Of its four main statutory purposes, only two apply
currently to the GLA:
▪ sets out the Secretary of State's determination of the percentage of a billing authority’s non-domestic rating income that is to be that authority’s
central share and the percentage that is to be that authority’s local share for each billing authority in England;

▪ sets out the basis on which the Secretary of State proposes to calculate authorities’ Baseline Funding Level as well as which authorities are to receive
payments (referred to in this Report as “top-up” payments) and which authorities are to make payments (referred to in this Report as “tariff” payments)
and the amount of such payments.
The other decisions relate to the Revenue Support Grant (applicability, calculation, distribution). Because of the GLA’s current status as an “increased business
rates retention” authority (along with several other devolved authorities), it is excluded from this grant, as it retains 100% rather than 50%.
What the settlement then does is calculate the Baseline Funding Level for each authority with increased Business Rates Retention arrangements - this will
consist of their 2020/2021 baseline calculated under 50% Business Rates Retention, uprated for 2021/2022, plus the value of the grant(s) that the authority
will forgo in 2021/2022.
For the GLA, this works out at an income level from BRs of £2.2bn (with a safety net threshold of £2.1bn = GLA’s minimum funding or safety net level guaranteed
by the Government irrespective of the level of business rates collected as confirmed in the final local government finance settlement. This is equivalent to 97%
of the GLA’s settlement baseline funding of £2.2bn which is the higher guarantee provided).
Including other, lesser, grant amounts due under the overall Local Government Finance Settlement, GLA’s Core Spending Power (a measure of the resources
available to local authorities to fund service delivery) for 2021-22 is calculated as £2.4bn, up from £2.3bn in 2020-21.
N.B. Even though the expected outturn for RBR income in 2020-21 came in higher than previously envisaged in draft budget and implementation of reforms
to the business rates retention system and the local government & fire “fair funding distribution reviews” has also now been delayed until 2022-23 at the
earliest, there remains significant and material uncertainty arising from:
“Material Change of Circumstances appeals by ratepayers and their agents resulting from the impact of the pandemic on rental levels, turnover and passenger
numbers. For offices alone - which account for around half the business rates taxbase - rating advisors have estimated that the valuation change could range
from minus 25% to minus 65% which could equate to a potential reduction in revenues London wide of between £1.1 billion and £2.8 billion of which the GLA’s
share could range between £0.4bn and £1.1bn. Further reductions are also likely across almost all sectors including airports and retail, leisure and hospitality
businesses. It is due to this clear inherent risk that the Mayor is unable to allocate resources above the 2021-22 minimum safety net guarantee until the
Valuation Office Agency makes its final determination of the downwards adjustment to valuations it intends to apply given that the Government has not
announced any compensation scheme for business rates losses in 2021-22.”
An adjunct of the Local Government settlement is the report determining the Council Tax referendum principles for the year:

2) The Referendums Relating to Council Tax Increases (Principles) (England) Report - by authority of the Secretary of State for Housing, Communities
and Local Government (under section 52ZB of the Local Government Finance Act 1992)

▪ Each billing authority and precepting authority must determine whether its relevant basic amount of council tax for a financial year is excessive; if an
authority’s relevant basic amount of council tax is excessive, a referendum must be held.
▪ In the case of the GLA, this report specifies the maximum absolute levels (or relevant %) of increase for both the adjusted (Band D - Greater London
boroughs) and unadjusted (City) rates.
“For 2021-22, the GLA’s relevant basic amount of council tax is excessive if -
(a) the GLA’s unadjusted relevant basic amount of council tax for 2021-22 is 2%, or more than 2%, greater than its unadjusted relevant basic amount of
council tax for 2020-21; or
(b) the GLA’s adjusted relevant basic amount of council tax for 2021-22 is more than £16.59, greater than its adjusted relevant basic amount of council tax
for 2020-21.”
How the precept total is applied and allocated by the Mayor within his overall income and expenditure budget is covered in the tables in section 3. above.
What follows is a table showing the Gov-mandated maximums and the levels/increases set by Mayor over his 5-year tenure. There has never been a
referendum.

