Crossrail seems to have been a long, long time coming. Last July, after some 35 years, a Crossrail Act finally emerged from the murky depths of Westminster chicanery and procrastination, spluttering with Royal Assent and waving a bill for £15.9 billion.
Last July? 35 years? Crossrail’s Keith Berryman can trace the project’s origins all the way back to a Royal Commission report of 1904. “In 2004, we had a small Crossrail centenary party,” quips Cross London Rail Links’ managing director.
Crossrail’s WEBs - its Wider Economic Benefits - “could be worth several times more than the transport user benefits”, Paul Buchanan, director of leading transport consultancy Colin Buchanan, told a central London audience of planners and developers on December 10.
But my thoughts were wandering as Buchanan dunked our brains into Benefit Cost Ratio parlance. I recalled my previous life, and dreary rush-hour mornings when my silver Mercedes regularly purred patiently outside JP Morgan’s City offices on John Carpenter Street, EC4. I’d hack through West End traffic and deviously execute a short cut through Ovington Square, only to get snarled up along the Cromwell Road.
Invariably, these tense 60-minute drives to Heathrow Airport ended with my grumbling JP Morgan banker scurrying to catch his flight. The chauffeur firm would net the £80 on account and I’d end up with the miserly basic and no tip.
Crossrail, by carrying 78,000 passengers per hour, could cull much Heathrow-central London road traffic when its east-west services roll in 2017. Forget Crossrail’s WEBs and BCR for a bit, take a gander at the promised impressive journey times run by its 100mph ten-car trains; Heathrow-Tottenham Court Road (30 minutes), Liverpool Street (36mins) and Canary Wharf (42mins). You beauties!
More recently, I got stuck on the overcrowded Docklands Light Railway on my way to see Tube Lines Chief E xecutive Terry Morgan at his Westferry offices. Failing London Underground radios had severely delayed morning peak Jubilee Line services, knocking crush and chaos onto the DLR. “Crossrail will add a vital 10% capacity to London’s rail-based public transport network,” says Morgan, who becomes Crossrail’s non-executive chairman in November.
That 10% figure isn’t universally accepted, but Crossrail’s extra capacity ought to render the entire London rail and tube network far more resilient to such peak pressures, as well as releasing capacity at termini such as Liverpool Street.
Buchanan Powerpointed his way through Crossrail’s win-win projections and (with apologies to John Cleese) it began to sound like ‘Reg’ in The Life of Brian.
“Crossrail has bled us white,” Reg blasts. “And what has Crossrail ever given us in return?”
Buchanan reels off Crossrail’s benefits.
Reg, beaten but unbowed, blurts: “Alright, but apart from the reduced London journey times, fewer interchanges, congestion relief, network resilience, regeneration via agglomeration, higher employment, productivity gains, GDP growth and swelling tax revenues – what will Crossrail ever do for us?”
Buchanan explains that Department for Transport guidance says if a metro rail project’s BCR is higher than 2, “fund most, if not all”. Between 1.5 and 2, “fund some, but by no means all”. Lower than 1, then don’t fund with a barge pole.
Crossrail will bring £16bn in ‘user benefits’ made up of £11bn enjoyed by commuters, tourists and day-trippers and £5bn by business travellers. Buchanan divides that £16bn by Crossrail’s £9bn ‘net cost’ to reach Crossrail’s BCR of 1.8, smack bang in the DfT’s “fund some, but by no means all” category.
However, 1.8 is only Crossrail’s half-time BCR score. Crossrail will save 26 million journey hours and 15m hours of congestion across the London’s transport network each year. “Crossrail will massively reduce the problems caused by, say, a Central or Victoria Line failure at peak time,” says Buchanan.
Watch the WEBs, too. By vastly improving access to the West End, the City and Canary Wharf, Crossrail will encourage businesses to high-density London locations where they’ll profit from higher productivity, economies of scale and the spread of ideas and innovation. Crossrail will add jobs across its east-west route, from Langley to the Thames Gateway. In turn, wages, rents, dividends, land values and tax revenues will rise.
So let’s have a look at the old BCR scoreboard. Fleet Line, DLR and Jubilee Line Extension, all less than 1. Thameslink, more than 2. But Crossrail zooms up from 1.8 to between 4 and 5, right off the DfT’s ‘fund or don’t fund’ scale.
