Crossrail 2 NIC Supplementary Submission.

Crossrail 2 NIC Supplementary Submission

Version 1.1, 12 February 2016

Document reference: NIC2

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Crossrail 2 NIC Supplementary Submission.

Table of Contents

1 Introduction ...... 4 1.1 About this submission ...... 4 1.2 Our ‘ask’ of the NIC ...... 4

2 Supplement to the June 2015 Strategic Case ...... 6 2.1 About this section ...... 6 2.2 London’s agglomeration - driven economy, its transport network requirements and emerging constraints on growth ...... 7 2.3 Evidence that Crossrail 2 is the most effective scheme, and that it is needed by the early 2030s ...... 24 2.4 Mitigating risks to the delivery of the economic uplift enabled by Crossrail 2 . 33

3 Funding ...... 37 3.1 Introduction ...... 37 3.2 Executive Summary ...... 38 3.3 Summary of the KPMG scoping exercise ...... 41 3.4 Potential funding building blocks ...... 49 3.5 Potential components of a revised funding plan ...... 54

4 Opportunities to reduce costs ...... 57 4.1 Introduction ...... 57 4.2 The Full Regional Scheme ...... 57 4.3 Scope for Cost Reduction ...... 67 4.4 Phasing of construction ...... 67 4.5 South Western branches ...... 74 4.6 Stations and Route Variants ...... 78

Appendix A Programme ...... 81

Appendix B – Strategic Goals and Objectives ...... 83

Appendix C – London Underground Network Crowding, 2031 Baseline, peak direction only ...... 84

Appendix D – Summary capacity constraint typology ...... 86

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Crossrail 2 NIC Supplementary Submission.

Appendix E Illustration showing constraints at a typical Central London rail (National Rail or Underground) station ...... 87

Appendix F – “Peak Tube” ...... 88

Appendix G : Impacts at Waterloo Station of an alternative capacity solution on the SWML to Crossrail 2 ...... 91

Appendix H The impacts of Crossrail 2 on crowding across the London and South East Rail and Underground network ...... 93

Appendix I The evidence that transport investment supports growth ...... 94

Appendix J – High Level Station Assessment ...... 98

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Crossrail 2 NIC Supplementary Submission.

1 Introduction

1.1 About this submission

This document and its appendices form the second part of TfL’s submission to the National Infrastructure Commission (NIC) in response to its ‘Call for Evidence’. The first part covered London’s strategic challenges, the options and priorities for addressing them, and the experience of other cities (questions 1, 2 and 5), and was submitted on 14 January.

The focus of this submission is Crossrail 2, building on the Strategic Outline Business Case (SOBC) submitted in June 2015. In particular, it responds to questions raised by the NIC on funding (covered in chapter 3 of this submission) and options to reduce costs and increase benefits (covered in chapter 4). Discussion with NIC commissioners and officers have also highlighted certain questions about the case for Crossrail 2 which this submission also seeks to address, as part of a broader restatement of the strategic case (chapter 2).

The analysis in this paper presents a ‘snapshot’, undertaken in response to the NIC’s questions in the time available. It does not make formal recommendations, or constitute a update to the business case. TfL and Network Rail, as co-promoters of Crossrail 2, are currently undertaking a comprehensive programme of analysis and optimisation, including a systematic assessment of responses received as part of the recent public consultation. Designs continue to evolve as engineering and other constraints at each location are better understood. This will come together to inform selection of a Single Preferred Option in summer 2016, following which the Business Case will be updated, as set out in the programme contained in Appendix A.

Any decisions to amend the scheme to save costs should be made only as part of that process, in the light of all the evidence, in order to ensure continuing public involvement in the scheme. We expect to continue to engage with the NIC on these issues over the coming months.

1.2 Our ‘ask’ of the NIC

The SOBC made the case for £250 million of development funding needed to allow a hybrid bill to be submitted in late 2017 and Royal Assent to be secured by 2020. The Department for Transport (DfT) has since indicated that, due to the timing of the various hybrid bills required for HS2, a window exists in 2018 for a Crossrail 2 bill. If that opportunity is missed the next available date would be in the next Parliament, unless Government resource and parliamentary time can be found to pursue two bills in parallel.

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Crossrail 2 NIC Supplementary Submission.

A hybrid bill submission in 2018 would result in a Development Phase funding requirement of £188 million in this Parliament, rather than £250 million. Short of cancellation, maintaining the project in a state that would allow it to be developed through to powers in the next Parliament would require a team similar in size to today’s, at an estimated at c.£80million over this Parliament.

The 2018 (rather than 2017) bill timetable would defer significant capital expenditure from the early 2020s (as considered in Figure 16 on page 63) and lead to railway services operating from 2031 rather than 2030.

We are therefore asking the NIC to recommend that the Government:  Commits in principle to a hybrid bill submission in 2018, noting that the programme in Appendix A provides a Review Point in March 2018 at which that commitment can be affirmed; and  Commits to allocating sufficient funds for a hybrid bill process – an estimated £188 million in this Parliament.

If insufficient parliamentary time or funding is made available, there is a significant risk of setting the project back by at least half a decade. This would result in a transport network that severely constrains London’s economic growth by the 2030s, and missed opportunities for increasing the city’s housing supply, as well as loss of potential for cost efficiency, through the transfer of knowledge and systems from Crossrail, which are likely to be lost in the event that the bill submission is delayed until the next Parliament.

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Crossrail 2 NIC Supplementary Submission.

2 Supplement to the June 2015 Strategic Case

2.1 About this section

The purpose of this section of the submission is to provide supplementary material to the Strategic Case submitted as part of the Strategic Outline Business Case (SOBC) in June 2015.

There are three parts:

(i) London’s agglomeration - driven economy, its transport network requirements and emerging constraints on growth

This part reiterates the core purpose of the scheme and the importance of the wider economic rationale to the transport case. In particular it sets out the relationship between London’s rapidly growing ‘agglomeration economy’, the regional labour market and the transport system. It identifies a series of transport system constraints forecast to emerge as London grows, that will hinder and eventually reverse this process if not adequately addressed.

(ii) Evidence that Crossrail 2 is the most effective scheme, and that it is needed by the early 2030s

This part sets out the alternative options for addressing the constraints identified in part (i) and why Crossrail 2 is the most effective solution. It also provides evidence showing that it needs to be delivered in the early 2030s in order to avoid transport system constraints hindering agglomeration-driven growth, and the associated damaging economic consequences.

(iii) Mitigating risks to the delivery of the economic uplift enabled by Crossrail 2

The economic benefits of the scheme depend upon the transport improvements brought about by the scheme translating into higher labour supply and additional high productivity jobs, which involves addressing all constraints – not just transport. Key risks to the realisation of these benefits are identified, along with measures aimed at mitigating them.

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2.2 London’s agglomeration - driven economy, its transport network requirements and emerging constraints on growth

The principal purpose of Crossrail 2 is to unlock sustainable economic growth in London and the UK by growing London’s international employment centres1.

The SOBC sets out evidence showing that the sustainable growth of London’s “agglomeration economy” is desirable, particularly in the context of increasing competition in the global markets in which London operates.2 Crossrail 2 is needed to unlock further economic potential, enabling London to maximise its contribution to the UK’s sustainable economic growth and productivity. The scheme will also deliver strong benefits across the wider south east region. The goals and objectives are set out in full in Appendix B. Standard transport cost benefit appraisal does not fully capture all of these impacts and a parallel approach was developed for the SOBC, a fact recognised by DfT3.

An innovative economic case4 was developed in parallel to the standard transport cost benefit appraisal to reflect the scheme’s expected economic performance impacts

This work showed how the scheme will unlock a series of transport and housing constraints on the growth of London’s labour supply. This will enable employment to continue growing in London’s international employment centres and generate productivity benefits worth tens of billions of pounds to the UK economy5. In particular, by boosting the capacity of the transport network serving central London and unlocking 200,000 new homes, Crossrail 2 could unlock 135,000 additional jobs6 in and around central London.7

This work also showed how, even under a cautious economic scenario8, those new jobs would generate net additional UK tax revenues sufficient to repay Government’s

1 Central London, Isle of Dogs, Stratford and Old Oak Common (after HS2 opens). 2 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp.34 – 40 3 see “Understanding and Valuing the Impacts of Transport Investment - Progress Report 2014”, DfT, December 2014 - paras 3.25 onwards, ‘dynamic clustering effects’ 4 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp 118-132;. 5 Evidence about the scale and nature of the agglomeration benefits is summarised in ‘Transport Investment and Economic Performance’, DfT, November 2014. 6 These jobs would be in addition to around 60,000 more local jobs as a consequence of housing growth. 7 135,000 new jobs is equivalent to an 8% increase in central London employment. This represents half of Crossrail 2’s theoretical capacity of 270,000 in both directions over the 3 hour peak. 8 “Economic assumptions” refers to the relationship between economic density and productivity (‘agglomeration elasticity’), and the ‘net additionality’ of the additional central London jobs at a UK level. See ‘Crossrail 2 – GVA Impacts’, KPMG (for TfL), June 2015

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investment in Crossrail 2 over time. Under a more optimistic (yet entirely plausible) scenario, the additional tax revenues resulting from higher productivity would return a very substantial ‘dividend’ to Government, once its initial investment is repaid. This fiscal impact, and the consequences for funding, are discussed in Section 3 of this submission.

London’s core employment centres generate agglomeration economies which depend on the massive labour market catchment area that London’s transport network offers

Evidence on this is set out in the SOBC9, supported by work undertaken for the Mayor’s 2050 London Infrastructure Plan10 which examined alternative spatial scenarios for the development of London. This showed that the benefits of facilitating further employment growth in the existing and planned clusters of very high density employment in and around the centre far exceed the infrastructure costs. This is backed up by the fact that these areas have experienced sustained growth in employment in recent years, attracting the vast majority of the growth in London’s ‘high value’ economic activities.

This spatial pattern of employment is critically dependent on London’s transport system and in particular the massive connectivity that the network affords these key locations, which share largely the same labour market catchment areas. Around 80% of peak morning travel to Central London is by rail modes, and in fact 48 per cent of the UK’s national rail trips begin or end in London. Figure 1 shows the number of people within 45 minutes travel time of each zone in London for 2011 and 203111. All of the key employment centres are, or will be,12 in locations which can be reached by more than 2 million people within this time (areas shown in pink and red).

The ‘hyper-connectivity’ the system offers depends on transport network effects that are only available close to its heart. This means London’s powerful agglomeration - driven growth cannot be replicated outside Central and Inner London.

Critically this level of ‘hyper-connectivity’ is a function of the interaction of the individual national rail and TfL rail lines that form a dense network focussed on central London. The Jubilee Line Extension provides a useful illustration of this effect. The line has enabled large scale development in a series of locations along its route, most notably at Canary Wharf, which now accommodates over 100,000 high value jobs. This is only possible because of the line’s function (along with the DLR

9 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp.40 – 48. 10 See 2050 London Infrastructure Plan consultation papers - Transport Supporting Paper, GLA, July 2014, pp 25-31. 11 The 2031 plot is based on all committed investment and the Crossrail 2 Regional scheme. 12 Old Oak Common will also be once it is served by HS2, Crossrail and London Overground trains.

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and Crossrail from 2019) in integrating the area into the wider transport network that serves Central London.13 It is therefore able to draw on a largely similar labour pool to the City of London and the rest of Central London.