Year Total Precept Gov't Max Level SK Level Increase


2021-22 £1,096,562,028.72 £363.66 Band D £363.66 9.5%
2020-21 £1,010,907,032.68 £332.07 Band D £332.07 3.6%
2019-20 £960,569,108 £320.51 Band D £320.51 8.9%
2018-19 £865,678,414 £294.23 Band D £294.23 5.1%
2017-18 £804,779,495 £281.52 Band D £281.52 1.5%

Cumulative increase Band D = +32%


By way of contrast to Mayor’s continuous maximum increases over his unique 5-year term, Mayor BJ cut by 6.4%/1.3%/1.3%/1.2% over prior 4-year term =
cumulative -10%
N.B. Regarding the consultation processes for these settlements - in the course of the 1-month consultation period for the latest local government finance
settlement, 60% of respondents (i.e. authorities) opposed the proposed package of council tax referendum principles for 2021-22 (vs. 23% supporting); they
went ahead exactly as proposed.
3) Police Grant Report (England and Wales) - prepared by the Home Secretary (Priti Patel) under section 46(3) of the Police Act 1996
(N.B. The section 46 point is actually significant here as this represents only one portion (the largest) of total funding for the police. It excludes: the police grant
for capital purposes made under section 47(1) of the 1996 Act or police grant for the safeguarding of national security made under section 48(1) of the 1996
Act; pensions grant funding paid to local policing bodies under section 31 of the Local Government Act 2003 by the Home Office; Council Tax Freeze Grant
funding through the MHCLG Local Government Finance Settlement; grant funds from the national Police Officer Uplift programme (additional 20,000 officers
by March 2023) to support the recruitment of 6,000 (c. 1,400 in London) additional police officers by the end of 2021-22.)
Funding allocations are based on the Police Allocation Formula distribution of 2013/14. This is a complex formula involving numerous demographic/socio-
economic factors/ratios, meaning London is heavily/positively weighted - receiving total section 46 funding in 2021-22 of £2.0bn (out of £8.7bn nationally =
23%). Total national funding settlement of up to £15.8bn for the policing system in 2021-22 (+£640m vs. 2020-21).
GLA also to receive >£190m in recognition of both London police forces’ distinct national and international capital city functions + >£110m (out of £400m
nationally) from officer uplift programme.
Total grant from Gov of £3.1bn (vs. £2.9bn in 2020-21).
5. Borrowing

Legal Framework
▪ Part 1 of the Local Government Act 2003 introduced a new statutory regime to regulate the borrowing and capital expenditure of local authorities.
Section 23(1)(d) and (e) provides that the Greater London Authority (GLA) and the functional bodies are local authorities for this purpose.
▪ Section 3(1) of the 2003 Act provides that all local authorities are to determine and keep under review how much money they can borrow. Section 3(2)
of the Act is more specific in relation to the Mayor and functional bodies by providing that the determination is to be made by the Mayor following
consultation with the Assembly, in the case of the GLA, or the relevant functional body.
▪ The management of the Authority’s Treasury function and the development and monitoring of the Treasury strategy fall within the responsibility of
the Chief Financial Officer.
▪ Section 401A(2) of the Greater London Authority Act 1999, as amended, permits a shared service arrangement. This enables the GLA, the Functional
Bodies and the LPFA to delegate the professional technical and administrative functions involved in treasury management to the GLA and for them all
to jointly participate in the GIS (Group Investment Syndicate) under their common powers to borrow and invest for the prudential management of
their financial affairs.
Powers & Operating Procedures
▪ The Group Treasury Management function is responsible for the management of the GLA’s investments, borrowings and cash flows, its banking, money
market and capital market transactions; the effective control of the risks associated with those activities; the pursuit of optimum performance
consistent with those risks and the paramount issue of preserving capital.
▪ Investments/Borrowings are largely managed collectively through the GIS. The GLA undertakes the treasury management functions of:
GLA, MOPAC, LFC, LLDC & OPDC - i.e. all of Group excluding TfL (which is responsible for its own borrowing)
+ London Pensions Fund Authority (LPFA) & some individual London Boroughs which sign up for inclusion.
▪ The Mayor is responsible for setting and approving the Authorised Limit for external debt and Operational Boundary for external debt for the
functional bodies (including TfL) and the GLA alongside the Prudential Indicators and Capital Financing Requirements required by statute, and must
do so each year by statutory deadline of 31 March.
▪ Latest borrowing limits and treasury management policy approved by Mayor on 15 March 2021 (MD2792) per table below.
▪ The Introduction & Background section of this states: “The cost of debt service is the GLA’s largest single item of revenue expenditure and its greatest
source of financial risk, alongside business rates volatility.”

