Fare rise fears over '£1.7bn gap'

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London's transport network faces a potential funding gap of £1.7bn by 2018 because of the effects of the recession, a report has warned.

The London Assembly (LA) said the shortfall could lead to increased fares and a reduction in services.

It said a freeze in fares next year under a formula linked to inflation meant income loss could "spiral".

Transport for London (TfL) said the LA figures were inaccurate and it would "closely monitor the economic outlook".

The LA's budget and performance committee said funding problems will leave Mayor Boris Johnson and TfL with a "difficult decision" to make.

Londoners need to know what the options are, especially since they will have to bear the burden of any increase Committee chairman John Biggs

Options would include increasing fares at a rate "significantly higher" than inflation, cutting services, deferring or cancelling planned improvements and expansions and finding greater efficiency savings in addition to £2.5bn already required.

Committee chairman John Biggs said: "Finding ways to plug the gap that do not impact on services or place a large financial burden on fare payers will be difficult.

"The mayor is not required to consult with Londoners about the fares, but we feel it is essential that he does so.

"Londoners need to know what the options are, especially since they will have to bear the burden of any increase."

Jobs fear

Keith Norman, general secretary of the train drivers' union Aslef, said the report made "depressing" reading, and warned against any "planned neglect" of the Tube and other transport systems.

The Rail Maritime and Transport union said it believed the funding gap for transport in London could reach £6bn which it warned threatened to "wreck" modernisation schedules and plans for the 2012 Olympics, as well as threatening thousands of jobs losses.

It is unrealistic to predict that the economic climate will remain stationary until 2018 Mayoral transport advisor Kulveer Ranger

The mayor's transport advisor Kulveer Ranger said: "The mayor has made his commitment to ensuring that fares remain fair and affordable very clear."

He added: "Every organisation has to deal with changing economic conditions.

"But it is unrealistic to predict that the economic climate will remain stationary until 2018. Therefore it is inappropriate to propose options based on that assumption."

TfL's Managing Director of Finance, Steve Allen, said a £112m "shortfall" mentioned in the LA report has "already been dealt with" in its budget for 2009-10.

"Therefore, we do not recognise the Assembly's range of numbers," Mr Allen said.

He added: "Clearly TfL is not immune from changing economic conditions and, among other things, we continue to seek further savings and efficiencies over and above the £2.4bn we are already delivering.

"However, lower RPI (Retail Price Index) means that we also benefit from some lower costs."