News Archive
Crossrail: the funding facts
Released on 15/10/2007
When, on 5th October, Crossrail chairman Douglas Oakervee announced that details of how the project would be funded would be included in the Government’s comprehensive spending review, it seemed the Treasury would disclose in the following week how the new £16 billion railway is to be financed.
But in the event, in the press summary of the Chancellor of the Exchequer’s statement on the CSR running to 12 pages of small print, the Treasury mentioned Crossrail funding only in the context of an additional £15 billion to be made available for railway investment.
Even the Treasury’s full statement on the Pre-Budget Report and 2007 CSR said little more than that Crossrail would commence construction with grants from the Department for Transport of over £5 billion, the remainder being contributed through the Crossrail farebox (used to service debt) and the private sector.
The additional £15 billion for rail investment, the Department for Transport has explained, will be available to Network Rail over the five years 2009-14 following the doubling of current expenditure on upgrading the national rail network over the two financial years 2007-09.
The main pre-Budget report paper speaks of this £15 billion being used over a period of five years to enhance rail capacity, as forecast in the recent Transport White Paper.
This work will include provision for longer trains in and around major cities, the Thameslink upgrade in London and removal of pinch points on key inter-urban lines.
Funding for this programme however is quite separate from the capital sum being advanced to Crossrail.
But later that week Crossrail gave more information about its own funding arrangements. Project Bulletin 10 explained that the railway’s expected cost of up to £16 billion would be met by three parties, the Government, businesses and farepayers.
It confirmed what the Government had said about a grant of over £5 billion from the Department for Transport during Crossrail’s construction and gave a lot more background as to how the project is to be financed.
“Crossrail fare payers”, said the bulletin, “will ultimately contribute through projected operating surpluses used to service debt raised during construction by Transport for London and by Network Rail in respect of the works on the national rail network.
“Direct contributions have been agreed with some of the project’s key beneficiaries along the route. Canary Wharf Group has agreed to make a significant contribution to the project, and will in addition be responsible for delivering the Isle of Dogs station on advantageous terms.
“The City of London Corporation will make a significant contribution from its own funds and will assist in delivering additional voluntary contributions from the largest London businesses.
“The Government will offer the Corporation its support, where necessary, to deliver these additional contributions. BAA British Airport Authority, the company that owns and runs airports has also agreed in principle to make a financial contribution.
“The Government is separately publishing a White Paper setting out its proposal to introduce a power for local authorities to raise supplementary business rates to fund economic development.
“Following discussions with Government, the Mayor of London has indicated that, subject to appropriate consultation, he envisages using these powers to levy a supplement of two pence per pound of rateable value across London from April 2010, with relief for businesses with a rateable value below £50,000.”
This revenue, says the statement, will be used to service £3.5 billion debt raised by the Mayor during construction.
“The Mayor has further indicated that he envisages securing contributions from property developers, particularly those who develop in the vicinity of Crossrail stations, and that subject to any appropriate obligations such as Examination in Public, he expects to bring forward London Plan alterations to this effect.”
This last might well be a fruitful area for contributions, judging from the size of the increments in the value of sites around Jubilee Line stations reported by Transport for London a few years after the tube extension to Stratford had come into service.
