The funding method for Londons Crossrail project hangs on the outcome of a top-level row between the Chancellor and his closest advisers.
The clash is between the political will of Chancellor Gordon Brown – who favours a standard PPP – and several of his closest advisers, including Ed Balls and Shriti Vadera, who back the use of controversial mechanisms, such as a land levy.
Brown is known to be against the use of “development tax” funding mechanisms, which might include a levy of existing landowners for the potential increase in land values or the negotiation of a contribution through planning gain.
But his advisers are worried that without such mechanisms it will be difficult to raise the £10bn needed to build the cross-London rail link.
A Treasury insider said: “The Treasury is anxious not to delay Crossrail while it works out the funding for the project. If the funding is controversial the whole Bill could be kicked out.
“The problem is that the advisers want some form of innovative funding, but Brown thinks it could be unpopular.”
The government wants to have a hybrid Bill for Crossrail ready for the next parliamentary session, and funding will have to be agreed at the same time.
Any innovative funding method would require parliamentary consent, either as part of the Crossrail Bill or as part of the forthcoming Local Government Finance Bill.
The land levy is being strongly backed by the Mayors team at Transport for London, which argues that the 400% increase in land values around the Jubilee line extension in the 1990s should have been used to pay for the line itself.
The source added: “Other funding methods, such as raising money from planning gain, could be used without legislation, but are likely to be contested in the High Court.
“It is the sort of political mares nest Brown would rather avoid.”
Negotiations between the Treasury, TfL, Crossrail and lobbyists, including the BPF, are being led by Vadera.
EGi News 10/06/02
