Transport for LondonNotes to the Accounts
Skip to navigation1) Segmental analysis
| Sales revenue 2005/06 £m |
Sales revenue 2004/05 £m |
Net operating expenditure 2005/06 £m |
Net operating expenditure 2004/05 £m |
Net assets excluding grants 2005/06 £m |
Net assets excluding grants 2004/05 £m | |
|---|---|---|---|---|---|---|
|
Streets |
311.5 | 250.8 | (401.4) | (424.6) | 1,616.4 | 1,825.4 |
| Other | 24.0 | 20.7 | (150.6) | (120.8) | 1,623.5 | 1,335.3 |
| Corporation | 335.5 | 271.5 | (552.0) | (545.4) | 3,239.9 | 3,160.7 |
|
Subsidiary operations |
||||||
| Bus operations | 961.1 | 892.6 | (597.3) | (549.2) | 93.1 | 115.7 |
| London Underground | 1,405.2 | 1,351.7 | (747.6) | (748.3) | 8,167.8 | 8,103.3 |
| Docklands Light Railway | 15.2 | 12.8 | (41.6) | (33.6) | 416.9 | 436.0 |
| Other | 20.6 | 25.9 | (37.0) | 3.1 | 174.2 | 207.0 |
| Joint venture | ||||||
| Cross London Rail Links | - | - | (22.9) | (22.1) | - | - |
| Loss on sale of fixed assets | - | - | (3.9) | (5.5) | - | - |
| Group | 2,737.6 | 2,554.5 | (2,002.3) | (1,901.0) | 12,091.9 | 12,022.7 |
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2) Group sales revenue
| Note | 2005/06 £m |
% of total | 2004/05 £m |
% of total | |
|---|---|---|---|---|---|
| Fares | 2,0680 | 75.5 | 1,959.1 | 76.3 | |
|
Revenue in respect of free travel for older and disabled people |
184.1 | 6.7 | 173.2 | 6.8 | |
|
Congestion Charging |
25 | 254.1 | 9.3 | 218.1 | 8.5 |
|
Charges to London boroughs |
11.1 | 0.4 | 11.4 | 0.4 | |
|
Charges to transport operators |
7.4 | 0.3 | 9.9 | 0.4 | |
|
Bus enforcement |
45.8 | 1.7 | 20.6 | 0.8 | |
|
Commercial advertising receipts |
53.1 | 1.9 | 50.6 | 2.0 | |
|
Rents receivable |
52.5 | 1.9 | 47.3 | 1.9 | |
|
Taxi licensing |
15.5 | 0.6 | 10.3 | 0.4 | |
|
Museum income |
1.7 | 0.1 | 3.0 | 0.1 | |
|
Other |
44.3 | 1.6 | 61.0 | 2.4 | |
| Total sales revenue | 2,737.6 | 100 | 2,554.5 | 100 |
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3) Expenditure
| Note | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|---|
|
Staff costs: |
|||||
| Wages and salaries | 617.2 | 577.1 | 103.9 | 93.9 | |
| Social security costs | 52.0 | 48.3 | 9.4 | 8.4 | |
| Pension costs | 23a | 120.8 | 107.5 | 19.5 | 24.0 |
| 790.0 | 732.9 | 132.8 | 126.3 | ||
| Operating leases and PFI charges | 276.2 | 254.7 | 13.8 | 52.4 | |
| Financial assistance to boroughs and other third parties | 26 | 190.0 | 164.3 | 190.0 | 164.3 |
| Supplies and services | 4,962.5 | 4,195.4 | 788.9 | 600.2 | |
| 6,218.7 | 5,347.3 | 1,125.5 | 943.2 | ||
| Capital expenditure | 11a,b | (1,784.9) | (1,157.4) | (278.5) | (160.8) |
| Expenditure charged to revenue | 4,433.8 | 4,189.9 | 847.0 | 782.4 |
| Note | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|---|
|
The cost of operations include the following amounts: |
|||||
| Auditors' remuneration for statutory audit services | 0.8 | 0.9 | 0.4 | 0.4 | |
| Auditors' remuneration for non-statutory audit services | 0.1 | 0.1 | - | - | |
| Auditors' remuneration for non-audit services | 0.1 | - | - | - | |
| 1.0 | 1.0 | 0.4 | 0.4 |
The Group leases certain properties on short-term and long-term leases. The rents payable on these leases were £32.5m (2004/05 £27.0m). The rents payable under these leases are subject to renegotiation at various intervals specified in the leases. The Group pays all insurance, maintenance and repairs of these properties.
Total operating lease rentals for the Group included in the revenue account were £243.7m (2004/05 £227.7m). Payments under these lease agreements, which include the cost of routine maintenance and repairs, are charged to revenue over the period of the leases from the time the assets become operational.
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4) Asset management revenue account
| Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|
|
Depreciation reversal |
158.0 | 138.5 |
| Capital financing charge reversal | 87.6 | 83.7 |
| Reversal of notional capital charge for use of assets | 245.6 | 22.2 |
| Depreciation | (158.0) |
(138.5) |
| Amortisation of deferred capital grants | 73.1 | 54.2 |
| Third-party interest payable | (10.2) | (2.9) |
| 150.5 | 135.0 |
The asset management revenue account is required by the SORP in the Corporation revenue account to reverse the notional capital charge for use of assets included in net cost of services and replace it with depreciation net of amortisation of deferred capital grants and external interest costs.
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5) Employees' renumeration
Employees' remuneration, which includes their salaries, fees, performance bonus, benefits in kind, lump sums and termination payments, but excludes pension contributions paid by employer and employee, fell within the following bands:
| £ | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m |
|---|---|---|---|---|
| 50,000 - 59,000 | 405 | 274 | 144 | 121 |
|
60,000 - 69,999 |
171 | 131 | 78 | 60 |
| 70,000 - 79,999 | 84 | 81 | 45 | 36 |
| 80,000 - 89,999 | 64 | 37 | 26 | 16 |
| 90,000 - 99,999 | 21 | 24 | 11 | 17 |
| 100,000 - 109,999 | 11 | 24 | 5 | 11 |
| 110,000 - 119,999 | 18 | 15 | 8 | 8 |
| 120,000 - 129,999 | 7 | 7 | 5 | 6 |
| 130,000 - 139,999 | 10 | 5 | 5 | 1 |
| 140,000 - 149,999 | 7 | 4 | 3 | 4 |
| 150,000 - 159,999 | 3 | 2 | 3 | 1 |
| 160,000 - 169,999 | 2 | 4 | 2 | 4 |
| 170,000 - 179,999 | 3 | 3 | 2 | 2 |
| 180,000 - 189,999 | - | 1 | - | 1 |
| 190,000 - 199,999 | 2 | 1 | 1 | 1 |
| 200,000 - 209,999 | 2 | 2 | 1 | 1 |
| 210,000 - 219,999 | 1 | - | - | - |
| 220,000 - 229,999 | 2 | 1 | - | 1 |
| 240,000 - 249,999 | 2 | - | - | - |
| 260,000 - 269,999 | - | 1 | - | - |
| 310,000 - 319,999 | 1 | 1 | 1 | 1 |
| 320,000 - 329,999 | - | 2 | - | 1 |
| 330,000 - 339,999 | 1 | - | 1 | - |
| 350,000 - 359,999 | 1 | - | 1 | - |
| 390,000 - 399,999 | 1 | - | - | - |
| 450,000 - 459,999 | 1 | - | 1 | - |
| 690,000 - 699,999 | - | 1 | - | 1 |
| 1,720,000 - 1,729,999 | 1 | - | 1 | - |
| Total | 821 | 621 | 344 | 295 |
The SORP requires the above disclosure for only the Corporation's employees. The impact of the transfer of employees into and out of the Corporation from subsidiaries can cause distortion for year-on-year comparison.