That’s because Buchanan lobs another £39bn-£65bn in GDP growth on top of those £16bn of transport user benefits, growth generated by 14,000 people paying taxes while building the railway, and thousands of new jobs created as an indirect result of Crossrail.
“Crossrail’s opportunity for Canary Wharf is to help create 200,000 jobs,” says James Berry, transport adviser to Canary Wharf Group, the developer funding construction of the Isle of Dogs Crossrail station. Berry points to Canary Wharf’s ongoing North Quay, Wood Wharf, Riverside and Heron Quay West developments, amounting to more than 25 million square feet of office space. “Crossrail makes Canary Wharf a more viable place,” adds Berry.
“If you include tax revenues from GDP growth then Crossrail is a financially viable investment for government in the long term,” affirms Buchanan.
Money in the bank?
We’re told that Crossrail, with its fine BCR and great WEBs, enjoys cross-party support. Everyone heralds Crossrail as top priority, as vital for London’s future and for UK plc’s revival.
But while the City and business sing Crossrail’s praises in public few seem to have any loose change to flip onto the collection plate. Crossrail’s £15.9bn funding package looks fragmented, and many of the plans to recoup the money borrowed for construction are still on the drawing board.
The massed choirs of the DfT, Mayor of London, Transport for London, CLRL and Network Rail sing a repeated chorus that the DfT is underwriting £5.6bn of direct grant funding to Crossrail, including contributions from the Corporation of London and BAA.
TfL, the song goes, guarantees a further £7.7bn extracted from various sources. NR’s agreed £2.3bn facilitates its major works on the Great Western and Great Eastern sections of Crossrail, east and west of the central tunnel section.
Berryman, currently responsible for acquiring land and property for Crossrail, elaborates to soothe funding worries. He points out the £15.9bn cost, based on Q1 2007 prices, incorporates an escalation factor until 2017 and a substantial contingency. The basic construction price is about £8bn.
Berryman, who led the London East-West Study that revived Crossrail in the mid-1990s, chides ‘funding gap’ speculation. “I’m happy to confirm that all of the funding agreements are in place,” he told the December 10 gathering. “I know that because I signed them myself.”
Berkeley Homes has also agreed to pay at its own risk to build a box for the Crossrail station at Woolwich.
Berryman’s signatures on the final Crossrail agreements flowed on December 4, a giddy news day, not least because the Bank of England dropped the base rate to a record 2% low and recession-hit Nomura and Credit Suisse announced the loss of 1,650 City jobs. Transport Secretary Geoff Hoon told the Commons that he needed to “take more time before making an announcement” on whether to give the green light to Heathrow Airport’s expansion.
Later that afternoon Hoon, via a written parliamentary statement, announced previous commitments to Crossrail had “been developed into a comprehensive suite of agreements which will ensure a robust governance structure to enable the project to be delivered on time and on budget”.
The Sponsors Agreement between DfT and TfL formalises the overall management, ownership and governance of Crossrail. The Project Development Agreement between CLRL, DfT and TfL formally appoints CLRL as the project delivery agency. The Shareholders Agreement between CLRL and TfL means that CLRL, soon to become simply ‘Crossrail’, is now a wholly owned subsidiary of TfL.
Crucially, the new agreements confirm Crossrail’s £15.9bn funding, previously announced by Prime Minister Gordon Brown in October 2007 when he said: “The City of London, in particular, will need to make a significant contribution.” Maybe not, Prime Minister, if City firms lift their feet off the ground when they’re tapped on the shoulder to cough up.
The DfT’s £5.6bn
Instead of bigging up the funding agreements on December 4, the DfT, the Mayor and the Greater London Authority chose to spin the City’s contribution to the DfT’s £5.6bn.
“A landmark moment,” oyez’d Transport Minister Lord Adonis. “A crucial milestone,” chimed Mayor Boris Johnson. “Full steam ahead for Crossrail,” chorused joint DfT, Mayor of London, TfL and Corporation of London press releases.
Last October, Sir Michael Snyder, chairman of the Corporation of London’s Policy and Resources Committee, cheerily told Gordon Brown and Alistair Darling that the City’s Court of Common Council had agreed to pay, wait for it… £350m towards that total £15.9bn.
Snyder said that Crossrail “will make an immense difference to London’s credibility as a place to do international business”. Incredibly, given Crossrail’s benefits to the City, £200m of that modest £350m is a lump sum contribution direct from the Corporation’s coffers, forked out to the government only after 2015.
