In exchange, the mayor agreed to continue work on the introduction of driverless trains, as well as accepting the need for pension reforms that have angered the unions. Despite accepting the offer, Khan warned that the package was “less than ideal” and would not plug a “significant funding gap”, likely leading to an increase in fares and cuts to some bus services.
“There are also unnecessary and damaging strings attached to this deal, none more malicious than the government trying to force TfL to rush through significant reform to TfL’s pension scheme,” he said.
“It’s no secret that conditions placed on TfL as part of previous deals have been a primary motivator for strikes by transport workers. This latest deal seems designed to provoke further industrial action, which would lead to more disruption, misery for commuters, and economic damage.”
In a letter to Khan laying out the terms of the deal, Shapps reiterated that the mayor’s own independent report in 2020 found the TfL Pension Scheme to be “expensive, outdated and in need of modernisation”.
As part of the funding package, TfL has agreed to “consider the findings” of the most recent independent review and, by September 13, to “provide a response to the final report alongside a work plan, setting out the steps that would be necessary for moving TfL’s pension fund into a long-term, financially sustainable position”, the letter explained.
“This work plan must include detail on what resources will be committed to achieving this objective,” it added.
A meeting between the government and TfL will then take place on September 20 to discuss the proceeding and agree next steps. TfL will then have until September 30 to submit “two categories of options for future service reform with no more than two sub-options under each, all of which will aim to reduce future service liabilities by circa £100mn”.
TfL will be required to explain why it has ruled out other potential avenues for reform. It will also be required to set out the core design principles for each sub-option chosen, including salary risk, retirement age, indexation and possible accrual rates. Additionally, it will be required to set out its assessment of how each sub-option meets certain criteria, including deliverability, affordability, sustainability and fairness, and how these compare with “other equivalent pension schemes”.
Finally, it will have to set out its view “on what [government] support is needed to progress the shortlisted options alongside proposals for how past service liabilities will be managed under these proposals”, the letter said.