The network effect declines rapidly with distance from the centre, as illustrated by the fact that close proximity to central London is critical to the success of Canary Wharf as an international employment centre. This means the cumulative impact of the committed and planned investment in transport infrastructure between 2011 and 2031 will be through network effects on connectivity close to the heart of the system, as shown in Figure 1 below. The additional jobs associated with agglomeration - driven growth will be in areas of very high connectivity (shown in red and maroon), which will expand around the centre and certain key nodes in inner London - but they will continue to represent only a modest proportion of London’s total area.

Figure 1: Connectivity of London's transport system in 2011 (left) and 2031 (right)

The range of locations capable of supporting agglomeration - driven growth is determined both by transport connectivity and place specific factors

It is clear that only areas that can benefit from these strong network benefits have access to the size of labour market catchment necessary to support the ‘agglomeration economy’. In fact there are other factors that mean the range of potential locations is more limited than Figure 1 suggests. For example inner London rail hubs such as Clapham Junction or Finsbury Park meet the connectivity criterion but do not have sufficient areas of developable land available. Without this the high

13 For example, the Jubilee Line links Canary Wharf to every other Underground line, the Overground at Canada Water and, a number of national rail routes – C2C at West Ham, the Great Eastern Main Line at Stratford, South Eastern at London Bridge, the South West Main Line at Waterloo and Chiltern via the Metropolitan.

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fixed costs associated with creating a location ‘brand’ and the very high quality urban realm that is required cannot be justified, viz., the levels of investment required in areas such as King’s Cross, Stratford, Vauxhall Nine Elms Battersea to turn them into places capable of attracting the types of activity associated with London’s World City function.14

Agglomeration-driven growth is fundamental to London’s international competitiveness but depends on the transport system’s ‘effective connectivity’

In the absence of labour supply constraints, the process of growth fuelled agglomeration is self reinforcing as illustrated in Figure 2 below. Agglomeration economies make firms competitive and profitable and this success attracts new workers to the city and encourages existing workers to stay. They, in turn, boost labour supply further, which employers take up, creating further agglomeration benefits and so on. As the areas served by the transport system become more densely populated the effective connectivity it provides increases, and larger numbers of people will exploit the economic opportunities it offers.

These transport enabled economic opportunities depend on the system being able to deliver people reliably from where they live to where they work at times they are prepared to travel. This means that in addition to the connectivity of the transport system, its capacity and performance are critical. 15 These factors together determine its ‘effective connectivity’. There are further more indirect links. For example the transport system will also influence the sustainability of growth and liveability of the city, factors which are also reflected in the objectives of the scheme.

14 Old Oak Common is however expected to be able to support such activities – it is a very large brownfield site and will have exceptional connectivity through HS2, Crossrail and London Overground as well as excellent links to Heathrow Airport.

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Crossrail 2 NIC Supplementary Submission.

Figure 2: The agglomeration - driven growth process

Transport capacity and housing supply constraints can limit the effective connectivity of the transport system, and will constrain growth in labour supply if not addressed

Persistent levels of excessive crowding on the transport system and associated impacts on system performance can be seen as a ‘warning sign’ that labour supply constraints are starting to emerge. The impacts may be felt before the point is reached at which passengers cannot physically board trains as some travel will be deterred by the prospect of severe overcrowding. They are also likely to be accompanied by deteriorating system performance.

If experienced on a daily basis this will reduce some people’s willingness to commute resulting in them withdrawing from labour markets in which they would otherwise be willing to participate. If the situation is sufficiently widespread it will impact on people’s perception of the quality of life available in the city and fewer people willing to live and work in it, reducing the effective supply of labour that is available. This in turn will impact firms’ location decisions.

An alternative mechanism by which capacity constraints can start to bite is that planners will anticipate excessive crowding on the transport network and turn down applications for new floorspace on the basis that the transport network cannot

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support the additional travel this would generate. This applies particularly where the constraints are more local than network wide. In this case firms’ costs are increased through higher rents and they may be faced with settling for poorer quality accommodation, which may also affect their competitiveness. The solution is for additional capacity to be created through appropriate investment in the transport system.

There are also limits to the residential capacity of the areas that are served well by the existing transport system, which means housing can also become a biting constraint on the growth of labour supply. 16 In this case the solution is for investment to enable areas previously unattractive to ‘agglomeration economy’ workers to be better connected, making it viable to deliver more housing that meets their needs.

Investing in the transport network to provide further ‘effective connectivity’ will ease these constraints

As described above and in Figure 2, relieving the labour supply constraints will enable further growth in employment in the key centres, allowing agglomeration - driven growth to continue. On the other hand if biting constraints on labour supply are left unaddressed, growth will be thwarted and the process could be thrown into reverse. As labour supply becomes constrained, employers‘ costs will increase as they have to pay higher wages and they will become less competitive. Eventually the city will become less attractive as a business location and agglomeration benefits will decrease leading to a further loss of competitiveness and so on.

Forecast levels of crowding are a signifier of lost economic potential

This suggests that the crowding levels implied by transport models shouldn’t necessarily be regarded as forecasts of actual crowding; behavioural responses to crowding mean the transport system is unlikely to physically ‘break’ or experience ‘meltdown’ as a result of the pressure it experiences. Rather, the consequence of the pressure on the transport system is a slowing and eventual reversal of agglomeration-driven growth. Very severe crowding levels should therefore be seen as a signifier of the lost economic potential that would result from a failure to invest to address critical constraints.17 Similarly where there is a housing supply constraint, the impact of the resultant high costs of housing deterring people from living and working in London also signifies lost economic potential.

16 The housing supply aspects of the case for Crossrail 2 are considered further in the SOBC. See Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp.59-62. 17 It is important to note that where bottlenecks emerge on critical links or nodes there is the potential for the impacts to be felt in all the areas that depend on these network benefits, i.e. across London’s core employment centres. There is not necessarily therefore a correlation between the areas of future employment growth and rail pinch points.

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Crossrail 2 NIC Supplementary Submission.

Constraints on sections of line that provide strong ‘network effects’ will have much greater impacts on the overall ‘effective connectivity’ of the system than constraints on more distant parts of the network, where the impacts will be more localised. For example, in the example of the Jubilee Line Extension discussed above, any capacity constraints will be felt across the network because of the line’s role in consolidating demand for travel to locations such as Canary Wharf from across the London and south east labour market catchment area. This suggests that the scale of the benefits arising from relieving constraints on such critical links at or close to the heart the network will be very large, and they will be felt over a widespread area – and this will justify more costly solutions.

With currently committed and planned investment the ‘effective connectivity’ of the transport system will be insufficient to meet London’s labour supply requirements from the early 2030s.

The scale of lost economic potential that could result from a failure to address emerging labour supply constraints was assessed in the SOBC.18 To make as robust a case as possible for the investment to remedy this requires evidence in relation to a number of further steps in the argument. In particular it is necessary to demonstrate there will be a biting constraint on labour supply by the early 2030s, despite the investment that is already committed and planned for the transport network. This could occur through a combination of:

 transport system capacity constraints, arising from continuing growth in demand for labour in the international employment centres, and

 remaining constraints on housing supply in spite of policies to ensure housing delivery rates are increased so that all feasible opportunities are used up with the reference case transport network by 2031.

The following sections provide a summary of the evidence base and set out some areas of ongoing and planned work to strengthen it.

There is strong evidence that London’s economy will continue to have strong economic potential though the 2020s and beyond

London’s history of sustained economic success and population growth over the last 30 years provides strong evidence for the likely continuation of strong economic potential and London’s international competitiveness provides further support. In particular, London’s size is a competitive advantage and further supports a legitimate expectation of continuing growth.

18 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp.119 - 132

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Crossrail 2 NIC Supplementary Submission.

International evidence19 indicates cities and especially large ones will be the key growth drivers of the future and are likely to be successful provided policies that support such growth are pursued. London’s track record of success as a leading centre in the global economy and as a provider of high value internationally traded services suggests this is likely to continue.

Evidence is emerging that central area employment growth will be even stronger than previously forecast

Part 1 of TfL’s NIC submission (14 Jan) provided evidence about London’s strategic challenges over the next two decades or so. These are primarily consequences of the city’s success, and in particular pressures resulting from recent and forecast economic growth and the continuation of rapid population growth that is associated with this. This shows that the key challenges relate largely to the agglomeration - driven growth process set out above which is in fact self sustaining provided constraints on growth are tackled as they emerge.

TfL believes there is a significant upside potential on forecast growth in demand for labour in London’s key employment centres. Recent employment and population forecasts suggest that the assumptions driving the Crossrail 2 strategic and economic cases may be conservative. There is increasing evidence that London is growing far faster than either the Greater London Authority (GLA) or the Office for National Statistics (ONS) has historically predicted.

A 2015 report by WS Atkins with Oxford Economics and Centre for London20, proposed higher population and employment projections than those underpinning the latest London Plan. It forecasts a 2036 population projection of 11.1 million, which is significantly higher than the current GLA range. Atkins also forecast a higher employment projection (6.07m jobs by 2036) than an early 2015 GLA figure of 5.76m jobs to the same date. The GLA revised their projections upwards in July 2015 to 6.42m jobs. While our current modelling reflects this most recent projection in part, it is clear that in recent years growth in London’s population and employment has been higher than expected.

There is strong evidence that the heart of the reference case transport network will be severely constrained by the early 2030s

The central area of the Underground network within the Circle Line together with links to Canary Wharf, Stratford and Battersea represents the heart of the network that is critical to the ‘hyper - connectivity’ that enables the key employment centres to

19 See, for example, “London 2036: An Agenda for Jobs and Growth,” London Enterprise Panel. 20 WS Atkins with Centre for London and Oxford Economics. Future Proofing London. July 2015.

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share a vast shared labour market, as described above. This part of the network offers a dense array of interchange possibilities between Underground lines and also with the ring of national rail stations that enables dispersal of arriving national rail commuters to their employment locations. The TfL Business Plan21 sets out the investment planned for increasing the capacity in the Underground and other TfL networks. A revised Business Plan will be published later in 2016.

Despite this investment programme, in the absence of additional investment, capacity constraints22 are expected to re-emerge by the late 2020s on both critical sections of line and at key interchanges. Figure 3 below shows the degree of pressure on the central London network expected by 203123 especially on London Underground lines ‘inbound’ from national rail termini. Sections forecast to have extreme or very severe crowding include:

 the Victoria line northbound, north of Victoria; and southbound, south of Finsbury Park;  the Northern Line northbound and southbound on both the Charing Cross and Bank branches (inbound from Waterloo, London Bridge, Euston and King’s Cross St Pancras);  the Jubilee Line eastbound, east of Waterloo;  the Waterloo and City line northbound.

21 TfL Business Plan 2014, pp 31 -35 22 A summary of the types of capacity constraint is set out in Appendix D and an illustration of typical central London station capacity constraints is set out in Appendix E. 23 Only sections of the Bakerloo Line (ca. 2 passengers per square metre available) and the Central Line and Crossrail 1 (ca. 1 passenger per square metre available) offer any spare capacity.

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Figure 3: Effective capacity on the London Underground network, peak direction, by line, weekday peak period, 2031

Key: Thickness of line denotes level of crowding

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Without major additional transport capacity through the heart of central London, growth in the London and south east labour market (which is critical to agglomeration - driven growth) will be prevented during the 2030s.

It is clear from the above analysis that once these constraints bite, the effective connectivity of London’s key employment locations can only be increased if additional capacity through the core of central London is provided that tackles these constraints. In the absence of this, additional capacity or connectivity on outlying parts of the system will not be effective in increasing the overall labour market catchment area that feeds London’s agglomeration - driven growth.