Consequently, an additional voluntary disclosure for the Group has been provided that shows the combined employee bands for TfL and its subsidiaries.
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6) Minimum revenue provision
| Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|
|
Minimum revenue provision @ 4 per cent |
3.2 | - |
| 3.2 | - | |
| Amount charged as depreciation | 158.0 | 138.5 |
| Amortisation of deferred capital grant | (73.1) | (54.2) |
| Appropriation of fixed asset restatement account | (79.9) | (81.7) |
| Appropriation of capital financing account | (1.8) | (2.6) |
| 3.2 | - |
The Local Government and Housing Act 1989 requires a Minimum Revenue Provision (MRP) to be set aside for the redemption of external debt. This amount is calculated as a percentage (currently 4 per cent) of the Authority's Capital Financing Requirement of £79.1m.
The SORP requires that the provision for depreciation be regarded as part of MRP, with the difference being a charge or credit to the revenue account. This ensures that the revenue account is charged with no more than the amount required for the repayment of debt. This sum should replace the depreciation charged to services in respect of the Corporation in the revenue account.
The transfer from the capital financing account reduces the charge in the Group revenue account to the statutory minimum.
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7) Allocation of transport grant received
| Note | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|---|
| Grant from Department for Transport applied to fund revenue expenditure | 1,974.6 | 2,121.3 | 1,974.6 | 2,121.3 | |
| Grant from Department for Transport taken to deferred grants | 17 | 205.8 | 138.8 | - | 35.5 |
| Grant from Department for Transport used to fund capital expenditure in subsidiaries and joint venture | - | - | 205.8 | 103.3 | |
| Total transport grant received | 2,180.4 | 2,260.1 | 2,180.4 | 2,260.1 |
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8) Interest and investment income
| Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|
|
Interest and investment income: |
||||
| Interest receivable and investment income | (58.2) | (55.4) | (55.0) | (52.6) |
| (58.2) | (55.4) | (55.0) | (52.6) |
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9) Interest payable and similar charges
| Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|
|
Interest payable and similar charges: |
||||
| Imputed interest on finance lease creditors | 104.0 | 61.6 | - | - |
| Interest payable | 10.2 | 4.1 | - | - |
| 114.2 | 65.7 | - | - |
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10) Taxation
The Corporation is exempt from corporation tax but the subsidiaries are assessable individually to taxation in accordance with the Income and Corporation Taxes Act 1988. No liability for corporation tax arises in respect of the current year.
At 31 March 2006 the Group had a deferred tax asset in respect of capital allowances of £43.3m (2004/05 £31.0m).
No deferred tax asset is accounted for, as it is not believed that such an asset would be recoverable in the foreseeable future.
The full potential liability for deferred taxation in respect of potential capital gains on revalued fixed assets has not been quantified as no tax liability is expected to arise due to the availability of rollover relief.
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11) Tangible fixed assets
a) Group
| Note | Infrastructure and other property £m |
Rolling stock £m |
Plant and equipment £m |
Non-operational assets £m |
Total £m | |
|---|---|---|---|---|---|---|
|
Gross cost or valuation |
||||||
| Balance at 1 April 2005 | 17,782.3 | 3,101.7 | 915.2 | 789.6 | 22,588.8 | |
| Additions to fixed assets | 1,342.6 | 135.6 | 98.1 | 208.6 | 1,784.9 | |
| Disposals | (109.7) | (3.0) | (63.5) | (20.1) | (196.3) | |
| Transfers and adjustments | 20.2 | 4.1 | (0.4) | (23.9) | - | |
| Revaluation | 16.8 | - | - | 36.3 | 53.1 | |
| Gross cost or valuation at 31 March 2006 | 19,052.2 | 3,238.4 | 949.4 | 990.5 | 24,230.5 | |
| Depreciation | ||||||
| Balance at 1 April 2005 | 7,472.9 | 1,808.9 | 470.9 | 0.2 | 9,752.9 | |
| Disposals | (74.2) | (3.0) | (62.4) | (0.2) | (139.8) | |
| Depreciation charge | 11c | 383.8 | 74.8 | 91.6 | - | 550.2 |
| Revaluation | (4.3) | - | - | - | (4.3) | |
| Balance at 31 March 2006 | 7,778.2 | 1,880.7 | 500.1 | - | 10,159.0 | |
| Net book value at 31 March 2006 | 11,274.0 | 1,357.7 | 449.3 | 990.5 | 14,071.5 | |
| Net book value at 31 March 2005 | 10,309.4 | 1,292.8 | 444.3 | 789.4 | 12,835.9 |
PPP assets and leased assets The net book value above includes the following amounts in respect of leased assets and assets allocated to PPP contractors:
| Infrastructure and other property £m |
Rolling stock £m |
Plant and equipment £m |
Non-operational assets £m |
Total £m | |
|---|---|---|---|---|---|
|
Gross cost |
|||||
| PPP assets | 12,976.5 | 3,118.0 | 288.6 | 512.5 | 16,895.6 |
| Leased assets | 144.9 | 45.3 | 228.2 | - | 418.4 |
| 13,121.4 | 3,163.3 | 516.8 | 512.5 | 17,314.0 | |
|
Depreciation |
|||||
| PPP assets | 5,448.8 | 1,848.3 | 142.9 | - | 7,440.0 |
