Ken's Fare Deal And That Rating Agency Assessment

Rachel Holdsworth
By Rachel Holdsworth Last edited 84 months ago
Ken's Fare Deal And That Rating Agency Assessment

Yesterday's Evening Standard splashed with the news that rating agency Moody's had "damned" Ken Livingstone's plans to cut transport fares. The ES says the report, which came out in January, claims

Transport for London faces years of financial turmoil and even economic collapse if the cuts go ahead... Moody’s, which delivers verdicts on the financial health of organisations, is warning that any fall in TfL revenue could put its credit rating under pressure.

Yes and no. What the Standard has picked up on is Moody's' assessment (PDF) of what could cause TfL's credit rating to fall – and therefore raise the amount of interest it has to pay on loans:

TfL's rating could be lowered were it to take on a substantially higher financial burden in its financial projections, were the UK government to signal a clear dilution of its support for TfL or were TfL to under-perform persistently in meeting operational or financial goals.

which is the same wording Moody's has used since it started reporting on TfL in 2008 (PDF). Moody's has not been "spooked", it's just repeated the same common sense line it's used for the last five years. TfL's debt is already rising: from £3.9bn in 2009 to £6.4bn in 2011, and with central government grants falling, TfL's business plan relies on fare revenues increasing. That can happen two ways: you put fares up, and/or you get more people travelling.

The ES goes on to quote Moody's saying:

TfL also functions in a highly politicised environment, which may affect the levels at which it may set fares

which comes from the preamble to a February report explaining the rationale behind their rating assessment. The rest of the text is paid for – we're not shelling out cash for it (maybe the ES did) but if we look back at the January credit report there's a section explaining that the "political environment of urban public transport" is why TfL is unlikely to ever get the same (top) rate of credit as the UK government.

Interestingly, Moody's credit report says TfL underspent by 8% in 2010/11 and that revenues are rising, so Ken's campaign are using the same report to back their fare rise oops cut plans.

London's Chamber of Commerce and Industry also recently published its list of wants from the next Mayor: on transport (PDF) they want investment in infrastructure prioritised over low fares. On this issue, business backs Boris.

Photo by Mix Master B from the Londonist Flickr pool

Last Updated 13 March 2012