How other infrastructure projects can learn from London’s new railway

How other infrastructure projects can learn from London’s new railway

Nov 23rd 2013 |From the print edition

FOR the past 18 months Phyllis, a 1,000-tonne boring machine, has been whirring underground through London. Navigating its way past Victorian sewers and London’s labyrinthine Tube system, in October the bore (named after the woman who created London’s A-Z map by The Economist’s deputy editor in a competition) arrived at Farringdon station in north-east London, having tunnelled 13 miles through the city. The new tunnel marks the first stage of the ambitious Crossrail project, a £15 billion ($24 billion) new railway line.When it is finished in 2018 Crossrail will stretch across London, connecting the south-west suburbs in Berkshire with Essex in the east. The new line will increase the capacity of London’s transport network by 10%. Commuters will be able to zip from Abbey Wood in the south-east to the City of London in 17 minutes (the journey now takes 45). Stations are being extensively rebuilt. “It’s the perfect example of what infrastructure does for the British economy,” says Paul Deighton, commercial secretary to the Treasury, who oversees public-sector investment in infrastructure.

For several decades it looked as if the project would never go ahead. First mooted in 1974, then formally considered from 1989 onwards, Crossrail became a byword for government vacillation. Several elements came together to make it possible. The creation of the office of mayor in 2000 made a huge difference, says David Leam of London First, a lobby group. As the mayor’s remit is limited mainly to transport, incumbents badly wanted the railway. And the business case for the project has strengthened. Between 2008 and 2013 the number of passengers on the Underground jumped by 13%. Whereas the number of people driving is falling, the use of public transport is increasing. In 2012-13, the Underground carried more passengers than ever before.

Most important, however, the project’s planners managed to attract a substantial amount of private-sector money. Crossrail is being financed by a combination of government grants, fares and an enhancement of land values. A business-rate supplement of 2p on non-domestic properties with a rateable value of £55,000 or more created £4 billion for the project, nearly as much as the government is providing. Shining new offices will be built above stations by developers; this is novel in Britain, but a common way of funding infrastructure elsewhere.

Future projects could learn from Crossrail’s funding structure. “We need to assume that public-sector funding is the last resort,” says Isabel Dedring, deputy mayor for transport. Business levies could be used more widely while existing taxes, such as the congestion charge, could be used more effectively or extended. Others think more taxes should be kept in London: the mayor gets a mere 7% of all taxes raised in the city. Better assessments of the rise in land values near a new station would help, too.

Outside London this may be harder. In Manchester local authorities now keep some tax revenues after investing in the transport network—but only after much wrangling with the Treasury. More incentives should be put in the system to encourage other councils to invest in infrastructure, says Sir Howard Bernstein, the chief executive of Manchester City Council. This looks unlikely to happen soon. And uncertainty over government-backed projects, such as a new high-speed railway to the north, has dented business investment. Bores like Phyllis risk becoming even rarer.