| Leased assets | 2.2 | 14.2 | 28.6 | - | 45.0 |
| 5,451.0 | 1,862.5 | 171.5 | - | 7,485.0 | |
| Net book value at 31 March 2006 | 7,670.4 | 1,300.8 | 345.3 | 512.5 | 9,829.0 |
| Net book value at 31 March 2005 | 6,964.8 | 1,212.4 | 192.2 | 415.6 | 8,785.0 |
b) Corporation
| Note | Infrastructure and other property £m |
Plant and equipment £m |
Non-operational assets £m |
Total £m | |
|---|---|---|---|---|---|
|
Gross cost or valuation |
|||||
| Balance at 1 April 2005 | 3,667.6 | 152.1 | 74.0 | 3,893.7 | |
| Additions to fixed assets | 168.2 | 68.3 | 42.0 | 278.5 | |
| Disposals | (31.3) | (11.0) | (13.0) | (55.3) | |
| Transfers and adjustments | 4.5 | - | (4.5) | - | |
| Revaluation | 2.8 | - | 0.7 | 3.5 | |
| Gross cost or valuation at 31 March 2006 | 3,811.8 | 209.4 | 99.2 | 4,120.4 | |
| Depreciation | |||||
| Balance at 1 April 2005 | 1,565.1 | 49.6 | 0.2 | 1,614.9 | |
| Disposals | (22.2) | (10.9) | (0.2) | (33.3) | |
| Depreciation charge | 11c | 119.1 | 38.9 | - | 158.0 |
| Revaluation | (1.3) | - | - | (1.3) | |
| Balance at 31 March 2006 | 1,660.7 | 77.6 | - | 1,738.3 | |
| Net book value at 31 March 2006 | 2,151.1 | 131.8 | 99.2 | 2,382.1 | |
| Net book value at 31 March 2005 | 2,102.5 | 102.5 | 73.8 | 2,278.8 |
c) Depreciation charge
| Note | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|---|
| Depreciation for the period: | |||||
| - on the historical cost of depreciated fixed assets | 114.7 | 93.2 | 158.0 | 138.5 | |
| - on the revalued element of depreciated fixed assets | 118.2 | 120.4 | - | - | |
| - on assets allocated to PPP contractors | 308.7 | 304.0 | - | - | |
| - on assets held under finance leases | 8.6 | 6.8 | - | - | |
| Total depreciation charge | 11a,b | 550.2 | 524.4 | 158.0 | 138.5 |
| Less: release of deferred grants | 17 | (334.8) | (310.6) | (73.1) | (54.2) |
| Depreciation net of release of deferred grants | 215.4 | 213.8 | 84.9 | 84.3 |
d) Historical costs of assets
The historical cost of assets is the original cost to the subsidiary that acquired the assets, together with the fair value of the assets transferred to the Corporation on 3 July 2000 and the cost of subsequent additions.
| Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|
| Infrastructure and other property | 14,235.8 | 12,939.3 | 3,811.6 | 3,670.2 |
| Rolling stock | 2,034.0 | 1,894.9 | - | - |
| Plant and equipment | 845.5 | 819.7 | 209.4 | 152.1 |
| Non-operational assets | 744.1 | 574.1 | 69.7 | 45.2 |
| Gross cost | 17,868.4 | 16,228.0 | 4,090.7 | 3,867.5 |
| Less accumulated depreciation | (5,069.8) | (4,679.2) | (1,739.6) | (1,614.8) |
| Net written down cost | 12,798.6 | 11,548.8 | 2,351.1 | 2,252.7 |
e) Group assets
| Group 2006 Number |
Group 2005 Number | |
|---|---|---|
|
Railway carriages |
4,164 | 4,077 |
| Track route length (kilometres) | 438 | 434 |
| Railway stations | 291 | 287 |
| Bridges and viaducts | 1.991 | 1,991 |
| Roads (kilometres) | 580 | 580 |
| Car ferries | 3 | 3 |
| Buses | 517 | 515 |
| Bus stations and stands | 100 | 99 |
| Bus shelters | 9,046 | 8,732 |
| Offices | 130 | 135 |
| Piers | 9 | 9 |
f) Capital expenditure analysed by source of finance
| Note | Group 2005/06 £m |
Group 2004/05 £m |
Corporation 2005/06 £m |
Corporation 2004/05 £m | |
|---|---|---|---|---|---|
| Analysis by source of finance: | |||||
| Transport capital grants | 0.4 | 138.8 | - | 35.6 | |
| Prudential borrowing | 550.0 | 195.6 | 260.6 | 104.2 | |
| Finance leases - PPP | 887.6 | 712.1 | - | - | |
| - other | 146.8 | - | - | - | |
| Third-party contributions | 157.5 | 102.6 | 7.1 | 5.7 | |
| Capital receipts and revenue contributions | 42.6 | 8.3 | 10.8 | 15.3 | |
| 11a,b | 1,784.9 | 1,157.4 | 278.5 | 160.8 |
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12) Investment in subsidiaries and joint venture
| Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|
|
Balance at 1 April 2005 |
- | - | 22.5 | 22.5 |
| Share of gross assets of joint venture | 8.5 | 6.3 | - | - |
| Share of gross liabilities of joint venture | (8.5) | (6.3) | - | - |
| Balance at 31 March 2006 | - | - | 22.5 | 22.5 |
The Group's subsidiaries and joint venture are:
| Subsidiaries | Principal activity |
|---|---|
| Transport Trading Limited | Holding company |
| London Underground Limited | Passenger transport by underground train |
| London Bus Services Limited | Passenger transport by bus |
| Docklands Light Railway Limited | Passenger transport by rail |
| Victoria Coach Station Limited | Coach station |
| London River Services Limited | Pier operator |
| London Buses Limited | Bus operator and Dial-a-Ride |
| London Transport Insurance (Guernsey) Limited | Insurance |
| Joint venture | |
| Cross London Rail Links Limited | Develop and promote new rail links across London |
The Corporation owns all the ordinary share capital of its subsidiaries. Transport Trading Limited holds 50 per cent of the share capital of the joint venture. The accounts of these companies are lodged at Companies House. TfL has given assurances of financial support to the boards of all the subsidiary companies listed above. The statutory accounts for these companies for the year ended 31 March 2006 all received unqualified audit opinions.