Borrowing limits

(£m) GLA Mayor MOPAC LFC TfL* LLDC Total


2021-22
Authorised limit 7,200 1,411 245 14,495 520 23,871
Operational boundary 6,800 1,286 240 13,163 520 22,008
30.2% 5.9% 1.0% 60.7% 2.2% 100.0%
2020-21
Authorised limit 6,100 1,216 225 14,892 520 22,953
Operational boundary 5,700 1,091 220 13,777 520 21,308
26.6% 5.3% 1.0% 64.9% 2.3% 100.0%
* N.B. In-year revisions upwards to TfL’s borrowing limits in 2020-21
▪ The Authorised Limit is the expected maximum borrowing needed with some headroom for unexpected developments such as unusual cash
movements; a statutory limit intended to be an absolute ceiling which cannot be exceeded (except where payments expected but not yet received can
temporarily result in the limit being exceeded, provided the original setting of the limit had not taken into account any delay in receipt of the payment);
can be amended in-year, as per TfL.
▪ The Operational Boundary is based on the same estimates as the Authorised Limit. However, it reflects an estimate of a prudent level of borrowing
required to meet capital expenditure and maintain sufficient liquidity; it is set as a warning signal that external debt has reached a level nearing the AL
and must be monitored carefully; not significant if the OB is breached temporarily on occasions due to variations in cash flow; a sustained or regular
trend above the OB would be significant, requiring further investigation and action as appropriate.
▪ GLA can (and has credit rating to) borrow in wider (public and private) debt markets but great majority is through PWLB (Public Works Loan Board) -
central lending facility operated by the UK Debt Management Office (DMO) on behalf of HM Treasury specifically to provide loans to local authorities
(mainly for capital projects) from the National Loans Fund.
▪ PWLB in November 2020 reduced standard and certainty margins by 1% (Standard Rate is now gilts plus 100 basis points; Certainty Rate gilts plus 80
basis points). However, “considering the fluctuation in the cost of PWLB borrowing, Group Treasury will continue to build relationships with other lenders
and establish a capital markets presence that will achieve the lowest possible margin above gilts, in pursuit of long-term access to sustainable funding.
This emphasises the importance of attempting to optimise maturity profiles at the point of entering into borrowings.”
Compliance, Monitoring & Constraints
Borrowing subject to the following codes, protocols and prudential indicators:
▪ Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management in the Public Services Code of Practice
▪ CIPFA Prudential Code and associated Guidance Notes
▪ MHCLG (Ministry for Housing, Communities and Local Government) Capital Finance Guidance on Minimum Revenue Provision (MRP is the amount
out of revenues set aside each year to fund capital expenditure previously financed by borrowing or credit arrangements).
▪ Mayor holds responsibility for the implementation and regular monitoring of treasury management policies and practices and delegates responsibility
for the execution and administration of treasury management decisions to the Executive Director of Resources.
▪ The Assembly has delegated the responsibility for ensuring effective scrutiny of the treasury management activities to the Audit Committee
Key metric (against which ongoing headroom is measured) is:
Capital Financing Requirement (CFR) - the Authority’s underlying borrowing need (a measure of the Authority’s as yet unfunded capital expenditure).
Table of Gross Debt and the Capital Financing Requirement (this indicator seeks to ensure that debt does not, except in the short term, exceed the total of the
capital financing requirement in the preceding year plus the estimates of any additional capital financing requirement for the current and next two financial
years):

(£m) 2019-20 2020-21 2021-22 2022-23 2023-24


Actual Projected Estimate Estimate Estimate
Gross Debt at 31 March 5,202.8 5,155.1 4,814.6 4,467.6 4,193.6
Capital Financing Requirement 5,204.9 5,267.4 5,995.9 6,029.7 5,889.3
Table of Headroom vs. Borrowing Limits

(£m) 2019-20 2020-21


Actual Projected
Gross Debt at 31 March 5,202.8 5,155.1
Authorised Limit 6,100.0 6,100.0
Headroom 897.2 944.9
Operational Boundary 5,700.0 5,700.0
Headroom 497.2 544.9

Also subject to various other affordability indicators - e.g. Ratio of Financing Costs to Net Revenue Stream (currently around 22% and rising) and Limits for
Maturity Structure of Borrowing (stricter limits on shorter maturities).
Offset against the value of the GLA investment portfolio (c. £4.0bn), the total net borrowing level is c. £1.2bn.
Total debt servicing costs (interest + principal repayments) budgeted across GLA (excl. TfL) for 2021-22 = £0.63bn (£210m just in interest).
6. Transport for London (TfL)

Overview
▪ Mayor serves as Chairman of Board and has statutory authority to set transport fares and road-user charges (CC/LEZ/ULEZ).
▪ In accordance with TfL's Standing Orders, the Board delegates to the Chief Officers the discharge of core functions and day-to-day management of the
business of the TfL Group.
▪ Chief Finance Officer responsible for financial management, including treasury/investments/borrowing, subject to scrutiny by the Finance Committee.
▪ Borrowing strategy independent of GLA/GIS but subject to same codes/principles/sources/prudential indicators.
▪ Authorised Limits and Operational Boundaries for external debt set by Mayor.