Severe capacity constraints are forecast on radial corridors beyond the central transport network that need to be addressed by the early 2030s. The south west – north east corridor is the priority

While a number of radial corridors will benefit from major new infrastructure provision, there are some gaps in the committed and planned investment programme, for which no means of addressing emerging capacity constraints have been identified. The South West Main Line (SWML) carries around 20 per cent of all national rail arrivals into Central London and faces the most pressing remaining capacity constraint on the radial national rail network, as illustrated in Figure 4 and Figure 5 below.

It is of particular note that passenger kilometres spent in severely crowded conditions on the SWML are forecast to increase from 500,000 in 2031 to 2.7 million in 2041. This is indicative of a railway in which crowding pressures are at a tipping point, with a small increase in demand leading to many links entering the over-crowded threshold. The railway has no obvious bottleneck that could be resolved to release capacity.

The South West Main Line serves the largest geographical sector of London’s commuter catchment area. It is served by London Waterloo, the busiest station in the UK with around 100,000 passengers arriving in every three hour morning peak period. Over the last decade and a half demand at London Waterloo has increased from 66.7million passengers in 2001 to 99.2million in 201424.

24 ORR Station Usage data 2011 & 2015.

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Figure 4: Crowding on the National Rail network, by line into London termini – more than 2 passengers per square metre

Figure 5: Severe crowding on the National Rail network, by line into London termini – more than 4 passengers per square metre

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By the end of Network Control Period 5 (2019) all ‘fast’ line25 capacity will be fully utilised and opportunities for lengthening trains and platforms will be used up also. Demand is forecast to continue growing with the high peak hour demand forecast to increase by 40%26 to 2043. To meet this requires capacity for 37 trains per hour (tph) ‘up’ to London Waterloo during the high peak hour27 whereas at present there is capacity for 24 tph (17 for longer distance28 and 7 for Outer Suburban29 services). This represents an increase of over 50 per cent.

There are currently 18 inner Suburban services, which use the ‘slow lines, ’to London Waterloo during the high-peak hour,. Demand on the Southwest Mainline Inner Suburban services in the high peak hour to Waterloo is forecast to increase by up to 40% by 2043, from 23,600 in 2011. This would represent an increase in demand of an extra 9,500 passengers. This is equivalent to the capacity (seated and standing) of 6 10-car class 455 suburban trains.30 To resolve crowding issues in the medium term a 10-car lengthening programme is currently committed in CP5. Assuming the CP5 train lengthening as base, capacity for an additional 6,200 passengers (equivalent to 40 full high density suburban carriages) is required by 2043 during the high peak hour.

The priority corridor for relief in central London by the early 2030s is on the south west – north east axis via the West End

Modelled crowding densities of the London Underground, DLR and Crossrail network in the 2031 weekday morning peak hour are shown in Appendix C. This indicates how despite the currently planned investment programme, some key links on this network will be severely crowded. Key links expected to experience severe capacity constraints include:  the Victoria line between Victoria and Euston;  the Charing Cross and City branches of the Northern line  a number of east west links including the Jubilee line, the District line and Metropolitan and Circle lines.

There are high levels of absolute demand in the corridor, in particular on the Victoria Line and Northern Line – see Figure 6 below, which reflect demand from the areas they serve and from the key rail terminals for which they provide onward dispersal.

25 longer distance and Outer Suburban’ services to locations such as Woking and Guildford. ‘slow lines’ refers to ‘Wessex Inner Suburban’ services to locations largely within London 26 from 16,000 passengers in 2011 to over 22,000 by 2043. This would mean passengers being unable to board up services from Farnborough, from where the journey time to Waterloo is 44 minutes – see London and South East Market Study, Network Rail, 2013. 27 08:00-08:59 28 To Portsmouth, Southampton, Salisbury and Basingstoke. 29 To Guildford, Woking, Dorking (via Epsom). 30 London and South East Market Study, Network Rail, 2013.

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The Northern Line makes up around 18% of total boardings*, or around 360,000* trips in the three-hour morning peak31 while the Victoria Line makes up around 13% of total boardings and has the busiest single station to station links on the Underground.

Figure 6: Levels of demand in a typical weekday peak hour on the south west - north east axis

nb the thickness of line denotes demand.

Additional south west – north east capacity will improve the effective connectivity of all the employment centres32by exploiting some spare east – west capacity that is otherwise unused on Crossrail and the Central line.

31 Based on modelled 2031 boarding figures. 32 Stratford, Canary Wharf, The City and old Oak Common in addition to the West End

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There is in fact forecast to be spare capacity for at least 20,000 additional passengers in a typical weekday morning peak hour on Crossrail 1 (shown in Figure 7 below) and the Central Line (see Appendix C) in both directions from Tottenham Court Road. Note that the plots in Figure 3 and in Appendix C only show peak direction crowding and therefore do not fully illustrate these opportunities.

Providing new SW / NE south capacity with interchange at Tottenham Court Road would make good use of this network capacity and connect with key employment centres with the capacity for growth to the east (The City, Canary Wharf, and Stratford), and the west (elsewhere in the West End, Paddington, and Old Oak Common). This will provide much needed alternatives for journeys that would otherwise require use of very crowded sections of the network including the Jubilee Line between Waterloo and Canary Wharf and the Waterloo and City Line. Furthermore, in the longer term the capacity of Crossrail could be increased from 24 to 30 tph, which could release further capacity for potential use in this way

Figure 7: Spare capacity on Crossrail 1 (with 24 trains per hour)

Increasing housing delivery rates has become a key policy priority. It is likely that most feasible development opportunities with the reference case transport system will have already come forward by 2031 but that despite this a significant supply shortage will persist

Around 24,000 new homes are being built in London each year; this is less than half of the required number (49,000). Initiatives are in place to increase delivery, but even if the required rate is reached over the coming years identifying enough sites and delivering at a significantly higher rate over a sustained period will be very challenging. The current Strategic Housing Land Availability Assessment33 has not identified sites for development beyond 2025, but it is clear that on the basis of the

33 “The Strategic Housing Land Availability Assessment, 2013”, GLA, January 2014.

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Crossrail 2 NIC Supplementary Submission currently committed and planned transport network insufficient opportunities for viable housing development will exist. With supply in the wider South East region an issue also, the Upper Lea Valley represents a major opportunity to alleviate the housing supply constraint on agglomeration - driven growth that will otherwise exist.

Current and forecast demand in the West Anglia Main Line corridor, which serves the Upper Lea Valley is modest compared to other radial routes, reflecting the relatively poor connectivity the service offers and the consequent relative unattractiveness of the corridor as a place for commuters to live.

There are currently twelve West Anglia services arriving at London Liverpool Street and Stratford during the high-peak hour. The number of passengers in the high peak hour is forecast to increase to over 20,000 by 204334 which is around 6,300 above current capacity. Forecast demand would be far higher if the considerable development opportunities in the Lea Valley area are realised.

Key messages:

 there are huge potential benefits arising from the continuation of the cycle of agglomeration - driven growth in London. This is self reinforcing providing the transport system pressures it generates are adequately addressed in order to ensure labour supply shortages do not start to constrain the process;

 the system is critically dependent on very high levels of effective connectivity, i.e. connectivity to a vast labour market supported by adequate capacity to support the associated demand;

 the central London transport system, particularly ‘inbound’ from the national rail termini plays a critical role in supporting this but despite the current investment programme capacity constraints are forecast to emerge that will start to severely constrain this role by the 2030s in the absence of additional new capacity;

 there are also severe capacity constraints emerging on key radial routes, with the SWML representing the priority for action in the 2020s;

 key priorities for new capacity in central London are also on the south west – north east corridor. The Crossrail 2 Regional Scheme will also increase ‘effective connectivity’ for all the key employment centres by utilising otherwise unused capacity on Crossrail and the Central line east and west of Tottenham Court Road;

34 Anglia Route Study, Network Rail, 2014.

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 despite the prospect of increasingly pro-active policies to increase the rate of housing delivery in the coming years there are expected to be severe constraints on labour supply in the absence of major new development opportunities, which will only be enabled through step changes in connectivity in key corridors. The biggest opportunity is in the north east corridor.

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2.3 Evidence that Crossrail 2 is the most effective scheme, and that it is needed by the early 2030s

2.3.1 Alternatives considered in SOBC

To make the case for the Crossrail 2 Regional scheme its effectiveness in addressing the constraints identified in the previous part needs to compared to that of an appropriately defined set of alternatives

The SOBC set out the process by which, through progressive development and sifting, over 100 options were reduced to four shortlisted options.35 It then set out in detail the components of the shortlisted options36 and assessed their performance37 against objectives and value for money. The shortlisted options are summarised below, together with an additional option that we have been asked to consider by the DfT, Option 1b - a ‘360 degree option’)

The alternative options considered are as follows:

Alternative 1:National Rail alternative (“Do Minimum +”) – a package of significant on-network works, focused on increasing capacity and connectivity on the South West Main Line and West Anglia Main Line

Alternative 1b: 360 degree option involving incremental capacity / connectivity improvements on a series of national rail radial routes ‘around the clock’;

Alternative 2: Crossrail 2 Metro scheme (a brand new, tunnelled Metro railway across London)

Alternative 3: Crossrail 2 Metro scheme, plus National Rail alternative

Alternative 4: Crossrail 2 Regional scheme (a brand new tunnelled railway across London, connecting into the existing national rail network at Wimbledon and Tottenham Hale

The performance of these options in addressing the constraints on London’s agglomeration - driven growth in the previous part is examined below. This looks in turn at the Underground constraints in Central London, the South West Mainline, the West Anglia Mainline and then at the overall performance of each alternative.

35 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp. 76 - 81 36 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp. 82 - 97 37 Crossrail 2 Strategic Outline Business Case, TfL, June 2015, pp. 98 - 109

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Crossrail 2 NIC Supplementary Submission

2.3.2 Alternative Central London capacity solutions

There is a practical limit to the extent to which capacity on the London Underground network can be enhanced beyond the current investment programme. This means new infrastructure will be required to meet capacity requirements in the critical central London network

It is clear that operating the network with very high levels of demand, in many cases, at many times the level of demand the system was initially designed for, can reduce the effective capacity of the system. Prior to the current investment programme, however, it was generally possible to identify investment schemes that could provide additional system capacity, eg signalling / rolling stock upgrades. Upon completion of the current investment programme the scope for further such schemes is far more limited as the practical limits of the Underground system will have been reached in most cases. This situation is known as ‘peak tube’, the point at which it is no longer practical or economically beneficial to continue to invest in relieving constraints. The principles behind these effects are explained further in Appendix F. Figure 8, below, shows how much further capacity could be generated on each line before ‘peak’ tube is reached and that only a handful of limited opportunities remain.

Figure 8: Train service frequency on the Tube: current, planned and maximum theoretically achievable levels

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Crossrail 2 NIC Supplementary Submission

The implication is that the only means of providing the additional central London capacity that is needed by the 2030s is through a major new alignment. The two options considered for this are the Crossrail 2 Metro option and the Crossrail 2 Regional option. For travel wholly within central London there is little to distinguish between these options. However there is a clear difference in their performance when radial capacity and connectivity in the south west and north east corridors are taken account of.

2.3.3 South West Mainline capacity

The Crossrail 2 Regional scheme provides the only effective solution for the south west main line.

A requirement for capacity of 37 main line tph to Waterloo by 2041, against capacity for 24 tph currently, was identified above (see page 19). Options for bridging the gap involving one or more of the following interventions have been analysed:  a ‘Digital Railway’ ETCS38 and ATO39 signalling solution;40  adding a fifth track between Surbiton and Clapham Junction;41  Crossrail 2 Regional scheme, which would remove a significant proportion of the inner suburban services on the slow lines allowing an additional 7 tph for Outer Suburban services to be transferred;

The only options that provide sufficient capacity to meet 2043 are combinations of either (a) Crossrail 2 Regional scheme and the Fifth Track or (b) Crossrail 2 Regional Scheme and the ‘Digital Railway’ solution.