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13) Stocks
| Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|
|
Maintenance stores |
4.7 | 4.6 | 2.5 | 2.9 |
| Goods purchased for resale | 0.4 | 0.4 | - | - |
| 5.1 | 5.0 | 2.5 | 2.9 |
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14) Debtors
| Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|
|
Trade debtors |
265.6 | 266.4 | 48.3 | 31.1 |
|
Amounts due from subsidiary companies |
||||
| - loans | - | - | 380.8 | 91.4 |
| - other | - | - | - | 6.9 |
| Prepayments and accrued income | 36.0 | 72.0 | 3.6 | 17.1 |
| 301.6 | 338.4 | 432.7 | 146.5 |
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15) Cash at bank and in hand
| Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|---|
|
Cash at bank |
12.0 | 9.9 | 3.4 | 8.0 | |
| cash in hand and in transit | 12.0 | 14.1 | 0.1 | 0.1 | |
| 19b,20 | 24.0 | 24.0 | 3.5 | 8.1 |
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16) Creditors
| a) Amounts falling due within one year | Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| Trade creditors | 791.2 | 690.0 | 222.2 | 167.2 | |
| Capital works | 263.2 | 216.9 | 109.0 | 100.5 | |
| Amounts due to subsidiary companies | - | - | 16.3 | - | |
| Finance lease obligations repayable within one year | 19 | 544.7 | 453.7 | - | - |
| Salaries and wages | 13.4 | 12.6 | 3.9 | 2.6 | |
| Receipts in advance for travelcards and bus passes | 87.0 | 84.3 | - | - | |
| 1,699.5 | 1,457.5 | 351.4 | 270.3 |
| b) Amounts falling due after more than one year | Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| Retentions on capital contracts | 0.3 | 4.1 | 0.3 | 4.2 | |
| Accruals and deferred income | 17.9 | 7.6 | 4.4 | 4.2 | |
| Finance lease obligations | 19 | 1,249.6 | 624.8 | - | - |
| 1,267.8 | 636.5 | 4.7 | 8.4 |
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17) Deferred grants
| Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|---|
| Balance at 1 April | 6,681.7 | 6,766.8 | 477.5 | 491.6 | |
| Transport grant | 7 | 205.8 | 138.8 | - | 35.5 |
| Third-party contributions and other grant funding | 157.5 | 102.6 | 7.1 | 5.7 | |
|
Transfer from subsidiary |
- | - | - | (1.0) | |
|
Release of deferred grant: |
|||||
| - to meet the depreciation | 11c | (334.8) | (310.6) | (73.1) | (54.2) |
| - on disposal of tangible fixed assets | (15.1) | (15.9) | - | (0.1) | |
|
Balance at 31 March |
6,695.1 | 6,681.7 | 411.5 | 477.5 |
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18) Provisions for liabilities and charges
| Note | At 1 April 2005 £m |
Payments in year £m |
Increase/(decrease) in provision £m |
At | |
|---|---|---|---|---|---|
| Group | |||||
| Claims for compensation | 132.8 | (17.2) | 69.6 | 185.2 | |
| Capital investment activities | 35.8 | (5.6) | (10.3) | 19.9 | |
| Unfunded pension liabilities | 23f | 40.2 | (3.2) | 0.3 | 37.3 |
| Other | 8.7 | (1.7) | 10.8 | 17.8 | |
| 217.5 | (27.7) | 70.4 | 260.2 | ||
| Corporation | |||||
| Claims for compensation | 43.9 | (8.3) | 26.2 | 61.8 | |
| Capital investment activities | 30.1 | (5.4) | (9.8) | 14.9 | |
| Unfunded pension liabilities | 26.2 | (2.2) | (3.1) | 20.9 | |
| Other | 1.5 | (0.7) | 13.4 | 14.2 | |
| 101.7 | (16.6) | 26.7 | 111.8 |
Claims for compensation include provisions in respect of disputes in the ordinary course of business relating to projects and contracts for which the outcome is uncertain. While a claim is ongoing TfL is unable to disclose the quantum or timing of any possible settlement as this could prejudice its commercial position.
Capital investment activities includes compulsory purchases, claims in respect of structural damage or diminution in value of properties affected by transport schemes, and other related third-party claims.
Details of unfunded pension liabilities are given in Note 23. Other provisions include the long-term charges to Train Operating Companies and dilapidations on full repairing leases.
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19) Borrowings
The carrying value and maturity of Group debt are as follows:
| Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|---|
|
a) Amounts falling due within one year |
|||||
| Finance lease obligations | 16a | 544.7 | 435.7 | - | - |
| 544.7 | 435.7 | - | - | ||
|
b) Amounts falling due after more than one year |
|||||
| Finance lease obligations | 16b | 1,249.6 | 624.8 | ||
| Loan Notes, loans from Public Works Loan Board and Bank Project Finance | 745.9 | 195.6 | 745.9 | 195.6 | |
| 1,995.5 | 820.4 | 745.9 | 195.6 | ||
| Total borrowings | 2,540.2 | 1,274.1 | 745.9 | 195.6 | |
| Investments - deposits | (1,663.1) | (1,326.5) | |||
| Cash at bank and in hand | 15 | (24.0) | (24.0) | ||
| Net borrowing/(funds) | 853.1 | (76.4) |
| Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|---|
|
Borrowings analysed by maturity: |
|||||
| Within one year | 544.7 | 453.7 | - | - | |
| Between one and two years | 890.7 | 225.3 | - | - | |
| Between two and five years | 19.2 | 199.0 | - | - | |
| Between five and ten years | 70.1 | 59.1 | - | - | |
| Over ten years | 1,015.5 | 337.0 | 745.9 | 195.6 | |
| 2,540.2 | 1,274.1 | 745.9 | 195.6 | ||
|
Borrowings analysed by source: |
|||||
| Finance lease - PPP | 1,426.3 | 857.7 | - | - | |
| Finance lease - Other | 368.0 | 220.8 | - | - | |
| Bank Project Finance | 18.1 | - | 18.1 | - | |
| Public Works Loan Board | 334.4 | - | 334.4 | - | |
| Loan Notes | 393.4 | 195.6 | 393.4 | 195.6 | |
| 2,540.2 | 1,274.1 | 745.9 | 195.6 |
The increase in obligations under finance leases principallyreflects the level of fixed asset additions provided by the PPPcontractors during the year net of the capital element of theannual payments to these contractors, and assets providedunder a Private Finance Initiative in respect of the DLR CityAirport Extension which became operational in 2005/06.
Bank Project Finance comprises the first instalment ofa 4.293 per cent fixed rate £450m facility to finance theEast London Line maturing in 15 equal instalments from March 2017.
Loans from the Public Works Loan Board comprise £159.4mat a fixed rate of 4.25 per cent with maturities in March 2033,2034 and 2035 and £175.0m at a fixed rate of 4.2 per centwith maturities in March 2036, 2037 and 2038. Loan Notescomprise £200m with a fixed coupon of 5.0 per centmaturing in five equal instalments from March 2031 and£200m with a fixed coupon of 4.5 per cent maturing infive equal instalments from March 2027.
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20) Financial instruments
In developing its strategy the Corporation has regard to its financial risks and considers the implications of its overall asset and liability management. It specifically considers the short- and long-term funding requirements of the Group's operations, its capital investment programmes and liquidity required to discharge its financial obligations when they fall due. It also considers its exposure to inflation and interest rates as they affect its commercial and financial activities. The Group has no exposures to foreign exchange or to derivative contracts.
In managing these financial risks, the Corporation is required by Regulation to have regard to the Code of Practice on Treasury Management contained in CIPFA's guidance 'Treasury Management in the Public Services'. This requires the Board to approve a Treasury Management Policy Statement and, annually prior to commencement of the year, a Treasury Management Strategy. A quarterly report on performance against the approved strategy is considered by the Finance Committee, a committee of the Board.
The Corporation is subject to the requirements of the Local Government Act 2003. This requires the Mayor to set an affordable borrowing limit. By Regulation, the Mayor and the Corporation are required to have regard to the CIPFA Code of Practice entitled the 'Prudential Code for Capital Finance in Local Authorities' (The Prudential Code). The Prudential Code requires the Board to approve annually indicators for prudent and affordable borrowing, for estimates of capital expenditure and for interest rate exposures and the maturity profiles of borrowing.