Synder revealed City firms will be asked to contribute the remaining £150m. The Corporation guarantees £50m of that slice, meaning City banks and businesses could get away with just a £100m contribution to Crossrail; not much more than Madonna and Guy Ritchie’s divorce settlement. Nevertheless, £350m was enough for Lord ‘mustn’t upset the City’ Adonis to declare that it “signals the commitment of businesses to this vital project”. Just don’t spend it all once, Crossrail.
BAA Heathrow
“There’s absolutely no relationship between Crossrail and a third runway at Heathrow,” said Berryman, explaining that Crossrail’s business case took into account Terminal 5’s impact but not further Heathrow expansion.
“If I was addressing an audience of bankers, they’d tell me that the most important link was with Heathrow,” he added. “The number of passengers using Crossrail to take them from Heathrow to City destinations is significant but Heathrow is just a nice add-on. Crossrail is about getting people to work in London.”
‘Just a nice add-on’ isn’t how BAA Strategy Director Mike Forster sees BAA’s ‘in principle’ deal to contribute £230m to Crossrail. That sum, underwritten by the DfT, will secure four Crossrail services an hour in each direction for Heathrow during much of each day.
Forster believes these services will help air passengers by “complementing our existing four trains per hour non-stop Heathrow Express service and taking thousands of cars off the roads”, improving access to Heathrow for 185,000 passengers and 72,000 airport workers each day.
BAA’s £230m, an outturn sum taking inflation into account, will cover the rebuilding and upgrade of the rail flyover at Stockley Park to carry both Crossrail’s lengthy trains and Heathrow Express’ Class 332 EMUs. Heathrow Connect, the Paddington-Terminal 4 stopping service, will cease once Crossrail starts.
Heathrow Airport Ltd, BAA’s wholly-owned subsidiary, will pay the £230m in two instalments linked to progress on the Heathrow Spur works. However, the Civil Aviation Authority, BAA’s economic regulator, needs to approve BAA’s £230m Crossrail investment during its next quinquennial review of Heathrow. That review doesn’t start until 2013.
“The third runway at Heathrow isn’t part of the equation,” says a CAA spokesman. “We’ve anticipated that BAA won’t make any contribution to Crossrail during this current five-year period until 2013. If they do, they’ll have to come to us for approval.”
The CAA considers that the money could be raised as a ‘Regulatory Asset Base investment’; in other words, the CAA would allow BAA to recoup the money in future charges levied against airlines using Heathrow. Airlines could pass that cost onto air passengers. Plus ça change, non?
TfL’s £7.7bn
TfL’s £7.7bn contribution, guaranteed by the Mayor, and the GLA, amounts to an average annual payout of £738m until 2017. On paper, this £7.7bn looks like easy money. In reality, there’s a way to go.
Boris hopes that a whopping £3.5bn chunk of that £7.7bn will be recouped from the private sector via the Business Rates Supplement. This £3.5bn ranks second only to the DfT’s £5.6bn direct grant.
The Queen didn’t read it out during her speech on that busy December 4 but TfL hope the new Business Rate Supplements Bill, if passed, will allow top tier local authorities such as the GLA and TfL to raise business rate supplements to fund economic development.
Gordon Brown had Crossrail firmly in mind when his government published a White Paper on business rate supplement proposals in October 2007. The new mechanism could set a national limit at 2p in the pound levied on all properties with a rateable value of above £50,000. From April 2010, Boris could levy a supplement that might - hopefully - generate an income stream to service that £3.5bn of debt piled during Crossrail’s construction.
TfL contends that such a supplement would cover about 15% of business in London with 85% exempt. Only the largest London businesses would pay, notably those that stand to gain the most from Crossrail.
That’s Gordon and Boris’ plan. Or is this another fine mess Crossrail is getting into? The new law, if enacted, could impose a legal duty on Johnson to consult businesses before introducing a Crossrail business supplement.
Business leaders are already whinging that Crossrail is yet another looming tax on struggling businesses. “I’m concerned that small firms will struggle to pay extra business rate charges,” said John Wright, national chairman of the Federation of Small Businesses.
“We’re concerned about the consequences of yet another tax on business, particularly when we have just entered a recession,” added Nadia Nath-Varma of the Royal Institution of Chartered Surveyors.
“Additional funding is needed for big infrastructure projects, especially Crossrail,” claimed John Cridland, deputy director general of the Confederation of British Industry. “But now is not the time to bring in new powers to raise tax more widely from business.”