38 European Train Control System 39 Automatic Train Operation 40 Two levels of ETCS have been considered: Level 2 offers a fixed block system to reduce signalling headway, while Level 3 provides a moving block system, but this system has yet to be implemented on a fully operational national rail line. 41 See Option F5 in London & South East Route Utilisation Strategy, Network Rail, 2011.

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Crossrail 2 NIC Supplementary Submission

Figure 9: Practical maximum train paths for ‘fast line capacity’ into London Waterloo during a typical weekday morning high peak hour

5th Track Option Crossrail 2 ETCS Level 2/3 & ATO Regional

5th Track Option 31tph 38tph 31tph

Crossrail 2 38tph 31tph 38tph

ETCS Level 2/3 & ATO 31tph 38tph 31tph

As Figure 9 shows, Crossrail 2 is required if more than 31 tph are to be provided because with other solutions the constraint becomes the station throat and platform capacity at Waterloo. To relieve this would require a massive and very costly rebuild at Waterloo. Crossrail 2 would free platform capacity for Outer Suburban services, obviating this need.

The options for bridging the SWML slow line capacity gap identified on page 18 are Crossrail 2 Regional and Metro options and 12-car lengthening. The latter would only provide additional capacity for 5,500 passengers while the Crossrail 2 options would meet the requirement.

The impacts of the combination of non Crossrail 2 alternatives for meeting slow and fast line capacity requirements would result in around 40,000 additional passengers arriving at Waterloo in the AM peak period and a similar number of additional trips in the PM peak, compared to a scenario with the Crossrail 2 Regional scheme, as shown in Figure 10. The likely impact on forecast station crowding would be sufficient to trigger the need for a costly rebuild at Waterloo station (the ‘Waterloo Masterplan’) to be delivered in the early 2030s. The SOBC allowed £2 billion for this risk although costs are uncertain. Further details of the crowding impacts at Waterloo Station without Crossrail 2 are provided in Appendix G.

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Figure 10: Passengers arriving into London Waterloo in the average three hour AM peak period

160,000 40,000 fewer passengers will pass through 140,000 Waterloo with Crossrail 2. 120,000

100,000

80,000

60,000

40,000

20,000

0 2005 2011 2023 2031 2041 with 2041 with 5 Crossrail 2 tracking & 12- car suburban

2.3.4 West Anglia Mainline

Crossrail 2 regional scheme provides the only solution that can unlock the full housing supply potential that exists in the Upper Lea Valley

Both Crossrail 2 Regional scheme and the four tracking / train lengthening option help deliver improved journey times for mainline services as well as increased capacity and connectivity. However in the four-tracking option only two additional paths can be accommodated despite major works at Coppermill Junction and provision of an additional platform at Stratford, as shown in

Figure 11. Any additional paths into Stratford above the 2tph are constrained by conflicting empty coaching stock moves out of London Liverpool Street to Orient Way depot, which would require further investment. The West Anglia Taskforce is examining this further.

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Figure 11: Additional high peak hour passenger capacity in the peak direction in the WAML corridor

Crossrail 2 Four-tracking & train lengthening

Main line 4,900 2,450 +1,000

(+4tph) ( if + 2tph are assumed)

Lea Valley 10,200 – 14,800 1,200

(+10-15tph)

Total 15,100 – 19,700 4,650

The existing 2-track West Anglia Main Line approaches to London Liverpool Street are used to maximum capacity, as are the 7 existing platforms. Crossrail 2 not only delivers significantly more capacity than four-tracking and train lengthening, but provides a significant uplift in the number of services to central London. Compared to the South West, the issue is not so much one of capacity, but frequency and directness of services to central London. It is this frequency uplift and faster, more direct journeys which will unlock growth in the corridor.

2.3.5 Summary of option performance

The Crossrail 2 Regional scheme clearly outperforms the other alternatives

The analysis set out in this section provides the context for appraising the performance of the various options. The full benefits aren’t captured in conventional transport appraisal42 and any straightforward comparison of standard BCRs would therefore be considered potentially misleading.

The Crossrail 2 Regional scheme enables a massive expansion of opportunities for direct travel into and across central London and it delivers widespread crowding relief across the national rail and Underground system. This is illustrated in Appendix H. In particular it relieves the critical capacity constraints on the South West Mainline, Victoria line and Northern line as well as several critical interchanges including Waterloo, Euston, Victoria, Liverpool Street, Vauxhall and Finsbury Park.

There will also be more widespread network benefits, for example better alternatives for accessing routes with capacity that serve the key employment centres. The most

42 See “Transport Investment and Economic Performance,” DfT, 2014, pp 61 – 63.

29

Crossrail 2 NIC Supplementary Submission significant of these is the direct link to Tottenham Court Road, enabling improved interchange with the Central line and Crossrail and therefore more effective use of available network capacity to and from the City, Canary Wharf, Stratford and Old Oak Common. It is also important to note that where Crossrail 2 relieves capacity on the core sections of Underground lines, there are opportunities and potential benefits elsewhere on those lines, eg additional growth on the outer reaches of the Piccadilly line.

As a result, Crossrail 2 is the only scheme that provides a step change in the ‘effective connectivity’ of the key employment centres – those that benefit most from dynamic clustering effects. It addresses all of the critical constraints that would otherwise constrain the labour supply growth on which this depends. As well as unlocking major new areas for housing growth, through significantly enhanced connectivity (not least to central London employment opportunities).

By offering a link through Central London, Crossrail 2 is also forecast to significantly reduce the number of passenger entries and exits to major termini. Pedestrian congestion on footways and pavements; and busy bus interchanges are commonplace at locations such as Waterloo, Victoria, Euston, Kings Cross St Pancras, and Liverpool Street. Some of these key locations are identified in Appendix H. For example, the number of entries and exits from Waterloo’s National Rail and London Underground stations is forecast to reduce by around 20% as a result of Crossrail 2. This will reduce the risk of conflict between pedestrians and road users around key stations, which is typically high around termini, and will dilute the impacts on congestion around these areas, on all modes.

Alternative 1: National Rail alternative (“Do Minimum +”)

Investment on only the National Rail network fails to solve some of the crucial crowding problems on London Underground lines and in fact increases crowding on lines that feed the key employment centres in the CAZ, slowing down agglomeration - driven growth. Furthermore, the termini capacity at Waterloo and Liverpool Street caps the level of achievable new capacity. As a result this option fails to address the effective connectivity problem that will constrain London’s agglomeration - driven growth from the 2030s.

Alternative 1b: ‘360 degree’ solution

There is further work to do on this option as part of the business case update, however initial investigation suggests it is unlikely on its own to be able to address the constraints identified above on agglomeration - driven growth adequately. In particular, this option would not address the critical capacity constraint on the central London network ‘inbound’ from the national rail termini (see Figure 3) which indicates that it would not be able to increase the ‘effective connectivity’ of the key employment locations.

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Crossrail 2 NIC Supplementary Submission

Furthermore it appears unlikely that adequate additional housing could be accommodated on existing major transport corridors in any case. Firstly, a concerted policy response to address London’s housing constraints is expected to result in a higher delivery rates in the coming years and this is likely to exploit most of the available opportunities within London around the existing network. It is unlikely however to be sufficient to bridge the gap between need and delivery, particularly in the period after 2025, for which capacity has not been identified. The only way in which this is likely to be possible is through opening major new development corridors – and this is only available in locations that are currently very underserved by the transport system, where new connections could have a transformative effect on development viability. The Upper Lea Valley is considered to be the corridor containing the most potential of this type, which is the reason it performed very well in the Crossrail 2 optioneering process.

Alternative 2: Crossrail 2 Metro scheme

This provides significant additional network capacity in central London and aids dispersal from the mainline termini but fails to provide either an adequate solution to SWML crowding or sufficient additional connectivity to address the housing supply constraint. It could only therefore be considered in conjunction with additional interventions to address these issues – see Alternative 3.

Alternative 3: Crossrail 2 Metro scheme, plus National Rail alternative

This addresses the effective connectivity constraint on the agglomeration - driven growth but less effectively than Crossrail 2 Regional scheme which provides better direct journey opportunities and lower journey times. This option involves funnelling more trips through the main rail terminals, which triggers significant additional investment in station capacity relief schemes, notably at Waterloo and Liverpool Street. Overall it is likely to cost at least as much as the Crossrail 2 Regional scheme.

Alternative 4: Crossrail 2 Regional scheme

The Crossrail 2 Regional scheme will build on already committed and planned investment to provide an integrated solution that will ensure the effective connectivity of the transport system is sufficient to meet the needs of the agglomeration - driven growth process in the 2030s.

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Crossrail 2 NIC Supplementary Submission

Key messages:

 ‘Peak tube’ means that only a new rail alignment through Central London can provide the essential new capacity that is required to support a continuation of agglomeration - driven growth process in the 2030s;

 on network solutions to national rail capacity constraints on the SWML and poor connectivity on the West Anglia Main line exacerbate the pressures at key mainline rail termini and on the onward underground links to employment centres;

 Crossrail 2 will relieve a series of the most severe network constraints, including in the critical heart of the system ‘inbound’ from the ring of national rail terminals, and enable better use to be made of available network capacity, eg on Crossrail 1, improving access to all the key employment centres;

 it will also provide a massive boost to connectivity by unlocking large scale housing development across the region.

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2.4 Mitigating risks to the delivery of the economic uplift enabled by Crossrail 2

Investment in new and improved public transport infrastructure is an established method of enabling jobs and housing growth

New public transport connections can have journey time, frequency, reliability, and journey comfort improvements:  they can bring forward undelivered development; the Jubilee Line Extension for example was a critical trigger in unlocking significant development capacity and opportunity in East London;  increased property and land values allow financial viability barriers to be overcome, attracting new or additional development investment; Tottenham Court Road saw net retail rental values increase by 30% in 2015, (in comparison to 18% across Central London as a whole) even though Crossrail does not come into operation until late 2018;  more efficient land use is enabled through the provision of improved transport services; the DLR extension to Lewisham increased the Public Transport Accessibility Levels (PTAL) in the local areas such that 15-25 storey towers are now being delivered by the station, where previously such development densities could not be supported;  new significant transport provision creates greater agglomeration benefits for major economic centres and supports diversification and the complementary role of other employment hubs; the Victoria line in North London has enabled new and existing small and medium-sized enterprises (SME’s) in the creative, arts, and fashion sectors to grow in Haringey and Waltham Forest.

Further evidence of the effectiveness of investing in transport, and how it can unlock housing and jobs growth, is contained in Appendix I.

London’s integrated strategic planning processes will ensure growth supporting policies are coordinated in order to maximise the additional employment and housing unlocked by the scheme

The delivery of the economic uplift associated with the transport network improvements delivered by Crossrail 2 depends on supportive policies to deliver growth. The London Mayoralty is at the heart of many integrated strategic planning and policy-making processes43 that are informed by a common evidence base, and which together enable London to respond to the challenges in an effective and

43 Including The London Plan, Mayor’s Transport Strategy and Economic Development Strategy and a host of related supplementary strategies at the London wide level and Local Plans at the London Borough level. It also includes a 2050 London Infrastructure Plan.

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Crossrail 2 NIC Supplementary Submission coordinated way. This approach has a demonstrable track record and has to date been resilient to changes in political administration.