The Group's main financial assets and liabilities, as defined in FRS 13, are its cash and investments, its borrowings and its obligations under finance leases, mainly the PPP arrangements in London Underground Limited. These financial assets are taken into account when considering the prudence and affordability of the long-term funding plan necessary to support the Group's operations and capital investment programmes.
In managing these financial assets and liabilities, the Treasury Management Strategy and annual plan has the following objectives:
- To undertake treasury management operations with primary regard for the security and liquidity of capital invested with reference to Government guidance
- To maximise yield from investments consistent with the security and liquidity objectives
- To ensure that sufficient cash is available to enable the Corporation and the Group to discharge its financial obligations in accordance with approved spending plans
- To undertake treasury management activity with regard to Prudential Code Indicators
Security and liquidity are dictated by specific policies on counterparty exposure limits, minimum limits on credit quality and term of investment. All investments are made in sterling with institutions having high levels of credit quality and for varying terms not exceeding one year.
The Group intends to raise £3.3bn through prudential borrowing, as approved by the TfL Board on 29 April 2004, to meet the needs of London's transport infrastructure. The Secretary of State has confirmed that the Government supports these plans, subject to London's borrowing remaining consistent with the wider Prudential Code Regime. These resources, together with existing reserves, support TfL's capital investment programme.
In March 2006, the Corporation launched its second Eurobond issue for £200m through joint arrangers HSBC and Morgan Stanley. The Corporation also borrowed £334.4m from the Public Works Loan Board and the first £18.1m instalment of a £450m project finance facility. This borrowing by the Corporation uses £746m of the £800m limit set by the Mayor for 2005/06.
The maturity profile of obligations under finance leases and group borrowings are given in note 19.
The Group policy in relation to financial risk management is discussed above. As permitted by FRS 13, short-term debtors and creditors have been omitted from all disclosures. The following table sets out the book values of financial assets and liabilities as defined and required by FRS 13:
| Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|---|
| Financial assets | |||||
| Cash at bank and in hand | 15 | 24.0 | 24.0 | 3.5 | 8.1 |
| Short-term investments | 1,663.1 | 1,326.5 | 1,632.9 | 1,300.4 | |
|
Total financial assets |
1,687.1 | 1,350.5 | 1,636.4 | 1,308.5 | |
| Financial liabilities | |||||
| Borrowings | 19b | 745.9 | 195.6 | 745.9 | 195.6 |
| Obligations under finance lease | 19a,b | 1,794.3 | 1,078.5 | - | - |
| Other creditors greater than one year | 16b | 18.2 | 11.7 | 4.7 | 8.4 |
|
Total financial liabilities |
2,558.4 | 1,285.8 | 750.6 | 204.0 |
Short-term investments represent deposits invested with banks and institutions for less than one year with interest earnings benchmarked by reference to three-month LIBOR. Obligations under finance leases carry an imputed weighted average interest charge of 6.8 per cent. Long-term borrowings carry fixed coupons ranging between 4.2 per cent and 5.0 per cent.
The weighted average interest rate ranges between 4.2 per cent and 5.15 per cent.
At 31 March 2006 the market value of the Group's quoted debt was £412.1m (2005 £197.4m). All other financial assets and liabilities have fair values equal to their book value.
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21) Capital commitments
| Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|
|
In respect of contracts placed for: |
||||
| Road projects | 111.9 | 77.1 | 111.9 | 77.1 |
| London Underground projects | 178.7 | 56.2 | - | - |
| Docklands Light Railway projects | 276.4 | 151.0 | - | - |
| Other projects | 81.4 | 11.0 | - | 2.1 |
| 648.4 | 295.3 | 111.9 | 79.2 |
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22) Financial commitments
a) Operating leases
As at 31 March 2006, the Group and the Corporation were committed to making the following payments during the next year in respect of operating leases:
| Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m | |
|---|---|---|---|---|
| Property leases which expire: | ||||
| Within one year | 1.6 | 3.7 | - | - |
| Between one and five years | 4.6 | 4.2 | - | - |
| Thereafter | 22.0 | 20.0 | 1.2 | - |
| 28.2 | 27.9 | 1.2 | - | |
| PFI agreements and other leases which expire: | ||||
| Within one year | 0.3 | 0.8 | - | - |
| Between one and five years | 0.4 | 1.0 | - | - |
| Thereafter | 254.2 | 251.5 | 19.9 | 26.3 |
| 254.9 | 253.3 | 19.9 | 26.3 |
Under the Government's PFI initiative, agreements have been entered into by London Underground Limited for the provision by the private sector of a new communications network, a new gating and ticketing system, new facilities for the British Transport Police and upgraded high-voltage power generation and distribution systems. Given the substantial risks retained by the private sector, these transactions are accounted for as operating leases and the assets provided are, therefore, not included in the balance sheet.
The Group also has PFI agreements and leases in respect of road schemes (including Congestion Charging), the DLR Lewisham and City Airport extensions, Croydon Tramlink, ticketing equipment and motor vehicles. Given the substantial risks retained by the private sector, these transactions, other than the DLR Lewisham and City Airport extensions, are also accounted for as operating leases and the assets provided are, therefore, not included in the balance sheet.
b) PPP
LU has entered into three PPP contracts for the maintenance, enhancement and replacement of LU's operational assets. The contracts are for 30 years and are re-negotiable after 7.5 years. The amount payable to thePPP contractors is dependent upon their performance.The capital element of the contracts over the 30-year periodis estimated to be between £15bn and £20bn.
c) Contingencies
There are a number of uncertainties surrounding projects, including claims in the course of negotiations, which may affect the financial outcome. Where claims are possible but not probable, or unquantifiable, such claims are treated as contingent liabilities. Contingent liabilities are not recognised in the Statement of Accounts, but are monitored to ensure that, where a possible obligation has become probable or a transfer of economic benefits has become probable, aprovision is made. The financial statements include provisions based on management's best estimate of the outcome of these uncertainties (see Note 18).
While any disputes are ongoing TfL does not disclose the quantum or timing of any possible settlement as this could prejudice its commercial position.
