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Downturn casts doubt over Crossrail funding
Pippa Crerar, City Hall Editor31.10.08
BUSINESS leaders have raised fears they could struggle to raise their £3.5billion contribution to Crossrail during the economic downturn.
They admit that firms which are feeling the pinch might struggle to pay the supplementary business rate of two pence in the pound.
A funding shortfall could delay the £16 billion cross-capital rail link which ministers and Mayor Boris Johnson say is essential to London's economy. London government expert Tony Travers said: "Clearly there will be a loss of some of the business rates but there are also problems with other elements of the funding package."
Tony Halmos of the City of London Corporation added: "I don't think anyone is going to pretend that it's going to be easy to impose that increase when the economic circumstances are bad."
Graham Capper, communications director of London First, warned the two pence on the rateable value of a company's premises was "non-negotiable".
There had been concerns that, with some firms such as investment bank Lehmans going bust, those that were left in the capital would be expected to increase their contribution.
But Mr Capper said: "It's obviously going to be a harder call on business than it would have been just a couple of years ago. But they can't make the business rate contribution greater just because the pool of companies paying it is smaller." He said the Government should tap into the project's contingency, inject more public cash or pay the special levy over a longer period to make up for any shortfall.
The other main funding sources for the Crossrail project are a £2.7billion loan off the back of future rail fares and a £5.1billion grant from the Government.
Concern has been so acute that last week Transport Secretary Geoff Hoon was forced to issue a guarantee the project would not face any delays.
"The Government is fully committed to Crossrail and is determined that the project will be funded as planned, delivered on time and on budget," he said.
"If we are to stimulate Britain's economic growth it is essential we make the right long-term decisions and investments in our transport infrastructure."
City Corporation boss Stuart Fraser insisted the Square Mile's local authority would pay £200million from its own coffers as pledged. He told the Evening Standard: "The budgets and funding arrangements for Crossrail are all agreed. As far as the City is concerned, a deal is a deal. Of course, the financial crisis has prompted questions."
However, Heathrow airport's owner BAA has not yet committed itself to a £250million contribution to the rail link planned to open in 2017 running from Heathrow to Shenfield.
The supplementary business rate, thrashed out by former mayor Ken Livingstone, will only be paid by firms whose premises have a rateable value of more than £50,000.
A new local government Bill giving the Mayor power to raise the special levy will be announced in the Queen's Speech in December.
Reader views (4)
when one considers how poorly managed the recruitment process is at such an early stage it is no wonder that this wil be delayed irrespective of finance
- Peter Kavanagh, epsom, UK
It's okay, us Londoners will bail you out, after all, we're paying for the mayor, the olympics, free travel for under 16's, upgrading the existing transport infrastrucure, etc, why not just bung another one on the pile, we're made of money.
- Bob, Cheam
It seems that BAA's contribution is the problem. In that case, their continued control of Heathrow should be conditional on them providing their share of the Crossrail funding.
BAA is responsible for the infrastructure required to support Heathrow, so they shouldn't be allowed to wriggle out of their share.
- Liz, London
They've spent all the money subsidising the grotesque comsumerism of super-wealthy bankers, so that they can maintain seven homes each.
- Neil, london uk, Airstrip ONE .