The new Mayor of London, who will assume office in May 2016, will have responsibility for creating a new London Plan, and new Mayor’s Transport Strategy. A new Mayor of London will be elected in May 2016 and is expected to require new versions of the main strategies to be produced. It is expected that Crossrail 2 will form the backbone of the approach for addressing London’s strategic challenges within a new Mayor’s Transport Strategy, supported by a pipeline of complementary interventions across multiple modes and geographies over the coming decades and appropriate support from the London plan and other planning strategies. It is important to note that a new approach to planning policy is required to maximise Crossrail 2’s impacts. This could include the intensification of existing development, new development coming forward at densities which are higher than those currently prescribed by the London Plan (this is already common), and the release of land which is currently designated for industrial land uses, or is open space, for housing. Any such changes would be subject to full and proper consultation and due process.

The Crossrail 2 Growth Commission believe that the levels of growth predicted by the Crossrail 2 project team are credible and deliverable

The Crossrail 2 Growth Commission, established last year by the Mayor, have conducted extensive engagement with Local Authorities and key landowners and developers, and found strong stakeholder support for the levels of housing and jobs growth that the Crossrail 2 project team forecast could occur. Furthermore, the Commission has worked with the Crossrail 2 project team to identify a range of activities that could increase the public sector’s involvement in delivering this growth, for example through the extension of existing planning powers and greater collaboration with the private sector, and the use of Mayoral Development Corporations and joint-venture agreements .The Growth Commission has made a separate submission to the NIC.

TfL is working with GLA and other stakeholders to plan sustainable new communities that maximise the opportunities for housing development that Crossrail 2 offers in key locations

The housing growth that Crossrail 2 could potentially support will in some areas builds upon strong strategic and policy support at national, regional and local levels. More than 20,000 new homes could be unlocked in the Upper Lea Valley Opportunity Area. Investment in rail infrastructure sits at the core of many transformative redevelopment packages, through which housing and jobs growth have been delivered; the completed Jubilee Line and Docklands Light Railway extensions for example have driven significant growth in their immediate and surrounding areas,

34

Crossrail 2 NIC Supplementary Submission with the in-construction Crossrail project already being linked to significant increases in housing numbers and land values along its route before it has even opened44.

The benefits of the scheme depend on the existence of sufficient capacity for additional new floorspace to meet employment growth potential at key locations. TfL is studying how the physical capacity for Crossrail 2 enabled employment growth in the key employment centres can be provided

Experience of the last two decades or so indicates that the Central Activities Zone is able to respond flexibly to accommodate additional employment. For example, the City of London has been extensively redeveloped to incorporate denser commercial development while new clusters of high value commercial development have appeared around major transport nodes, notably most of the major national rail terminals. It is believed that there is considerable scope for expansion through:  ‘densification’ and expansion into adjacent areas in the periphery of the existing CAZ., (e.g. Vauxhall Nine Elms Battersea and City Fringe);  Further growth on the Isle of Dogs beyond current growth plans  Expansion of employment at Stratford, which is starting to succeed as a second ‘satellite’ centre;  the development of Old Oak Common, which is a new planned commercial centre on brownfield land in west London that will be served by outstanding transport connections including HS2 and Crossrail, and represents a potential third satellite centre of central London.

TfL is currently commissioning an employment capacity study to investigate the scale of opportunities in these locations with respect to the level of development expected in a 2031 transport network reference case. In particular it is necessary to show that the additional employment space needed to accommodate the jobs will be delivered, and the housing will be delivered in areas where additional ‘effective connectivity’ is provided both on the Crossrail 2 corridor and in other areas that the scheme benefits through network effects.

Key messages:  there is a significant body of evidence which is clear that investment in new transport infrastructure can directly unlock and help deliver new housing and employment growth, as well other positive effects such as regeneration and quality of life improvements;

 a supportive new policy environment will be required to maximise the positive effects of Crossrail 2, and this can occur through existing statutory planning processes;

44 For further evidence of the link between transport investment and housing growth, please see Appendix I

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Crossrail 2 NIC Supplementary Submission

 work to determine exactly how and where the new housing and employment opportunities unlocked by Crossrail 2 are delivered is ongoing.

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Crossrail 2 NIC Supplementary Submission

3 Funding

3.1 Introduction

This chapter responds to the NIC’s questions on funding and financing. The NIC asked: What are the options for the funding, financing and delivery of large-scale transport infrastructure improvements in London, including Crossrail 2?  What is an appropriate local and regional contribution - given the potential distribution of benefits to business, residents, transport users and the wider economy - and how could this be achieved?  What innovative funding mechanisms could be considered to support delivery of key schemes, particularly given the point above about growth and tax?

As part of TfL’s preparation for an updated business case later this year, an exercise is underway to better integrate the strategic and financial cases for the project (one of the key recommendations of the independent ‘TIEP’ report, whose recommendations were accepted in full by DfT45). Drawing on some initial scoping work for this exercise, KPMG have assisted TfL with some indicative early analysis of:  the linkages between the strategic rationale for the project and the way it is funded;  the 2015 Financial Case (including PwC’s ‘Financial Review46’); and  the potential implications of wider developments in city infrastructure funding and business rate localisation that have emerged since.

The headlines from this work are summarised in section 3.3 below.

Against this background, this chapter then discusses:  the potential building blocks of a funding package for the project;  how these might be combined as part of an updated funding strategy; and  the role of the NIC could play in helping to formulate this updated strategy, together with some guiding principles for this work.

45 Transport investment and economic performance: Implications for project appraisal, by Anthony J. Venables, James Laird and Henry Overman, 9/10/14. DfT Response, “Understanding and Valuing the Impacts of Transport Investment”, published December 2014. 46 Crossrail 2 Financial Review, v1.00, PwC, 19 June 2015

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Crossrail 2 NIC Supplementary Submission

These proposals represent the starting point for a detailed series of discussions on Crossrail 2 funding over the coming years. Based on the Crossrail 1 experience, “heads of terms” for a funding and financing package need to be in place early in the passage of the Hybrid Bill. This implies agreeing principles in 2019 (assuming a 2018 submission). The formal funding commitments would then follow Royal Assent.

The principal focus of this chapter is “funding” rather than “finance”. This means we address how any borrowings are repaid and by whom (the two main funding questions) rather than who does the borrowing and whether this is public or private, which are finance questions. Finance is nonetheless important given the scale of the project and is addressed at 3.3.3 below.

3.2 Executive Summary i. The 2015 Financial Review identified P80 capital costs for the full regional scheme of £30.9bn47 (in real Q2 2014 prices). After accounting for capital cost inflation, this is equivalent to outturn/nominal capital costs of £45.3bn48. This excludes any costs associated with capitalising interest during construction (which will be a function of the timing of revenues, grant, interest rates etc.), and early operating deficits to set up a new train operation. Including estimates of these costs takes the total outturn/nominal P80 funding requirement for the scheme to £52.3bn. (All numbers in this chapter are expressed in nominal terms, unless stated otherwise.) ii. The funding strategy for Crossrail 1 broke new ground, with the successful deployment of two new funding mechanisms: Community Infrastructure Levy (CIL) to provide a more systematic and broader basis for capturing development gain, and the Business Rate Supplement (BRS) regime. Both measures tap into the additional post-tax profits (generated for businesses, developers and land owners) as a result of a major transport investment designed to grow the economy.

47 £30.9bn includes the full costs of acquiring land and property.Net of land and property costs recoverable through re-sale post construction (50% of the total), this is £28.7bn. 48 See Section 7 of Crossrail 2 Financial Review (PwC)

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iii. The 2015 Financial Review identified how an updated Crossrail 1 funding package could allow London to make a direct contribution equal to 56.5% of the present value costs of the project, which is £32.7bn in outturn costs. This would involve Mayoral borrowings of some £27.4bn by the end of construction, plus more than £5bn of direct funding during construction. At 5.6% interest rates, total costs to London by the time the £27.4bn of borrowings were repaid (circa 2065 on the assumption of a 2030 opening date) would be £71bn at outturn prices. Of this total, £43bn would fall to London businesses from the more intensive application of CIL and BRS set out in the Financial Review, with a further £4bn from direct development gain from the sale of land purchased for the construction of the project. iv. £23bn of London’s total costs would come from growth in passenger revenues following Crossrail 2, under current fares policy. Although some of this would be at the expense of revenues on the national rail network (implying an indirect cost to government), rail devolution will internalise a significant proportion of this effect within London. The analysis on revenue abstraction is being refreshed for the business case update later in 2016. v. Private finance involves higher effective interest rates. Other things being equal, this means London’s £71bn of whole life contributions contribute less of the project, and government has to contribute more. Private finance could make sense if it reduces capital costs by enough to offset the interest effect. Analysis by PWC showed that this condition was unlikely to be satisfied for the bulk of the project’s costs, although rolling stock and depot costs are an area worthy of further investigation, and this is a very similar conclusion to that reached by KPMG on HS2. There may also be opportunities for value for money private finance at certain stations, drawing on experience of Crossrail 1 at Canary Wharf. vi. The 50% plus share of costs discussed in iii above covers only the direct contribution London would make towards the project (i.e. that financed by Mayoral borrowing and sources of Mayoral funding available to the project during construction). There is likely to be an even larger indirect contribution via the project’s impact on UK economic output, and thus exchequer tax receipts. The likely scale of these contributions, and the actions London would need to take to maximise them, were addressed by KPMG as part of the 2015 Strategic Case49.

49 See Crossrail 2 Strategic Case: National GVA Impacts, KPMG, June 2015

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Crossrail 2 NIC Supplementary Submission

vii. Crossrail 2 is designed to relieve transport and labour supply constraints on the growth of the London Central Activities Zone (CAZ), the most economically dense and therefore productive location in the UK. The CAZ is fundamental to London’s global role. Drawing on the independent ’TIEP’ report for DfT, which identified ‘lower bound’ values for the relationship between economic density and net national growth, KPMG identified the likely range of indirect contributions equivalent to between 84% and 156% of the P80 costs of the project, as a result of net national GVA impacts of up to £102bn in present value terms. This points to total direct and indirect contributions of between 130% and 200% of the P80 present value costs of the project. viii. The 2015 strategic case work also showed that at least 75% of the GVA impact of the project50, and thus the indirect contributions to its costs via tax, depends on London realising the employment potential of the CAZ, both before and after the opening of the project. Early work by KPMG on integrating the financial and strategic cases is also pointing to more than half of the direct London contribution to costs being dependent on growth in employment and housing across London as a result of the impact of growth on CIL, BRS and passenger revenues. Taking direct and indirect contributions together, this points to contributions equivalent to 90% to 140% of P80 costs being dependent on continued London growth. ix. This link between London growth and the net cost of the project to taxpayers has close ties with the emerging “Payment by Results” or “Gain Share” model for city investment funding. Starting with the 2012 ‘Earn Back’ deal with Greater Manchester, there are also now nine of these deals, with five having been agreed in principle since the election. These deals provide city funding contingent on the growth that delivers exchequer revenues. They involve cities investing up-front and then being paid on delivery. Relative to size of economy the sums involved are significant – a London version of the deal announced for Sheffield in October, for example, would be more than £10bn. x. The 2015 Financial Review predated the five ’Gain Share’ deals agreed since the last election and assumed “plain vanilla” grant of £19.6bn (in outturn prices) during construction51. The Financial Review also predated the announcement in the autumn of full business rate localisation, recognising that the details of this regime remain unclear, including the all-important questions of how long growth is locally retained and any additional costs devolved alongside retained revenues.