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23) Pensions
a) Summary of Pension Totals for the year
|
Total pension service cost for the year |
Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| TfL Pension Fund | 23b | 112.7 | 95.3 | 18.8 | 17.0 |
| Local Government Pension Scheme | 23c | 1.9 | 1.9 | 1.9 | 1.9 |
| Principal Civil Service Pension Scheme | 23d | 1.3 | 1.1 | 1.3 | 1.1 |
| Other schemes and unfunded pensions | 23f | 4.9 | 9.2 | (2.5) | 4.0 |
| Amount included in net cost of services | 3 | 120.8 | 107.5 | 19.5 | 24.0 |
|
Total pensions interest cost and expected return on pensions assets |
Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| TfL Pension Fund | 23b | 7.5 | 14.0 | - | - |
| Local Government Pension Scheme | 23c | 0.4 | (0.1) | 0.4 | (0.1) |
| Amount included in net cost of services | 7.9 | 13.9 | 0.4 | (0.1) |
|
Total contribution to/(from) pension reserve in the year |
Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| TfL Pension Fund | 23b | 12.2 | 16.0 | - | - |
| Local Government Pension Scheme | 23c | (0.1) | (0.5) | (0.1) | (0.5) |
| Amount included in net cost of services | 12.1 | 15.5 | (0.1) | (0.5) |
|
Total pension deficit at end of year |
Note | Group 2006 £m |
Group 2005 £m |
Corporation 2006 £m |
Corporation 2005 £m |
|---|---|---|---|---|---|
| TfL Pension Fund | 23b | (752.2) | (945.8) | - | - |
| Local Government Pension Scheme | 23c | (17.7) | (14.9) | (17.7) | (14.9) |
| Amount included in net cost of services | (769.9) | (960.7) | (17.7) | (14.9) |
The majority of the Group's staff are members of the Public Sector Section of the TfL Pension Fund which was entitled the LRT Pension Fund until 1 April 2005. The majority of the Group's remaining staff belong to the Local Government Pension Scheme or the Principal Civil Service Pension Scheme.
b) TfL Pension Fund
The TfL Pension Fund, to which the Group contributes, is a final salary scheme established under trust. The Fund's Trustee is the TfL Trustee Company Limited, a wholly owned subsidiary of TfL. Under the rules of the Fund, its 18 Trustee Directors are nominated in equal numbers by TfL and on behalf of the Fund's membership. TfL's subsidiaries also participate in the Fund and it is not possible to identify the Corporation's share of the underlying assets and liabilities.
Every three years, the TfL Pension Fund's actuary makes valuations and recommends the level of contributions to be made by the participating employers to ensure the long-term solvency of the Fund. The latest valuation of the Fund was carried out as at 31 March 2003 by the Actuary, a partner of consulting actuaries Watson Wyatt, using the projected unit method.
A separate valuation has been prepared for accounting purposes on an FRS 17 basis as at 31 March 2006.
The assumptions used by the Actuary are the best estimates chosen from a range of possible actuarial assumptions, while the present value of the scheme's liabilities is derived from cash flow projections. Due to the timescale covered, neither the assumptions nor the cash flow projections may necessarily be borne out in practice.
The Corporation and the Group both account for pension costs in accordance with FRS 17. The underlying assets and liabilities of the TfL scheme cover a number of Group entities and cannot be readily split between each undertaking on a consistent and reliable basis. Thus, in accordance with the standard, the Corporation treats contributions to the TfL Pension Fund as if they were contributions to a defined contribution plan. The pension cost recognised in the Corporation's accounts for the TfL Pension Fund is the amount of contributions payable to the scheme during the year.
The main actuarial assumptions used for the Public Sector Section of the TfL Pension Fund were:
|
|
FRS 17 valuation at 31 March 2006 % |
FRS 17 valuation at 31 March 2005 % |
FRS 17 valuation at 31 March 2004 % |
|---|---|---|---|
| Inflation | 3.00 | 2.90 | 2.90 |
| Rate of increase in salaries | 4.50 | 4.40 | 4.40 |
|
Rate of increase of pensions in payment and deferred pensions |
3.00 | 2.90 | 2.90 |
| Discount rate | 5.10 | 5.55 | 5.70 |
| Investment return | 6.70 | 7.00 | 7.00 |
The liabilities for the TfL Pension Fund have been calculated using the mortality assumptions adopted for the latest funding valuation as at 31 March 2003. Standard mortality tables were used, adjusted to reflect the recent mortality experience of the Fund's pensioners at that date. An allowance was made for future mortality improvements which was broadly financially equivalent to a 0.25 per cent per annum reduction in the discount rate.
The assets in the Section and the expected rate of return were:
|
|
Expected return % |
Value at 31 March 2006 % |
Expected return % |
Value at 31 March 2005 % |
Expected return % |
Value at 31 March 2004 % |
|---|---|---|---|---|---|---|
|
Equities |
8.1 | 2,351.4 | 8.2 | 1,934.4 | 8.2 | 1,700.1 |
| Bonds | 4.5 | 1,260.2 | 4.9 | 1,055.9 | 5.0 | 987.7 |
| Cash, property and other assets | 4.0 | 150.1 | 3.9 | 43.9 | 4.1 | 37.0 |
| Total market value of assets | 3,731.7 | 3,034.2 | 2,724.8 | |||
| Actuarial valuation of Sectionliabilities | (4,513.9) | (3,980.0) | (3,604.8) | |||
| Deficit in the scheme recognisedas a liability in the balance sheet | (752.2) | (945.8) | (880.0) |
|
Analysis of amounts charged to cost of services |
Group 2005/06 £m |
Group 2004/05 £m |
|---|---|---|
| Current service cost | 112.7 | 95.3 |
| Past service cost | - | - |
| Total charged to cost of services | 112.7 | 95.3 |
|
Analysis of pensions interest cost and expected return on pensions assets |
||
| Interest on Section liabilities | 220.9 | 204.7 |
| Expected return on Section assets | (213.4) | (190.7) |
| Total charged to net operating expenditure | 7.5 | 14.0 |
| Total amount included in net operating expenditure in Group revenue account | 120.2 | 109.3 |
| Contribution to/(from) pensions reserve | 12.2 | 16.0 |
| Amount to be met from Government grant and local taxation | 132.4 | 125.3 |
|
Analysis of the movement in deficit in the Section during the year |
Group 2005/06 £m |
Group 2004/05 £m |
|---|---|---|
|
Deficit in the Section at start of year |
(945.8) | (880.0) |
| Contributions paid | 132.4 | 125.3 |
| Current service cost | (112.7) | (95.3) |
| Interest and investment charge | (7.5) | (14.0) |
| Actuarial gain/(loss) | 181.4 | (81.8) |
| Deficit in the Section at end of year | (752.2) | (945.8) |
The Local Government Pension Scheme is a funded multi-employer defined benefit scheme. The Corporation is able to identify its share of the assets and liabilities of the scheme and this scheme has therefore been accounted for as a defined benefit scheme under FRS 17. Employers' contributions were payable at the rate of 14.1 per cent (2004/05 13.2 per cent) of pensionable pay. The Corporation'sshare of the underlying assets and liabilities resulted in a deficitof £17.7m (2004/05 £14.9m). The annual report and accountsfor the whole scheme can be found on the London Pensions Fund Authority website (lpfa.org.uk).
