The British government is offering Transport for London (TfL) an additional £1bn ($1.3bn) bailout in exchange for increased fares and curbing remaining free travel entitlements for children and pensioners.
Ministers have told TfL, which operates the transport system in the capital, to introduce the reforms in order to secure a rescue deal for the second time this year.
The transport operator received a £1.6bn government bailout in May, which was set to expires on October 17, as its finances came under pressure. It has now been granted a two week extension in an attempt to conclude discussions.
The government is also said to be demanding the extension of London’s congestion charge zone as part of the proposal.
A source from the office of London mayor Sadiq Khan, cited by Reuters, said: “Negotiations are ongoing to do a deal to keep TfL services running.”
“Conditions such as extending a £15 congestion charge to the North and South Circular and taking free travel away from children and older people would be totally unacceptable to the mayor”, the source said. They asked not to be identified.
As people were told to stay at home between March and July, in a bid to prevent the spread of coronavirus, TfL’s income nose dived by 90%.
Last month, Khan said TfL would require as much as £5.7bn over the next 18 months if the capital’s transport system was to outlast the health crisis.
Without a renewed cash injection TfL would be forced to issue a Section 114 order. This is the equivalent of bankruptcy.
A TfL spokesman said: “We continue to discuss our funding requirements with the government and hope these discussions can be concluded successfully soon, so we can help London through the next phase of the pandemic.
“We have today agreed with the government that our funding will be extended for two weeks so that these constructive discussions can be concluded.”
This weekend London will be placed under Tier 2 restrictions, meaning that people will be banned from socialising with other households in indoor settings, including pubs and restaurants. The restrictions are likely to magnify TfL’s funding dilemma.
TfL costs were still running at a staggering £600m a month during lockdown. It is expected to lose £4bn this year.
The transport authority furloughed around 7,000 of its staff and halted hundreds of construction projects as it battled to save money.
Watch: Coronavirus restrictions tighten in London