50 This represents the difference between the high and low CAZ growth scenarios. The remainder constitutes the pure connectivity gain from the project itself – i.e. before any land use change. 51 See table 7-1, PwC Financial Review

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Crossrail 2 NIC Supplementary Submission

xi. Both business rate localisation and ’Gain Share’ point to the potential for a revised funding strategy for Crossrail 2 which makes the eventual scale of the direct London contribution to costs (via CIL, BRS, farebox and other potential funding sources) dependent on delivery of the growth that drives additional national exchequer tax receipts. Other things being equal, this would mean some of the capital grant assumed in the 2015 Financial Review being substituted for ‘Gain Share’, and/or additional direct contributions from London reflecting the details of the localised business rate regime. xii. There would be a significant number of important details to resolve as part of this, including how to manage the very substantial increase in London borrowing implicit in the 2015 Financial Review (plus any switch from grant to a ‘gain share’ model in addition), and the associated risks. There are also questions about the potential for value capture outside London, recognising that many beneficiaries CAZ growth will live do not stop at the GLA boundary, and the implications of rail devolution that should be addressed through joint working between London and central government. xiii. In the light of the above, we propose that the NIC be given the role of overseeing the negotiation of a revised funding package that includes a bespoke ‘Gain Share’ mechanism, and that as part of this the NIC should coordinate joint work on value capture beyond the GLA boundary and the linked opportunities associated with rail devolution. With this in mind, section 3.5 below proposes a set of principles to guide this work.

3.3 Summary of the KPMG scoping exercise

3.3.1 Implications of the strategic case for funding Crossrail 2

As part of their role as TfL’s financial advisers, KPMG have been reviewing the implications of the strategic case for Crossrail 2 for the way it is funded. As set out in chapter 2 of this submission, the strategic case for the project hinges on reducing the transport and housing constraints which will increasingly limit the growth of the UK’s most productive and internationally important location –London’s Central Activities Zone (CAZ), together with its satellite locations such as Isle of Dogs and Stratford52.

The headline implications of this for funding Crossrail 2 are:

52 Throughout this document “CAZ” should be taken as referring to the CAZ itself and these satellite locations that together comprise London’s high density global employment centre.

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i. Crossrail 2’s ultimate cost to the taxpayer depends on how successful it is in delivering its growth based objectives and thus additional HM Treasury tax receipts; ii. Even under pessimistic assumptions, assuming a 50% capital grant and tax effects together, the project has the potential to be covering its costs to the taxpayer within a decade of opening – i.e. assuming only growth generated in the first 10 years; iii. The most important determinant of the impact of the project on growth, and thus its net costs to the taxpayer, is the delivery of additional CAZ employment; iv. Every 1,000 additional CAZ jobs delivered after opening generates an additional £340m of gain to the exchequer, with growth equal to a little over 25% of the addition to CAZ peak capacity (67,500 of 270,000 over the 3 hour peak) by 2041 being sufficient to payback a 50% exchequer contribution to the project; v. CAZ employment growth between now and opening (assumed to be 2030) is also important to the benefits of the project and thus HM Treasury tax revenues. This is principally because this growth brings forward the point at which the additional transport capacity and housing supply become constraints on growth. As a result, each year’s forecast growth over the next 15 years adds up to £1,300m to exchequer tax receipts; and vi. Ensuring sufficient labour supply to the CAZ will be critical to employment growth both before and after opening. This means there is an important linkage between housing provision and benefits, and thus between housing provision and net costs to the exchequer. The project itself is designed to support delivery of adequate housing supply after opening. In advance, the critical issue is likely to be delivery of London’s housing plans.

3.3.2 Results of the 2015 Financial Review

The results of PWCs 2015 Financial Review (included as part of the Financial Case), with updates to reflect recent work on the funding of interest during construction, and updating the assumed cost of debt to 5.6%, are summarised below. This analysis will be updated as part of a new financial case for the business case update later this year.

The 2015 review built on previous work in 2014 and TfL and GLA practical experience, and sought to identify how broadly half the present value of the P80 costs of Crossrail 2 could be met through proven London funding mechanisms.

This meant a package focused on mechanisms that have already been linked to additional investment in London infrastructure, most notably Crossrail 1: i. An enhanced Mayoral-Community Infrastructure Levy (M-CIL) regime, with revenues being available for Crossrail 2 from FY2019/20, under a tailor made

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tariff structure that applies higher rates than for Crossrail 1, rolling in a significant S106 supplement for additional CAZ floor space; ii. An extension in time of the Business Rate Supplement (BRS) regime pioneered for Crossrail 1, once revenues have fully paid down BRS backed borrowings for that project (currently estimated to be 2031); iii. Project net revenues under established fares policy assumptions; iv. Development gain from land acquired for the project, including over-site development at key stations. The 2015 review considered the scope for additional direct development gain in addition to the value captured by M-CIL – eg in respect of large housing sites, but the opportunities did not appear material in the context of the overall funding requirement; and v. A modest contribution from an extension of the Olympic Council Tax levy.

Although building on established and proven mechanisms inevitably means there are strong parallels with the package developed for Crossrail 1, there are very important differences in terms of the scale of the London contributions being sought under the summer 2015 package.

Overall the London contribution towards Crossrail 1 covers some £7.1bn of outturn capital costs. As Table 1 and Table 2 below illustrate, a broadly 50% contribution to the costs of the Crossrail 2 project translates into a capital contribution of more than four times this amount, and whole life costs for London of more than £70bn:

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Table 1: Financial Review Summary

Financial Review funding summary

Nominal Present Funding requirement value, £bn value*, £bn

Capital cost1 45.3 33.0

Opex incurred prior to opening 0.2 0.1

Indirect costs funded separately2 (0.5) (0.5)

Interest during construction (IDC)3 7.3 n/a

Total funding requirement 52.3 32.6

Central government contributions (19.6) (14.2) 43.5%

Total London contribution to 32.7 18.4 56.5% financing of Crossrail 2

Funding as London Funding sources % of capital**

Operating surplus 23.321 3.8 11.6%

Business Rates Supplement 33.392 6.6 20.3%

Mayoral CIL 9.538 5.5 16.9%

Council Tax Transport Precept 0.727 0.5 1.4%

Over-Station Development 4.029 2.0 6.3%

Total gross of National Rail 71.0 18.4 56.5% abstraction

National Rail abstraction4 (21.7) (4.2) (12.9%)

Total net of National Rail 49.3 14.2 43.6% abstraction * Present value as at 2019/20 using 5.8% discount rate in line with PwC model ** Share of total present values will be affected by timing of revenues. This is why the ratio between nominal income and share of costs is much higher for OSD than operating surplus 1) Crossrail 2 Regional Scheme, P80 risk provision, as at June 2015 2) Indirect costs (project management, client design, corporate overhead, etc.) during development phase are assumed to be separately funded 3) Interest during construction (IDC) excluded from PV as reflected in the discount factor 4) National Rail abstraction based on fixed CAZ employment - i.e. excluding the impact of the project on total commuting into the CAZ and thus revenues. This will overstate abstraction as a share of total revenues

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Table 2: Financial Review Borrowing Totals

Financial Review borrowing summary

Nominal Funding requirement value, £bn

Capital cost1 45.3

Opex incurred prior to opening 0.2

Indirect costs funded separately2 (0.5)

Interest during construction (IDC) 7.3

Central government contributions3 (19.6)

London funding during construction4 (5.4)

Outstanding London debt at end of 27.4 construction 1) Crossrail 2 Regional Scheme, P80 risk provision, as at June 2015 2) Indirect costs (project management, client design, etc.) during development phase are assumed to be separately funded 3) From 2015 Financial Review 4) Primarily M-CIL revenues, but also some Council Tax Transport Precept revenues

Preliminary analysis by KPMG suggests that once the further work on operating revenues and abstraction is completed at least half of the direct London contribution to costs in the tables above will be found to be dependent on continued economic growth in London and housing delivery, both of which are critical to the overall benefits of the project and its contribution to the exchequer.

3.3.3 Financing

Although financing issues are secondary at this stage to the funding of the project (i.e. how any borrowing, whoever undertakes it, is going to be serviced and repaid), they are important. The two key financing questions are: the scope for private finance; and London’s capacity to deliver and manage the remainder.

The 2015 financial review addressed the overall potential for private finance and concluded that, given scale of the project relative to market lending capacity, and the challenging nature of some of the construction risks of projects of this type, it was highly unlikely that large-scale private finance could be secured at value for money rates for the core elements of the project without very substantial underpinning, which would reduce risk transfer.

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This would not preclude discrete elements of the project being suitable for private financing – eg rolling stock, depots and/or relatively standalone railway systems, potentially individual stations where a single large landowner / developer would make this feasible (as was the case at Canary Wharf for Crossrail 1).

In these areas it might be possible to transfer asset provision, financing and performance risk to the private sector in a value for money manner, once costs are considered over the whole asset life.

Private finance for rolling stock potentially has the scope to reduce the burden on public sector borrowing by some £1.4bn (2014 prices). PwC assumed that the rolling stock and depot facilities for Crossrail 2 would be publically financed, as is the case with Crossrail 1. In part this assumption reflected changes in leasing rules in 2019 (which will mean all leases scoring on the lessor’s balance sheet; the PFI model can also pose challenges in relation to the procurement of rolling stock as part of the delivery of a much larger overall scheme, given the interface with (and parallel delivery of) the wider project infrastructure and the need to achieve appropriate risk transfer while retaining sufficient flexibility. This means that what is value for money on an established railway is not necessarily so for a new build. However, the Crossrail 1 decision also reflected debt market conditions at the time, conditions that are unlikely to be replicated when the Crossrail 2 rolling stock is procured (sometime in the 2020s). For this reason the procurement and financing assumption for rolling stock will be kept under review, including as part of the next iteration of the financial case this year.

On the assumption of public finance for the whole project, the 2015 Financial Review implies total London Crossrail 2 borrowings by the end of construction of £27.4bn. The kind of gain share deal discussed below would add to that, potentially more than doubling London’s total borrowings following the completion of Crossrail 1. This would come alongside other potential draws on London’s balance sheet capacity, including renewal of existing infrastructure and housing. This will require consideration of new financing structures and further fiscal flexibilities, to ensure future Mayors have the tools to manage borrowing of this scale.

3.3.4 Fiscal Gains to the Exchequer

KPMG’s summer 2015 strategic case work identified fiscal gains to the exchequer equivalent to up to £36bn in present value terms at 2011 prices (35% of the £102bn present value net national GVA gain). This suggests that for every £1 generated from London by the 2015 funding package the exchequer stands to benefit by nearly £3, and that taken together the London direct contribution and the exchequer gain (really an indirect London contribution) add up to as much as 200% of the costs of the project.

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Figure 3 below combines the direct London contributions towards the costs of the project under with the additional HM Treasury tax receipts estimated as a result of KPMG’s strategic case work, under the high and low range of outcomes that emerged from economic modelling of the impact of the project. This shows that, even under pessimistic assumptions on revenue abstraction, CAZ employment growth and the relationship between economic density and productivity, the sum of London contributions and additional national tax receipts is in the order of 130% of the P80 present value of Crossrail 2 project costs, as shown in Figure 12below.

Figure 12: Combined direct and indirect contribution to costs

Sources of Funding for Crossrail 2 (as % of total funding requirement) 250% 13%

200%

150% 156%

100% 84% 212% 6% 1% 50% 17% 12% 20% 56% % of total funding requirement funding total of % 0%

Upper and lower bound exchequer impacts reflect the results of the summer economic impact modelling using the London LUTI model. This pointed to a minimum PV net national GVA impact using TIEP lower bound, linear elasticities for the relationship between economic density and net national productivity (i.e. excluding people effects) of some £55bn (2011 prices and values) on growth over the first 10 years of opening. A tax to GVA ratio of 35% is assumed, somewhat below the historic average, to translate this into exchequer receipts. The calculations above also adjust for the 2019 value and prices base of the financial analysis.

