The London mayor needs a £4.9bn settlement to bail out TfL for the next 18 months after passenger numbers collapsed and revenue crumbled as a result of the pandemic.
The government gave an initial six-month package of support worth £1.6bn to the vast transport authority in May.
Grant Shapps, the transport secretary, wrote to Mr Khan with a series of demands in return for any financial rescue package.
The government has threatened to take away mayor Sadiq Khan’s control of Transport for London unless he cuts costs and increases fares in return for a rescue package
The London mayor needs a £4.9bn settlement to bail out TfL for the next 18 months after passenger numbers collapsed and revenue crumbled as a result of the pandemic
According to the Financial Times, the letter demanded Mr Khan increase council tax across the city, expand the congestion charge zone and put in place higher tube and bus fares.
It also raised the controversial topic of pushing ahead with driverless trains.
In return, Mr Shapps proposed a six-month funding deal to March 2021 dubbed ‘the H2 deal’ that would be replaced by a longer-term settlement.
But the transport secretary warned that the government’s support for London would ‘take a different form’ if the two sides failed to strike an H2 deal or if its terms were not met.
The board of TfL is set to hold a crunch meeting on the settlement on Wednesday.
‘We will be taking reserve legislative powers allowing us if necessary to direct TfL,’ said Mr Shapps in the letter.
According to the Financial Times , the letter demanded Mr Khan increas e council tax across the city, expand the congestion charge zone and put in place higher tube and bus fares (pictured on the tube in 2016)
‘This would be combined with a further series of short-term funding settlements.’
In a reply on October 6, Mr Khan turned down the set to demands and insisted a rise in council tax for Londoners would ‘place even more reliance on an already broken form of taxation and would be regressive’.
On expanding the congestion zone, he added: ‘This blunt approach would have a catastrophic effect on the economy of inner London and beyond.’
The Government has since been accused of demanding ‘punitive’ conditions to agree the funding deal.
Mick Cash, general secretary of the Rail, Maritime and Transport union, said: ‘The speculation that the Government are threatening to take direct control of TfL sounds like more bullying by this administration designed to impose their will on Londoners and ride roughshod over local democracy.
‘While we await official confirmation on the future funding arrangements for transport in the capital, RMT reiterates our position that we will not tolerate any attacks on jobs and conditions from any quarter as part of any deal.’
Grant Shapps, the transport secretary, wrote to Mr Khan with a series of demands in return for any financial rescue package
The government’s battle with the mayor of London comes at an awkward time for devolution, as Wales, Scotland and Northern Ireland impose their own lockdown restrictions and Boris Johnson walked away from negotiations for support for Greater Manchester.
In his letter Mr Shapps said he expected Londoners to pay more through a supplement to their council tax to help improve TfL’s finances.
He also made clear he expected the mayor to begin ‘pensions and workplace reform’ at TfL, accelerate the ‘inadequate’ progress on implementing driverless trains, cut fare concessions for children and pensioners and implement a fares increase of more than the ‘RPI inflation + 1 per cent’ model agreed in May.
The mayor has imposed a fares freeze over the past four years. The transport secretary also urged the mayor to extend the central London congestion charging zone to cover the same areas as the ‘Ultra Low Emission Zone’ from October 2021.
He compared the imposition of stringent conditions on London with the government’s ‘continued blank cheque’ for the rail industry with only minimal conditions.
A spokesman for the Mayor of London said negotiations with the Government were continuing, but added: ‘Suffice it to say there is simply no way any mayor could accept conditions of this nature, which would make it harder to tackle the virus and choke off London’s economic recovery at the worst possible time.’
A Department for Transport spokeswoman said: ‘We have agreed an extension to the support period and to roll over unspent funding from the Transport for London Extraordinary Funding Agreement, allowing further time for negotiations for a new settlement.
‘These discussions will ensure London has a safe, reliable network. It would be inappropriate to disclose further details at this stage.’