Crossrail 2 is affordable says new report
Crosssrail 2 is affordable and parts of it should be profitable as well: these are the main findings of London First’s Funding Crossrail 2 report.
The report was drafted by an 11 member specialist working group, chaired by Francis Salway, and included Lord Adonis (former Labour Transport Minister), and economist Tony Travers (London School of Economics).
The government has already committed £2m towards a funding and financing study of the project, but insists that over 50% of the cost must come from private, non Exchequer sources.
The working group has identified funding options exceeding £23.4bn (at 2012 prices). Construction costs for Crossrail 2 (CR2) range from a low base estimate of £12bn (at 2012 prices) to £20bn if Treasury contingencies are included. The group is working on a central cost base of £16bn.
Fiscal devolution would contribute the largest single funding stream – £5.2bn out of the £16bn – but even without this, London First is confident that £18.19bn could still be covered from other sources.
CR2 is given a 1.8:1 benefit: cost ratio (or 4.1:1 if wider economic benefits are taken into account), and should increase public transport capacity in the capital by 10% if built. London First says it is necessary as London’s population is expected to reach 10 million in 2030. Even with completion of Crossrail 1 and Thameslink, more capacity will still be needed, especially if HS2 phases one and two kick in from 2026 and 2033.
No time scale has yet been set, but the working group assumes a possible 2020 construction start for completion in 2030 (10 years as against eight for building Crossrail 1).
The working group identifies the following possible revenue streams – in order of size, and at 2012 prices – against which finance to construct the project could be raised:
- Fiscal devolution (£5.21bn): London pays more in tax than it spends, making a net £5bn contribution to public finances in 2010/11, but only kept around 7%. London First wants this changing – the equivalent New York figure is over 50%.
- Central government grant (£4.00bn): A government contribution is expected as the scheme will have wider regional and national benefits, but this would account for around a one quarter share of the total cost (as against one third for Crossrail 1).
- Wider TfL farebox (£3.12bn): A contribution from London tube and rail passengers could be sought in the form of a 5% fare increase over a specified period and hypothecated to CR2, for example.
- Crossrail 2 farebox (£3.00bn): CR2 is expected to make an operating surplus after maintenance costs and rolling stock leasing charges have been covered. (The £16bn construction cost makes no provision for rolling stock).
- Intensification of development (£2.40bn): A more permissive planning regime encouraging retail and housing development in and around station sites is assumed, and should also increase property values and tax yields.
- Network Rail (£2.00bn): NR has provided ‘on network works’ to the value of £2bn for Crossrail 1, and something similar would be expected for CR2. Both schemes benefit the national network by relieving congestion.
- Business rates (£1.81bn): The Business Rate Supplement (BRS) is levied at 2p in the rateable £ for Crossrail 1 and ends in the 2030s, but could be extended by 30 years and hypothecated to CR2.
- Developer contributions (£0.99bn): The contributions from the Community Infrastructure Levy and S.106 could be transferred to CR2 once CR1funding commitments have been met.
- Council Tax (£0.87bn): It is suggested that a precept – similar to the one raised for the Olympic Games – could be levied on all Londoners.
- Other sources: The working group says that funding could also be raised from the sale/lease of new assets, citing the £2.1bn generated to the Treasury from the 30 year HS1 concession (around one third of construction costs). Also, from sponsorship deals that currently bring in about £10m per annum. However, payroll and tourist taxes were ruled out on competitive grounds.