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In addition to examining the potential of established funding mechanisms, the 2015 financial review drew on bottom up analysis of the project’s expected impact on stamp duty revenues, pointing to real revenues of some £5bn on an additional 200,000 new homes unlocked by the project, as well as possible impacts on existing properties along the line of route. These impacts are consistent with the analysis of GVA impacts as part of the strategic case.

3.3.5 Implications of Recent Developments in Infrastructure Funding

The KPMG scoping work also addressed the implications of recent developments in infrastructure funding, in particular the “Gain Share” funding deals recently agreed with other major cities for growth focused investment.

This is a new form of funding for growth related city investment. Four deals (total value £3bn) were pioneered in the last Parliament, and five similar deals for a further £5bn have been agreed in principle with cities since the last election. There are a number of other potential deals in the pipeline. These deals operate on top of devolved budgets, and relative to size of economy of the cities concerned they are very significant: for example, the London equivalent of the Sheffield deal announced in October would be some £10bn. The key features of this new form of funding are:  The city invests first in a programme designed to deliver the maximum impact on growth both at the city level and nationally, typically over a 10 year period;  Funding from Government is spread over a longer period (typically 30 years), with payments contingent on performance measured by an independent panel at five yearly gateways (i.e. years 5, 10, 15 etc). From year 10, these gateway assessments will be about the delivery of sufficient net national growth to justify the payments provided for under the deal. This means that the payments will be drawing on the tax proceeds of the growth generated, and therefore that a significant proportion of the city’s investment must be borrowed for;  An explicit part of this funding approach is the risk transfer to the city on the delivery of net national growth sufficient to justify the investment; and  The expectation is that payments after the investment has been completed (i.e. from year 10 onwards) will be used to repay the principal element of a city’s borrowing costs, and the city itself will address interest costs in the meantime, ideally through growth related revenues (eg CIL, Supplementary Business rates, and potentially retained business rates).

In principle, there are clear parallels between the logic of the strategic case for Crossrail 2 – net national growth sufficient to at least cover taxpayer costs of the incremental investment necessary to deliver that growth – and the new ’Gain Share’ city funding model.

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3.4 Potential funding building blocks

Building on the KPMG scoping exercise, the Crossrail 1 precedent and the 2015 Financial Review it is possible to identify five main categories of financial contribution towards the costs of building Crossrail 2. These have a degree of overlap. Each is considered below.

3.4.1 Fixed central government capital contributions

This is the traditional way that the majority of city infrastructure investment has been funded in the UK, and accounted for all of DfT’s direct financial contribution to Crossrail 1. These contributions are made during construction and reduce the local borrowing necessary to deliver a project.

In the context of Crossrail 2, the rationale for this kind of funding is fourfold:  The project includes significant investment in nationally controlled infrastructure, and helps to avoid costs (eg increased capacity on the SWML and connectivity on the WAML) which would otherwise fall to national budgets (via Network Rail);  The transport and post-tax economic benefits of the project run far beyond London. Circa 40% of the transport benefits accrue to people who live outside London, and commuters into London can expect to earn a significant proportion of the 60% of the GVA benefits of the project that translate into higher wages;  Although ‘Gain Share’ (see below) provides a mechanism for capturing a portion of the value of national exchequer project benefits (i.e. the 35% plus of GVA benefits that accrue in tax), and making those payments contingent on local delivery, there are limits to the risks London can accommodate; and  Devolved funding to London is not set at a level that allows it to meet all its investment needs to support future growth.

The 2015 Financial Review assumed that all of the £19.6bn outturn central capital contribution to the costs of the project comes as this form of funding.

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3.4.2 ‘Gain Share’/’Payment by Results’

This form of funding provides a mechanism to share the value of the national exchequer fiscal benefits (35% plus of additional national GVA) generated by a project like Crossrail 2, but recognises that these returns are uncertain and depend to an important degree on local delivery of enabling activities. This means central funding provided in this way is not fixed (although it may be capped), and there is a degree of time lag between investment costs being incurred locally and the ‘Gain Share’ funding (from additional national tax receipts) being available. This means additional local borrowing, interest costs and risk are features of the funding approach. The model produces powerful incentives on delivery and means that ultimately the local share of costs is a function of long term net costs to the national taxpayer. In other words, the better the ultimate deal London delivers for the national taxpayer, the lower the London contribution towards project costs needs to be.

In the case of Crossrail 2, the key driver of the impact of the project on national growth, and thus the exchequer receipts (on which a ‘Gain Share’ mechanism would draw), is CAZ employment growth, with growth both before and after the project opens driving up national exchequer returns. This means (amongst other things) the fiscal gain delivered by the project depends on housing delivery over the next 30 plus years.

The direct relationship between CAZ growth and national exchequer returns means that ‘Gain Share’ in the context of Crossrail 2 is much more straightforward than in the nine ‘Gain Share’ funding deals agreed with other cities, which rely on ex-post analysis by an independent panel to verify the delivery of additional national growth. A simple formula, based on CAZ employment growth, would provide a transparent starting point for a deal. In recognition of the importance of growth in advance of opening, there is a logic to starting the formula this decade, with revenues ring- fenced towards the costs of the project. This would also help address, but not solve, the challenge of accommodating additional London borrowing, and would mean that direct capital grants to the project - i.e. those discussed at (i) above - would be a function of growth being delivered as construction progressed.

There is also potential for a direct link with housing delivery, which is a necessary but not on its own sufficient condition for maximising the national exchequer returns from the project. This could be a simple formula linked to housing numbers, and there would be a logic to applying the formula this decade given the importance of growth in advance of opening to the overall fiscal return from the project.

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There is a direct read across from the logic of ‘Gain Share’ linked to CAZ employment growth and business rate localisation. The details of how this regime will apply in London have yet to be settled, with decisions on the length of period over which increases in business rates are retained, and any other costs devolved alongside business rates, being critical to how much London gains fiscally from growth, and therefore what contribution could be made towards project costs from this source. Depending on the default assumptions about length of retention and accompanying devolved costs, an enhanced regime for London – eg with longer retention periods for business rate growth within the CAZ – could provide at least one element of a practical ‘Gain Share’ approach. Again there would be a logic to applying this well in advance of opening, with the additional proceeds (which would accrue over the long term) ring-fenced to the project.

Similarly, it is possible to see how one or more stamp duty localisation pilots (eg one or more SDLT versions of business rate enterprise zones) could serve as a practical gain share mechanism linked to housing. The logic here is particularly strong in respect of the line of route housing impacts of the scheme itself, which has the potential to unlock an additional 200,000 houses in the medium term. We note, however, that SDLT is a more volatile tax, and that the implications on exchequer receipts of recent changes in the structure of SDLT are yet to be fully understood.

Given that ‘Gain Share’ involves risks and additional interest costs (revenues linked to growth delivered after opening bring additional London borrowing costs), it is not possible simply to substitute £1 of gain share revenue potential for £1 of central capital grant. This means government has a choice: a lower headline level of funding via plain vanilla grant, or a higher potential total contribution under ‘Gain Share’, but with sharper incentives on London delivery, and thus better prospects for the overall fiscal return and post-tax benefits across the UK economy. The mix of plain vanilla grant and ‘Gain Share’ would also have to work for London, and the exact rate of exchange between the two would need to consider the borrowing and risk profile across the rest of the funding package and London’s other programmes.

3.4.3 Indirect central funding

As the table at figure 1 highlights, a proportion of the farebox revenues generated by the project and assumed to be available to service and repay London borrowings will come at the expense of revenues elsewhere on the network. This could mean an indirect central government contribution via the Department of Transport’s rail franchising programme.

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We suspect the current estimates of the degree of abstraction from national rail are overstated, eg because they do not fully take account of the extra longer distance commuting that could be generated by the CAZ employment growth delivered by the project, but some costs from this source appear inevitable. What is not certain, however, is the degree to which these costs will ultimately fall to central government rather than London. Recent progress with rail devolution to London underlines the direction of travel and it is likely that further progress will have been made by the time the project opens 15 years from now. This means that a significant proportion of these costs are likely to have been internalised to London by the time they occur. Other things being equal, this will reduce the central contribution towards the costs of the project and increase that from London.

There is a clear parallel here with fiscal devolution, with both requiring adjustments to the details of the package.

3.4.4 London funding

This source of funding taps into the post-tax economic gains generated by the project that are retained by London businesses and residents. As with ‘Gain Share’, which captures a portion of national exchequer gains, it is a form of value capture.

The 2015 funding package focuses on value capture mechanisms that have proven themselves (Community Infrastructure Levy, Business Rate Supplement, direct development gain, and farebox) in the context of Crossrail 1. Overall these sources account for 56.5% of the present value costs of the project before allowing for the current estimate of revenue abstraction, and (based on worst case abstraction assumptions) 43.6% after making such an allowance. Overall, recent updates to the 2015 funding package involve London’s borrowing on the project peaking at some £27.4bn in nominal terms.

Setting the issues surrounding farebox to one side, M-CIL and BRS alone account for 37.3% of the present value costs of the project, which is estimated to cost London businesses and developers some £43bn over circa 45 years from the beginning of construction.

To date the approach to London funding has reflected:  The desirability of relying on proven mechanisms;  A 50% target contribution to the present value of the capital costs of the project;  Consistency with national policies – eg on fares  A recognition that it is difficult to capture value without putting some of it at risk – both M-CIL and BRS are in effect taxes on the very growth benefits the project is seeking to deliver; and

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 The need to keep some potential London funding sources – eg fares, council tax, higher BRS rate, a new payroll tax - in reserve to manage risks and avoid undue concentration of funding on value capture from businesses. KPMG have also indicatively estimated that at least half London contribution towards the costs of the project depends on continued employment, housing and productivity growth over the next 40-50 years. In practice, this means London already faces strong incentives on delivery aligned to the national exchequer gains from the project. Additional incentives and risk linked to ‘Gain Share’ would mean there was a greater need to hold some funding mechanisms in reserve, and, as noted above, rail devolution may internalise additional abstraction effects over and above those provided for to date. It is also worth noting that some of these reserve funding mechanisms require joint action between London and central Government – eg fares on the wider rail network, council tax reform. The London Mayor as well as the markets will need to know that there are no administrative or other non-political hurdles to raising revenues to fill any shortfall in core funding streams.

This said, the 2015 funding package does not (and could not) reflect the potential impact of business rate localisation on London revenues, recognising that in practice these revenues are volatile and the potential contribution heavily depends on the details of the regime, including the alternative calls on these revenues, the extent to which revaluation growth is retained within London and for how long. As a minimum, however, it might be reasonable to expect the London contribution to include the additional revenues generated for London by the project itself.

3.4.5 Value capture outside London

As noted above, part of the rationale for a fixed capital contribution from central government is the transport and economic benefits (eg via increased wages to commuters) that accrue outside London, and from which London is therefore unable to capture value through its own mechanisms.

Clearly, should central government be in a position to access these gains it could potentially find a source of indirect contribution towards central costs, and there may be areas (most notably longer term fares policy) where central government and London could collaborate on a more broadly based value capture approach, for example in the context of further steps on rail devolution.

