The risk is that cuts usage, which is to some extent self-defeating, AND pushes more people to cars - which is even more self-defeating because that slows down the buses, making them more expensive to operate.
I'd argue that the real solution to balance the books is to implement some kind of London-wide congestion charge - obviously not as expensive as the central London one, but enough to act as some deterrent to people driving unnecessarily. That will have the side-effect of making buses quicker and therefore both more attractive and cheaper to run (because of less congestion on the roads), as well as giving health/pollution benefits. I really don't understand why Sadiq Khan has been so opposed to something like that.
That's probably an extreme case, and I suspect if that's the frequency of that line, you could reduce it. But frankly, the number of places where you could make substantial savings in that way is going to be too small to make much of a dent in TfL's finances.
That fare now shows as £1.70 off-peak. Even so, I agree with you that kind of fare is ridiculous and ought to be higher. The problem here is the zonal fare system, which doesn't account for how long the journey is - only that you haven't passed through zone 1. I feel it's long overdue for replacing with a distance-based fare system which would allow for longer orbital journeys to be charged more appropriately. But again, there probably aren't enough people making those kind of journeys to make that much difference to TfL's finances.