The main actuarial assumptions used for the Local Government Pension Scheme were:
|
|
FRS 17 valuation at 31 March 2006 % |
FRS 17 valuation at 31 March 2005 % |
FRS 17 valuation at 31 March 2004 % |
|---|---|---|---|
| Inflation | 3.10 | 2.90 | 2.90 |
| Rate of increase in salaries | 4.60 | 4.40 | 4.40 |
|
Rate of increase of pensions in payment and deferred pensions |
3.10 | 2.90 | 2.90 |
| Discount rate | 4.90 | 5.40 | 6.50 |
| Investment return | 6.80 | 7.10 | 7.30 |
The assets in the scheme attributable to TfL and the expected rate of return were:
|
|
Expected return % |
Value at 31 March 2006 % |
Expected return % |
Value at 31 March 2005 % |
Expected return % |
Value at 31 March 2004 % |
|---|---|---|---|---|---|---|
|
Equities |
7.3 | 20.5 | 7.7 | 19.3 | 7.7 | 11.5 |
| Bonds | 6.0 | 6.2 | 4.8 | 2.6 | 5.1 | 1.8 |
| Cash, property and other assets | 5.8 | 5.8 | 5.4 | 2.7 | 5.8 | 0.7 |
| Total market value of assets | 32.5 | 24.6 | 14.0 | |||
| Actuarial valuation of Section liabilities | (50.2) | (39.5) | (16.7) | |||
| Deficit in the scheme recognised as a liability in the balance sheet | (17.7) | (14.9) | (2.7) |
| Corportaion & Group 2005/06 £m |
Corportaion & Group 2004/05 £m | |
|---|---|---|
|
Analysis of amounts charged to cost of services: |
||
| Current service cost | 1.8 | 1.8 |
| Past service cost | - | 0.1 |
| Curtailment and settlements | 0.1 | - |
| Total charged to cost of services | 1.9 | 1.9 |
|
Analysis of pensions interest cost and expected return on pensions assets |
||
| Interest on pensions liabilities | 2.2 | 1.0 |
| Expected return on pensions assets | (1.8) | (1.1) |
| Total charged to net operating expenditure | 0.4 | (0.1) |
| Total amount included in net operating expenditure in revenue account | 2.3 | 1.8 |
| Contribution (from)/to pensions reserve | (0.1) | (0.5) |
| Amount to be met from Government grant and local taxation | 2.2 | 1.3 |
| Corportaion & Group 2005/06 £m |
Corportaion & Group 2004/05 £m | |
|---|---|---|
| Analysis of the movement in deficit during the year: | ||
| Deficit at start of year | (14.9) | (2.7) |
| Contributions paid | 2.2 | 1.3 |
| Current/past service cost | (1.9) | (1.9) |
| Interest and investment income/(charge) | (0.4) | 0.1 |
| Actuarial gain/(loss) | (2.7) | (11.7) |
| Deficit at end of year | (17.7) | (14.9) |
d) Principal Civil Service Pension Scheme
The Principal Civil Service Pension Scheme (PCSPS) is an unfunded multi-employer defined benefit scheme. The Group is unable to identify its share of the underlying assets and liabilities on a consistent and reasonable basis, and in accordance with FRS 17 the Group treats contributions to the PCSPS as if they were contributions to a defined contribution plan.
A full actuarial valuation was carried out at 31 March 2003. Details can be found in the Civil Service Superannuation Resource Accounts (civilservice-pensions.gov.uk).
Employers' contributions were payable to the PCSPS at one of four rates in the range 16.2 per cent to 24.6 per cent of pensionable pay, based on salary bands. Rates may change for next year, subject to salary band changes.
Employer contributions are to be reviewed every four years following a full scheme valuation by the Government Actuary. The contribution rates reflect benefits as they are accrued, not when the costs are actually incurred, and reflect past experience of the scheme.
e) Analysis of movements in pensions reserve
The actuarial gains and losses identified as movements on the pensions reserve in 2005/06 can be analysed into the following categories, measured as absolute amounts and as a percentage of assets or liabilities at 31 March 2006:
| TfL Pension fund | Group only | |||||||
|---|---|---|---|---|---|---|---|---|
| 2005/06 | 2004/05 | 2003/04 | 2002/03 | |||||
| £m | % | £m | % | £m | % | £m | % | |
| Difference between the expected and actual return on assets (gain)/loss | (469.6) | 12.5 | (97.2) | 3.2 | (304.1) | 11.2 | 637.1 | 27.5 |
| Differences between actuarial assumptions about liabilities and actual experience (gain)/loss | (59.8) | 1.3 | 94.3 | 2.4 | 8.9 | 0.3 | (27.6) | 0.9 |
| Changes in the demographic and financial assumptions used to estimate liabilities (gain)/loss | 348.0 | 7.7 | 84.7 | 2.1 | 210.6 | 5.8 | 90.6 | 2.8 |
| Actuarial (gain)/loss recognised in reserves | (181.4) | 4.0 | 81.8 | 2.1 | (84.6) | 2.4 | 700.1 | 21.6 |
| Local government Pension Scheme | Corporation and Group | |||||||
|---|---|---|---|---|---|---|---|---|
| 2005/06 | 2004/05 | 2003/04 | 2002/03 | |||||
| £m | % | £m | % | £m | % | £m | % | |
| Difference between the expected and actual return on assets (gain)/loss | (4.1) | 12.6 | (0.7) | 2.7 | (1.6) | 11.8 | 3.5 | 39.3 |
| Differences between actuarial assumptions about liabilities and actual experience (gain)/loss | - | - | 4.7 | 11.9 | - | - | (0.3) | 2.5 |
| Changes in the demographic and financial assumptions used to estimate liabilities (gain)/loss | 6.8 | 13.7 | 7.7 | 1.9 | - | - | - | - |
| Actuarial (gain)/loss recognised in reserves | 2.7 | 5.5 | 11.7 | 29.6 | (1.6) | 9.7 | 3.2 | 23.9 |
f) Unfunded pension costs
The Group bears the cost of the augmentation of the pensions of certain employees who retire early under voluntary severance arrangements.
In addition, the Group bears the cost of:
- Ex-gratia payments which are made to certain former employees who retired more than 10 years ago in respect of service prior to the establishment of pension funds for those employees
- Supplementary pensions, which are made to certain former employees who retired more than 10 years ago and prior to index-linking of pensions
- Pensions of LU and LRT former board members who retired more than five years ago and who did not qualify to join the TfL Pension Fund
Watson Wyatt, consulting actuaries, were instructed to report on the financial position of the unfunded pension liabilities as at 31 March 2006 for the purpose of FRS17 only. The report does not constitute a formal actuarial valuation of the unfunded pension liabilities. The valuation as at 31 March 2006 was £37.3m (2005 £40.2m) and is fully provided for in these accounts.
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24) Related parties
Transport for London is required by the Accounting Code of Practice (ACOP) and FRS 8 Related Party Disclosures to disclose all material related party transactions.