Funding
Total budget of £10.3bn (£7.5bn revenue expenditure + £2.8bn capital spending)
Revenue sources annually (pre-pandemic) were:
▪ Fares/passenger income (c. £4.9bn - 47%) - Mayor froze for duration of term + maintained concessions
▪ Congestion charge/road network charges/commercial activity/sponsorship (c. £1.2bn - 12%)
▪ Grants including Crossrail/Northern Line/Retained Business Rates/Council Tax Precept (c. £3.4bn - 33%)
▪ Borrowing & cash reserves (c. £0.9bn - 8%)
(N.B. operating grant from the Department for Transport finished at the end of the 2017-18 financial year.)
The Problems
▪ Lockdown-induced impact on passenger income - forecast to be £1.5bn in 2020-21 (vs. previously budgeted £5.0bn).
▪ Resulting shortfall of >£3bn plugged by Gov bailout/"extraordinary grant" of c. £2.6bn (+ additional borrowings/cost savings/use of reserves).
▪ Passenger income is anticipated to rise to £3.3bn in 2021-22, but a similar shortfall of £3bn is again expected and a further Gov £2.9bn bailout is already
budgeted; TfL compromised in 2021-22 by limited reserves to draw on (£80m in 2021-22 vs. £650m in 2020-21) and by determination to undertake
virtually zero new incremental borrowing (outside of special DfT Crossrail scheme) due to affordability issues, and to refinance all debt maturities
until 2024/25 because “It is unlikely that we will have sufficient resources to make any principal repayments in the next few years.” £360m of debt
maturities in 2021-22 (excluding commercial paper).
▪ As of 19 February 2021 (datapoint for most recent Finance Committee Meeting) gross outstanding borrowing was £12.9bn, with a weighted average
maturity of 17 years and an average interest rate of 3.3%; expected to rise to £13.1bn by end of financial year 2020-21.
▪ This is within the £14.5bn Authorised Limit set by the Mayor, but total debt servicing costs (interest + principal repayments) budgeted for TfL in 2021-
22 = £0.6bn (£540m just in interest).
▪ Shortfall of £1.5bn identified for 2022-23; £1.6bn from 2023 onwards.

Current status
Through ongoing negotiations, TfL has outlined a £15.8bn multi-year funding package from UK government on a new funding model, in exchange for producing
a long-term Financial Sustainability Plan to prove how it will become self-sufficient in the long run. Given the bailout conditions set in the 2020-21 agreements
(£250m of savings required in second half of year alone), previous Mayoral licence/flexibility over setting of fares and other charges is highly likely to be
compromised.
“Let’s be really frank about this - there is no negotiation. We are answering myriad questions, literally hundreds of questions for clarification. But there is no
negotiation per se.” Andy Byford, Commissioner of Transport for London

“We now have very few growth projects left. As a starting point, this will not deliver the MTS (Mayor’s transport strategy). There remains a sizable risk we don’t
have enough money to complete Crossrail as things currently stand.” Simon Kilonback, Chief Finance Officer, Transport for London
Sources include:

Greater London Authority Act 1999; Greater London Authority Final Draft Consolidated Budget 2021-22 (February 2021); The Greater London Authority Consolidated
Budget and Component Budgets for 2020-21 (March 2020); GLA: MAYOR BUDGET, 2021-22; The Mayor of London’s Capital Spending Plan 2021-22 (February 2021); The
Local Government Finance Report (England) 2021/2022; The Referendums Relating to Council Tax Increases (Principles) (England) Report 2021/22; Police Grant Report
(England and Wales) 2021/22; TREASURY MANAGEMENT STRATEGY STATEMENT FOR 2021-22 (MD2792, March 2021); Greater London Authority Statement of Accounts
2019/20 (Audited - November 2020); Transport for London Budget 2020/21 (April 2020); Transport for London Annual Report and Statement of Accounts 2019/20 (July
2020); Transport for London Finance Committee Finance Report Period 11, 2020/21 (March 2021); Transport for London Settlement Letter (Department for Transport -
October 2020); Transport for London Financial Sustainability Plan (January 2021); Transport for London Board Finance Report Period 11, 2020/21 (March 2021); ); TfL
TREASURY MANAGEMENT STRATEGY STATEMENT FOR 2020-21; TfL TREASURY MANAGEMENT POLICIES; Planning for political transition in May 2021: A guide for Mayoral
and Assembly candidates (First guide for mayoral and assembly candidates – January2021);
www.london.gov.uk; www.tfl.gov.uk; www.londonelects.org.uk; www.londoncouncils.gov.uk; www.centreforlondon.org; www.instituteforgovernment.org.uk; www.lond
onreconnections.com; www.onlondon.co.uk; www.legislation.gov.uk; https://assets.publishing.service.gov.uk; www.gov.uk.

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Cover photograph: © User:Colin / Wikimedia Commons