"Not dictated by traditional budget cycles”
The project as we know it today was first instigated as part of Labour’s 10-year transport plan, published in 2000. By 2005, a business case, a DfT review and an economic appraisal had all provided the then-transport secretary Alistair Darling with evidence that the scheme was deliverable, if costly. The latest version of the business case, updated in 2011, concludes that for every £1 invested in Crossrail, £3.09 benefit will accrue.
However, only £1.97 of this gain relates to the transport case, covering narrow issues such as crowding relief and reduced journey times. The rest comes from a wider project aim – supporting London’s growth, particularly in the Thames Gateway.
“The original business case for Crossrail considered housing growth in these communities and included this information in the standard departmental economic appraisal methodology used at the time,” says the DfT’s current acting project director for Crossrail, Sarah Perring. Work was also undertaken assessing the wider economic benefits of the scheme in line with departmental transport analysis guidance, she says.
As a new hybrid bill crawled through parliament, the government worked on detailed costings. In 2007, a legal agreement between the DfT and Transport for London put the capital cost, including contingencies, at £15.9bn in 2015 prices. Professor Nuno Gil, academic director at the Centre for Infrastructure Development at Manchester Business School, says: “The decision to announce the cost in final prices deserves a lot of respect. It put lot of pressure on the department because there is less room for manoeuvre and for hiding increases the budget.”
According to Perring, this clarity on the amount of cash available protected the ability of those running the project to pursue long term value. “Providing this level of certainty of overall funding, along with flexibility on when the delivery body can time its spending, enables the delivery body to spend when it is best in value terms, rather than being dictated by traditional budget cycles,” she says.
However, it was only when an agreement was reached with the London business community over the introduction of a 2p business rates levy on larger commercial premises that the Treasury was finally convinced that the sums added up. The levy will contribute £4.1bn to the project funding. Former TfL deputy chairman Dave Wetzel says: “I met up with Darling’s then special adviser Sam White recently. He told me that the levy was the game changer – without that, Darling thought it was too expensive.”
The hybrid bill granting the planning and land acquisition powers to create the new line was finally given royal assent in 2008. At this point, a new governance model was established to guide the delivery phase. Delivery would become the responsibility of Crossrail Ltd, an independent company with all of its shares owned by TfL. It would report to a new sponsor group comprising representatives from the DfT and TfL.
James Stewart, chairman of global infrastructure at consultancy KPMG, was intimately involved with creating the new governance structure in his role as chief executive at Infrastructure UK, a former branch of the Treasury. The approach adopted was inspired by lessons learnt from the successful model which was at that time delivering the 2012 London Olympics. He says: “In the past there had been a muddle between client and deliverer – the money kept for contingency was always spent because they are the same person.”
In simple terms, the sponsor group was responsible for defining the scope of the project while holding the purse strings. “It said: ‘We want stations here there and everywhere’,” says Stewart. “It told Crossrail Ltd how much its budget was, leaving Crossrail to pull in the skills it needed to build the line.”
The separation meant that the “day-to-day delivery was deliberately kept away from politics”, Stewart says. Initial worries about having two joint sponsors (the DfT and TfL) on the client body – rather than just one on the equivalent Olympics body – proved unfounded, he adds. “Everyone thought it could create disagreements and problems but it actually helped to bring a certain neutrality – both the DfT and TfL scrutinise each other which ensures there is more independence from each of the partners’ parent bodies,” he says. [...] continues at length