Another £2.7bn of TfL’s £7.7bn will be drawn as a core contribution from its £39bn ten-year settlement agreed with government. However, TfL helpfully says that “it’s worth noting” – and it sure is – that an as yet unspecified part of that £2.7bn will be raised by borrowing set against future revenue recouped from Crossrail’s farebox.
TfL is confident that borrowing money in these credit crunched times isn’t a problem, as its local authority status means it can borrow from the Public Works Loan Board, a statutory body operating within the Treasury’s UK Debt Management Office. Ironically, this money will come from the Square Mile; the PWLB is based on Philpot Lane, EC3.
The PWLB “is not subject to the liquidity issues currently faced by some private lending institutions”, a TfL spokesman explains. Paying the PWLB back ought to be a doddle as monies flood into TfL’s coffers, swelled from Crossrail’s farebox fed by those 200 million passengers journeys each year.
Another £400m of TfL’s £7.7bn is described as ‘LU interface savings’, money a post-Metronet TfL believes it can save via “better co-ordination, integrated work programmes and other synergies” achieved by TfL, London Underground and Tube Lines as they work together to build and operate Crossrail stations at Ealing Broadway, Paddington, Bond Street, Tottenham Court Road, Farringdon, Liverpool Street, and Whitechapel.
It’s hoped a further £500m chunk of that £7.7bn will be recouped by selling ‘development opportunities’ at the sites over Crossrail stations. Such developments could enjoy possible exemptions from many costly and time-consuming planning rules under Schedule 7 of the Crossrail Act.
Another £300m slice is based on a view that property developers and freeholders should pay their fair whack. Crossrail will inflate land values adjacent to its route.
A potentially lucrative tax on added land
value gained as a result of the Jubilee Line
Extension never saw the light of day. Another proposed direct tax on land value hikes was recently rejected by MPs.
Undaunted, Boris still hopes to glean that slice from developers intending to build above a threshold of 500 square metres of B1 office space in the London Plan’s Central Activities Zone. Developers involved in schemes which have an impact on Crossrail in Westminster, bits of Camden, Islington, the City, Hackney, Lambeth, Kensington, Chelsea and Wandsworth, and in the northern part of the Isle of Dogs, could be required to pay £213.30 per square metre under ‘Section 106’ planning agreements.
Once again, the mechanism to claw back that sum isn’t yet in place. Johnson needs to renew the London Plan’s framework. This involves extensive consultation with the GLA, various interested bodies and the public, before this specific Crossrail benefit derived from Section 106 agreements can be invoked. Required alterations to the London Plan won’t be in place until spring 2010.
The Mayor’s office admits that although this is “a relatively small part” of Crossrail, “taking this alteration forward is essential if this vital piece of infrastructure is finally to go ahead”. Planning officials across London boroughs have complained that Johnson could have avoided a complicated London Plan review if only he had spoken to them first.
Finally, Johnson hopes to crowbar a
further £300m from private sector com-
panies through the Community Infrastructure Levy (CIL) that allows local authorities to levy an explicit charge on new infrastructure developments. You’ve probably guessed it, the CIL is still entwined in a Planning Bill trundling through Parliament.
Outside of the box
Naturally, much interest in Crossrail focuses on the central tunnel section and the new Crossrail stations at Paddington, Bond Street, Tottenham Court Road, Farringdon and Liverpool Street. Constant images of tunnel machines boring up to 30m beneath Oxford Street can be expected during the 2010s. Berryman, a former JLE construction manager, warns: “London will be dug up.”
Crossrail will also alter London’s skyline. Development sites over those new stations offer a potential post-recession bonanza for developers and the construction industry, helping to put a surge into an economic recovery cycle when that hopefully, perhaps optimistically, starts rolling in a year or so.
“The big money is in the central tunnel section,” says Berryman, referring to the 24 Crossrail trains that will run each hour in both directions through the 20km CTS in the peaks. Peering further into the future, it’s also likely that the central tunnel section itself, once completed, will be sold and privately managed.
Crossrail’s impact east and west of the CTS merits much attention. There’s the Crossrail station at Woolwich, electrification of Paddington-Maidenhead, rebuilding of Ealing Broadway station and platform extensions at 20 stations along the route. How will Crossrail integrate with new InterCity Express services at Paddington? Hopefully, the latter will be a live issue when Crossrail starts.
