The long-planned Crossrail 2 line, linking South-West London to North-East London has taken a tentative step forward, if funding can be secured.
Last week the Transport Secretary Chris Grayling and Mayor of London Sadiq Khan met to discuss the railway options, and while both agreed it is needed, there is still a debate about how it is to be funded.
With a tight deadline looming to deliver the line ahead of HS2, the omission of the £31 billion project from the Queen’s speech raised concerns about the government’s commitment to Crossrail 2. The big concern is that without Crossrail 2, Euston station will be unable to cope with the numbers of passengers alighting from HS2 when it is fully delivered by 2033.
They agreed on a way forward in the coming months to examine ways to improve the affordability of Crossrail 2, learning lessons from Crossrail 1, ahead of this autumn’s Budget. If approved, then Crossrail 2 expects to seek the legal powers to build the new line in 2020 and the process would last about two years. Construction is expected to start around 2023, with the new line opening from the early 2030’s.
The main sticking point now remains the funding of the railway.
TfL, directly, and through local business contributions, was expected to pick up around half the cost, but had aimed to defer the repayment until after the line was operational, as is the case with Crossrail 1.
The government is thought to favour a model where TfL pays its side of the construction costs as they are accrued, and the government was worried that TfL lacked the financial capacity to absorb the up-front costs in some cases many years before it can start recovering revenues from ticket fares.
The model used for Crossrail 1 staggered the funding over time, with around a third coming from private businesses, a third from the government and a third from Londoners. However, the funding is not all at once, and some of it wont be delivered until the 2030s, when commercial developments are able to deliver on their commitments.
The intention for Crossrail 2 was that businesses would pick up around half the cost, but payments would be deferred until their commercial developments were completed, as was the case with Crossrail 1.
A component was the Business Rates Supplement (BRS), which was set up explicitly to fund Crossrail 1, but a replacement to fund Crossrail 2 would be unlikely to be able to come into effect until 2033, when the Crossrail 1 debt to the Public Works Loan Board is expected to be repaid.
With Crossrail 2 construction expected to start in around 2022, that leaves a decade wide gap that needs to be filled with debt.
From TfL’s side, the funding models for Crossrail 2 are likely to be debt-funded, and the TfL preferred option would see government debt rise, then be paid back over time, while the government’s option would likely see TfL’s debt rise and paid down over the same timeframe.
Although TfL’s debt is rated as if it is backed by the government, and ultimately, it’s more an argument about who’s accounts the debt falls on, if the government can ensure it falls on TfL’s accounts then it won’t affect the sovereign debt level.
The difficulty is that TfL is already nearing the maximum it can borrow, as it already has £9.7 billion of debt.
Increases in debt are agreed in settlements with the Department for Transport (DfT), based on the Prudential Code. Between 2016-17 and 2020-21, TfL can currently borrow £3.2 billion, most of which is already earmarked for network upgrades.
TfL also faces a declining central government grant, and the current Mayor’s fares freeze, both of which add uncertainty to how TfL would fund the construction costs for Crossrail 2.
For TfL to absorb the upfront cost of its share of Crossrail 2, it would need an agreement from Chris Grayling at the DfT to increase its debt borrowing limits. This uncertainly about the funding model to be used is why there are delays in getting final sign-off on pushing ahead with Crossrail 2.
Although the cost to benefit ratio for Crossrail 2 is proven, and undeniably it will return a profit on its investment for UK PLC, it’s the squabbling over who picks up the cost, and more importantly when they pick up the cost that is likely to dominate the discussions for the next few months.
Regardless of the funding model chosen, London taxpayers and businesses will be stumping up more than half the cost of the railway, when it is built.
And we are now at a stage of when it is built, not if. That at least is progress.
We should start a sweepstake on which of the proposed stations won’t now be built “to improve affordability”.
@ diamond geezer I reckon Kings Road must have short odds at being dropped given it gives no interchange improvement and well without a station area won’t be attractive to live in come 2030/40s when those who are objecting today will be long gone …
I will believe Government is serious about Crossrail 2 when Bill is introduced into Parliament to construct the project!
I went to Euston yesterday and noticed how work for HS2 re ground surveys and demolition and site clearance is getting underway so if Euston is to get Crossrail 2 in time for HS2 then Grayling should stop playing politics and get on with the job !
A lot of people are miffed as other railway electrification projects e.g. Cardiff to Swansea & Midland Mainline through to Nottingham have been abandoned whilst Crossrail2 gets the go ahead. So much for the “Northern Powerhouse” that was being kicked around in recent years.
@ Maurice Crossrail 2 spending is still years in the future and thus even if given the go ahead tomorrow won’t have any bearing on cut to electrification which are of Chris Grayling making it here and now !
Anyway they voted for Brexit which resulted in the loss of the most Rail enthusiastic Chancellor Railway has had since Victorian times or even ever so now the price of Brexit is coming home … it’s coming home …
As usual nothing for South East London. As for those that complain about the cancellation of the electrification “oop north”, London has significantly more than 10% of the UK population so its needs are different.
Crossrail 2 has never intended to go to South-East London so I can’t fathom why you would express annoyance that it doesn’t go where it was never intended to go.
As for the area, there are planned upgrades, such as the Bakerloo line extension, and various improvements to mainline services
I’m in London so support Crossrail2, I was just repeating what was being said i.e. “that bloody London gets all the money again!”
The comments about postponement of Northern Powerhouse electrification fail to understand that the problem with current electrification is the network Rail are making a very expensive hash of the Great Western electrification. They do not have the resources, manpower, engineers and finance to even finish that G W project let alone do Northern and Midland projects. Starting the long legal process for Cross rail 2 will have no effect on the other projects. Really Cross Rail two legal start should have been years ago so that the tunnelers and engineers could have moved across from Crossrail Elizabeth line to CrossRails 2 as they do in other countries. Berlin had its east west equivalent to CrossRail 1 in 1882 with Kaiser Wilheim opening it.
North South was opened in 1939. Paris now has FIVE RER lines first in 1977. Crossrail 2 should be named the KINGS LINE (Goes through Kings Cross and Kings Road )but I would not put money on which of 3 future Kings will open it.Geoffrey
I saw a comment the other day, that cancellation of the electrification projects is not a problem because battery technology is improving fast enough that we will have battery powered electric trains in service by the time the projects would have been completed, avoiding the need for overhead power lines.
Sounds rather pie in the sky to me, and I’d favour getting on with electrification now rather than waiting for the technology to improve, but perhaps those more knowledgeable than me can comment.
I thought the prevailing consensus from the general public (on priorities) was roughly HS3, Electrification, Crossrail then HS2. Is it Benefit/Cost ratios or a London centric parliament causing us to do them in reverse order!
Fortunately, construction projects are decided based on cost/benefit ratios and the physical ability to build them, not what order the general public want them.