A related party is one which has direct or indirect control over the organisation, or influence over the financial and operational policies of the organisation. It follows that those persons who have control or influence over the organisation or policies of the Corporation may be involved in related party transactions where they also have control or influence over the organisation which has dealings with the Corporation. A related party transaction can also arise between parties subject to influence or control from the same external source. The related parties to the Corporation are:
- Its Board members, Chief Officers and Commissioner
- Its directors and heads of service
- Central Government
- Greater London Authority (GLA) and other functional bodies
- Partnerships and associated companies, and
- The TfL Pension Fund
Disclosure of these transactions allows readers to assess the extent to which the Corporation might have been constrained in its ability to operate independently or might have secured the ability to limit another party's ability to bargain freely with it.
Most of the transactions between these parties are reported elsewhere in the Statement of Accounts. The Accounts of the Pension Fund are shown separately and are subject to a separate audit opinion.
Board members, Chief Officers and the Commissioner are required to complete a declaration regarding any related party transactions.
Central Government is responsible for providing the statutory framework within which the Corporation operates and provides the majority of its funding in the form of Transport Grant. Transport Grant is paid by the Department for Transport to the Greater London Authority, which in turn pays the grant to the Corporation. Details of Transport Grant are disclosed in the Corporation and Group revenue accounts and cash flow statements and are therefore not included in this note.
Members of the Board of the Corporation are appointed by the Mayor, who serves as the Chair. The Board is responsible for approving the Corporation's strategic direction and monitoring the performance of the executive team in executing these strategies.
During 2005/06 there were no material related party transactions except as disclosed below.
On 24 November 2005 the Corporation entered into a Consultancy Agreement with the former Commissioner of TfL, Mr R Kiley, who stepped down as Commissioner on 31 January 2006.
In consideration for making himself available to provide consultancy services, Mr Kiley received a payment of £135,000 on 1 February 2006.
He is entitled to the following payments in future years:
| Date | Amount |
|---|---|
|
1 July 2006 |
£135,000 |
| 1 January 2007 | £146,250 |
| 1 July 2007 | £146,250 |
| 1 January 2008 | £175,000 |
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25) Congestion Charging
| Note | Corportaion & Group 2005/06 £m |
Corportaion & Group 2004/05 £m | |
|---|---|---|---|
| Revenue | 2 | 254.1 | 218.1 |
|
Expenditure: |
|||
| - Toll facilities | (143.5) | (120.8) | |
| - Traffic management | (0.4) | (0.6) | |
| Financial assistance | 26 | - | 1.7 |
| Depreciation | (2.8) | (1.6) | |
| Capital financing charges | (1.1) | (0.4) | |
| Net income/(expenditure) | 106.3 | 96.4 |
Congestion Charging was introduced on 17 February 2003 in central London at a daily rate of £5 per car or goods vehicle. The daily rate was increased to £8 on 4 July 2005. The net revenues from the Congestion Charge are spent on improving transport in line with the Mayor's Transport Strategy.
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26) Financial Assistance
TfL may give financial assistance to any body or person in respect of expenditure incurred or to be incurred by that body or person in doing anything which, in the opinion of TfL, is conducive to the provision of safe, integrated, efficient and economic transport facilities or services to, from or within Greater London.
Financial assistance given under section 159 of the Greater London Authority Act 1999 is outlined below:
| Note | Corportaion 2005/06 £m |
Corportaion 2004/05 £m | |
|---|---|---|---|
|
Financial assistance to subsidiaries and joint venture |
|||
| Transport Trading Limited | 4.6 | 30.5 | |
| London Underground Limited | 1,059.3 | 807.0 | |
| London Bus Services Limited | 627.6 | 549.9 | |
| London Buses Limited | 3.7 | - | |
| Docklands Light Railway Limited | 80.4 | 43.0 | |
| London River Services Limited | 1.0 | 0.8 | |
| Cross London Rail Links Limited | 35.8 | 30.9 | |
| 1,812.4 | 1,462.1 | ||
|
Financial assistance to London boroughs and other third parties |
|||
|
Borough Spending Plan |
162.1 | 154.8 | |
| Other bus priority payments | 5.5 | - | |
| Taxicard | 9.7 | 4.3 | |
| Congestion Charging | 25 | - | (1.7) |
| Trafalgar Square | - | (0.5) | |
| One Railway | 0.8 | - | |
| c2c Rail Ltd | 0.6 | - | |
| Southern Railway Ltd | 2.1 | 1.6 | |
| Thameslink | 0.8 | 0.6 | |
| First Great Western | 0.4 | 0.3 | |
| London Eastern Railways Ltd | - | 0.2 | |
| South Eastern Trains | 4.0 | 0.5 | |
| Silverlink | 0.2 | - | |
| WAGN | 0.4 | 0.1 | |
| Strategic Rail Authority | - | 0.2 | |
| South West Trains | 1.2 | 3.0 | |
| Others | 2.2 | 0.9 | |
| 3 | 190.0 | 164.3 |
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27) Guarantees
Section 160 of the Greater London Authority Act 1999 sets out the conditions under which TfL may give certain guarantees, indemnities or similar arrangements.
TfL and its subsidiaries have entered into a joint and several guarantee in favour of HSBC Bank plc as security for any bank indebtedness outstanding from time to time. TfL gave the guarantee under section 160(1) of the Greater London Authority Act 1999.
Tfl has given guarantees in respect of some of its subsidiary companies' contracts. The amount that could be payable by TfL under the guarantees (as described below) varies depending on a number of factors, including, inter alia, responsibility for termination of the underlying contract, when termination occurs during the life of the contract, breakage cost and other contractual costs which are not known before the event. For information only, the approximate maximum amounts of debt that were envisaged to be drawn by the counterparty at the signing of the agreements are disclosed. For the avoidance of doubt, these amounts may not represent the amounts that could be payable by TfL under the guarantees but are shown here to give an indication of the relative size of each contract.
Approximate maximum amount of debt available for drawdown under the relevant debt facilities as part of the:
| Agreement with Tube Lines | £1,803m |
| Agreement with Metronet BCV | £1,325m |
| Agreement with Metronet SSL | £1,325m |
| Agreement with CityLink | £502m |
| Agreement with PADCo and Seeboard Powerlink Ltd | £168m |
| Agreement with TranSys | £197m |
| Agreement with CARE | £164m |
| Agreement with APSLL | £4m |
While the guarantees in relation to the PPP contracts noted above are the significant guarantees issued on behalf of LU, it should also be noted that TfL guarantees LU termination obligations under a further two contracts relating to the Northern Line Train Service Contracts and the Jubilee Line Agreement. Unlike the agreements listed above, the contracts are not based on an initial amount of debt and so cannot be quantified in a similar manner.
No arrangements were entered into with another person under which that person gives a guarantee which TfL has power to give under section 160 (4) and no indemnities associated with the guarantees were given by virtue of section 160 (5) of the Greater London Authority Act 1999.
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