NR’s £2.3bn will also tackle major heritage bridge work on Brunel’s railway and sharpen possession management. Encouragingly, Mike Greedy, Passenger Focus’ ‘Crossrail man’ is already working with First Great Western ‘Crossrail project directors’ to ensure passengers are informed well in advance of any service disruptions caused by Crossrail workings under Paddington and elsewhere on the route.
Ideally, Greedy seeks six months’ notice of major works and service disruptions, so “commuters and their employers can adjust their journeys and working lives”. Crossrail brings no direct benefits to passengers west of Maidenhead, most of whom grasp neither the enormity of the project nor the potential disruption. “More disruption would be a bitter pill for Great Western commuters in the south west to swallow,” says Greedy.
Berryman repeats there’s not enough potential rider-ship to justify the electrification costs involved in extending Crossrail services to Reading. That’s not quite NR’s long-term outlook. “Reading is future-proofed for Crossrail with passive platform provision and for electrification,” says a NR spokesman. “If a future government decides to extend Crossrail, it would be relatively easy and cheap to bring it to Reading.”
Crossrail’s challenge
Forget Reading, we’re getting way ahead of ourselves. Crossrail, as set out in the Act, already represents a huge challenge for a rail industry still nursing wounds from the West Coast Main Line upgrade, quietly getting on with Thameslink and the East London Line Project, and rightly taking pride in High Speed 1.
However, even before Johnson wields his ceremonial shovel at the start of construction in 2010, Crossrail has achieved one notable irreversible gain. Colin Buchanan and Volterra’s economic appraisal of Crossrail broke through the Blair government’s conservative thinking frozen solely on the project’s narrower transport gains.
The DfT adopted Buchanan and Volterra’s analysis – with its applied agglomeration theory – that quantifies and values Crossrail’s wider impact on business productivity. Finally, a previously radical economic appraisal of rail schemes became conventional wisdom. Praise that day!
Soon, Londoners will witness the demolition of the Charing Cross block around the Astoria music venue as that derelict corner makes way for Crossrail’s Tottenham Court Road station with its planned public piazza and new theatre.
Cardinal House, voted one of London’s ugliest towers, will be demolished next June to clear the way for Farringdon’s Crossrail station.
Work will also begin on the approved Isle of Dogs Crossrail station, a stunning space-age design with its six levels crowned by a public park covered by glass and wood.
Crossrail seeks a chief executive who is “a well-respected and commercially-astute board-level leader”, with “a proven track record in the management and successful delivery of multibillion-pound complex projects”. National newspapers punted speculatively on December 5 that Rob ‘High Speed 1’ Holden, chief executive of London and Continental Railways since 1999, had shone during an interview and secured the job. CLRL’s media folk are keeping shtum but observers will munch serious hat if Crossrail doesn’t become beholden to Holden.
Yet, let’s not get too excited. It’ll be grand if the crucial relationships between Crossrail’s chief executive, programme management team and project delivery partner keeps in mind the harsh lessons the rail industry learned from the JLE’s construction delays, shenanigans and uncontrolled cost increases.
Crossrail’s £15.9bn might seem an expensive dish, but only when served cold without perspective. Berryman acknowledges there’s an inherent and inevitably unknown final outturn price. “We’ve a duty to the Treasury to keep a consistent figure, which includes the contingency needed over the passage of time,” he says.
Downing Street, Westminster, the City and London businesses can’t ask Crossrail for anything fairer than that; but fairness is a two-way track. For such a grand projet, it’s baffling that the funding regime isn’t more trenchant. Those still-under-construction funding mechanisms mustn’t stall or deflate any part of Crossrail’s project ambitions.
And yet, money doesn’t seem to be a problem for other panic-stricken and wilder adventures. Rightly or wrongly, we’ve seen the 2012 Olympics budget rise to more than £9.3bn. Government also underwrote Bradford & Bingley depositors to the tune of £18bn. Northern Rock cost £26.9bn. Trident missile renewal could cost £30bn, according to the National Audit Office.
After all, it’s only the transformation of London’s public transport system and the capital city’s economic revival riding on Crossrail. Present and future occupants of Downing Street, Westminster and the Treasury now carry moral and legal duties to protect Crossrail from dithering, backtracking and penny-pinching chicanery. If they fail, they risk facing a final reckoning in that court of pesky public opinion.
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