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3.5 Potential components of a revised funding plan In the light of the above, we believe there is a clear potential role for the NIC, or an alternative nominated independent agent, to broker an agreement between London and government on a revised funding package for Crossrail 2, drawing on the building blocks above with a bespoke ‘Gain Share’ mechanism at its heart. This would be focused on: the underlying growth rationale for the project, the key drivers of success and incentives to ensure they are delivered, and the balance between risk and reward amongst potential funders. With this in mind, propositions and principles to guide this work are as follows: i. Given the potential for Crossrail 2 to earn a fiscal return for the taxpayer (i.e. for additional national taxation income to more than offset a notional central government contribution), and the role London will need to play in maximising these benefits, there is a case for substituting the fixed central grant route used to provide central funding for Crossrail 1 for an approach that mixes fixed grant and a bespoke ‘Gain Share’ funding mechanism. An inevitable consequence of this would be a London share of the costs of Crossrail 2 would depend on the national benefits delivered, and in particular national exchequer tax receipts: a bigger exchequer gain should mean a lower London contribution, and vice versa. ii. Any ‘Gain Share’ mechanism should recognise the implications of business rate localisation, which means that some of the fiscal gains from the additional growth generated by the project could now accrue to London. Much, however, depends on the details of the localisation regime as it applies in London, and in particular for how long London retains the benefits of growth and the extent to which these are ring-fenced for Crossrail 2. Further fiscal devolution – e.g. SDLT - could also further change the package, and the balance of risk within it. iii. A Crossrail 2 ‘Gain Share’ mechanism should recognise the unique nature of the London CAZ in terms of its productivity differential with the rest of the country and its global role. This provides for a more straightforward mechanism to tack national level benefits than in ‘Gain Share’ deals in other cities, with CAZ employment and productivity growth representing a good proxy for both the fiscal gain to the national exchequer and London’s role in maximising these returns. This suggests that a bespoke business rate localisation regime, with longer retention periods for business rate growth in the CAZ (which reflects both employment and productivity growth), and with these revenues ring-fenced to the project, could be an element of this kind of regime. iv. Employment and productivity growth in the CAZ, before as well as after opening, is critical to the delivery of national fiscal benefits. This argues for an early start for the ‘Gain Share’ mechanism, with revenues earned in advance of opening serving to reduce borrowing and helping to manage risks.

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v. Any ‘Gain Share’ mechanism would work alongside and complement the funding approaches developed by London to date, including M-CIL and BRS, and explicitly recognise the growth incentives already in these mechanisms, and therefore the risks already implicit in the 2015 funding package. vi. In addition to examining the potential role a bespoke London business rate localisation regime could play as a practical ‘Gain Share’ mechanism, pilots in other areas such as SDLT retention along the project’s corridors should be examined as a means of incentivising the delivery of housing, which is critical to the overall benefits of the project and thus national exchequer tax receipts. vii. London risks have to be proportionate and manageable in the context of the overall current and planned GLA/TfL borrowing programme and linked to factors under its control. This means any ‘Gain Share’ mechanism has to be looked at as a package and seen alongside management of the core business in the light of the SR15 settlement and other pressures. Explicit caps on the level of risk taken by London may be necessary, and structural change may be required to accommodate the higher levels of borrowing implied by a gain share model and the volatility inherent in many potential sources of revenue. viii. In practice managing risks means some potential London funding streams need to be kept in reserve. There are also likely to be a number of specific reforms – eg in respect of the council tax regime or potential new reserve funding mechanisms – to allow London to better manage risks. The potential role of new funding mechanisms such as a London payroll tax or a higher BRS rate should be seen in this context. ix. There is also a potentially important risk management dimension to the options being examined for phasing and timing of elements of the project, and an obvious link to the benefits associated with early launch of a bespoke ‘Gain Share’ mechanism. This might mean, for example, that early progress with ‘Gain Share’ revenues could be reflected in decisions on the phasing of elements of the project. This would mean that ‘Gain Share’ revenues would drive the scale of both the London Crossrail 2 contribution, and its ultimate investment programme. x. Consistent with London’s funding plans there is a case for a fuller mapping of the GVA benefits of the project, recognising that many of these will accrue outside London and therefore require value capture approaches outside London’s control. Historically 60% of GVA gains have accrued to wage earners, and a significant proportion of these wage gains would be made by people who live outside London. Collaboration between London and government on longer term fares strategies linked to the transport and economic gains from jointly funded investment is likely to be an important part of this.

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xi. A further area for joint work is the implications of further rail devolution. At present revenue abstraction is likely to be a source of indirect central funding for the project, but one which might well be unwound with currently planned and any further rail devolution, effectively internalising the abstraction and thereby increasing London’s contribution to the project. A pragmatic approach to adjusting the overall funding package to reflect this should be part of the next iteration of the funding plan. There are direct parallels here with the adjustments the funding plan would require in the face of further fiscal devolution. xii. The agreed strategy must address the risks of pricing off the growth we are attempting to deliver through value capture techniques. CIL is already subject to viability assessment and there may be a need for similar protections in respect of other elements of any package. Other things being equal, this suggests a broader-based value capture approach and explicit analysis of feedback effects. In order to support this work, London will continue with its work on integrating the financial and strategic economic cases for the project, including a full mapping of the GVA benefits of the project, and begin an examination of potential ‘Gain Share’ mechanisms.

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4 Opportunities to reduce costs

4.1 Introduction

This section focusses on the NIC’s question 3: “What opportunities are there to increase the benefits and reduce the costs of the proposed Crossrail 2 scheme?”

In order to answer this question, we have:  Reviewed the Full Regional Scheme to understand the key drivers of costs and benefits;  Explained the basis of the current cost estimates, and considered the impact of the latest timetable for the profile of construction costs in the 2020s;  Considered options for deferring or reducing cost, by looking at: o phasing construction of one or more branches, in such a way as to enable the full regional scheme to be delivered in the future with minimal disruption and abortive costs; and o the contribution each central section station makes to the scheme’s business case.

The analysis presented in this section represents a starting point. Although there may be opportunities to defer expenditure without impacting benefits, these are not without risk, and further work on the engineering and socio economic impacts is required before any decisions should be taken.

As noted in Chapter 1, our programme envisages agreeing a ‘Single Preferred Option’ by summer 2016, which will take into account both this work and the results of the recent public consultation. Any decisions to amend the scheme to save costs should be made only as part of that process, in the light of all the evidence, in order to ensure continuing public involvement in the scheme. We expect to continue to engage with the NIC on these issues over the coming months.

4.2 The Full Regional Scheme

Significant progress has been made in developing scope, design and construction methodology for the core section, and there is now a high degree of confidence that the Full Regional Scheme is achievable in engineering terms.

There are a number of possible changes from the safeguarded scheme, notably:

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 Following new evidence regarding the geological conditions at Tooting (which would add cost, time and disruption), as part of the recent consultation, TfL has proposed a station at Balham instead of Tooting Broadway. Consultation responses have highlighted significant levels of support for Tooting. For the purposes of this submission, the Full Regional Scheme includes Balham rather than Tooting, however this is under review.  Options for the construction of Wimbledon Station. We are working with Merton to examine alternatives to the safeguarded scheme which could reduce the land and property take.  The consultation proposed an option to serve a single station at Wood Green, as an alternative to two stations at Turnpike Lane and Alexandra Palace on the New Southgate branch.

The map shown in Figure 13 below presents the Crossrail 2 Regional scheme as per the recent public consultation.

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Figure 13 - Crossrail 2 Full Regional Scheme Route – autumn 2015

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4.2.1 Construction Costs

The capital cost estimate for the full regional scheme via Balham is £32.6bn, set out in Figure 14 below. The estimate is in 2Q2014 prices and includes contingency allowances, applied at 20% for rolling stock and 66% for all other elements (in accordance with HM Treasury guidance on the application of Optimism Bias).

Figure 14 - Full Regional Scheme Cost Breakdown

CR2 Full regional Scheme via Balham (£m 2Q 2014 prices) Capex element Point Contingency Total % of Total Land & Property 1,862 1,229 3,091 9% Tunnels 2,418 1,596 4,013 12% Stations 6,517 4,301 10,818 33% Railway Systems 911 602 1,513 5% Surface Works 943 623 1,566 5% On Network Works 3,386 2,235 5,621 17% Indirect Costs 2,774 1,831 4,605 14% Rolling Stock CR2 1,164 233 1,397 4% Total Capex 19,975 12,648 32,623 100%

The estimate shown above compares with an estimate used in the SOBC of £31.8bn53 on an equivalent basis. It incorporates a number of changes to the central section scope, design, methodology, and development and delivery programmes. In particular:  it is now assumed that the tunnels will be constructed in advance of the stations;  additional operational crossovers have been included, for operational reasons;  station designs have been refined to reflect emerging passenger volume requirements;  the rolling stock maintenance depot is now assumed to be located at Weir Road (Wimbledon)54.

Figure 15 below shows the distribution of cost throughout the route.

53 See table 2-2, page 8, Crossrail 2 Financial Review v1.00, PwC, 19 June 2015 54 This represents an interim view that will be further reviewed before being adopted into the control baseline in May 2016

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Figure 15 - Breakdown of costs by section of route55

Full Regional Scheme via Balham (RV1 incl Contingency) 2Q2014 prices: £32.6bnm

On-network (North) 1 [£3.7bn 11.2%] of which: 4 tracking WAML = [£3.6bn 10.9%]

Central Tunnel Section £19.2bn 58.8% of which: Land & Property = £2.8bn 8.7% Tunnels = £4.0bn 12.3% Stations = £10.8bn 33.2% Railway Systems = £1.5bn 4.6%

On-network (South) 1 [£2.2bn 6.8%] of which: 6 tracking = [£1.1bn 3.5%]

Other Items £7.6bn 23.2% of which: Surface Works = £1.6bn 4.8% Indirect Costs = £4.6bn 14.1% CR2 Rolling Stock = £1.4bn 4.3%

55 On Network Works costs are shown in square brackets; these present the June 2015 estimate which is currently under review. See section 4.5.1 in relation to signalling cost assumptions.

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4.2.2 Development of Cost Estimate

In 2015, Arcadis (formerly ECHarris) completed a comprehensive validation and re- estimate of the 2013 cost estimate (originally produced by Mott MacDonald). The re- estimate included a more detailed assessment of the previous allowances for On- Network, Land and Property, and Indirect (management) costs.

That estimate has benefited from a cost benchmarking exercise against Crossrail, carried out in 2014 (utilising Turner and Townsend) which was detailed in PwC’s 2014 Funding and Financing Study56. That analysis applied actual and emerging Crossrail unit costs to the dimensions of Crossrail 2. It concluded that the Crossrail 2 estimate (inclusive of 66% optimism bias) was reasonable for the project at that stage of development. While a relatively coarse process, the same exercise was completed for Crossrail in 2006 and resulted in a cost estimate that proved resilient as that project developed.

In May 2016 the next control baseline will be set. From that position we will increasingly focus on the use of value management and value engineering as means of exerting downward pressure on cost, in additional to strategic options around scope. It is clear that there is significant opportunity, at this early stage of the project, to drive out cost and risk by focusing the key drivers of cost including:  Client Capability  Requirements  IM/IT strategy.  Design Management  Design standards  Interface definition  Control of change  Delivery Strategy (including risk transfer and incentives)  Organisational Design  Design maturity at contract award.  Stakeholder requirements.  Management of foreseeable risk.  Unforeseeable risk.  Management Costs  Land and Property Costs  Utilities and third party cost  Schedule/construction method.

56 Para 2.7.1.2, Crossrail 2 Funding and financing study, PwC, 27 November 2014

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No allowance has been made within the current estimate for the efficiencies that might be achieved through the transfer of people, knowledge and processes between Crossrail and Crossrail 2. If Crossrail is considered as a prototype for Crossrail 2, significant savings in management, overhead, design and method related costs can be expected, provided Crossrail 2 is developed at a sufficient pace to take advantage of that opportunity.

The application of Optimism Bias at this stage is in accordance with HM Treasury guidance. It is designed to allow for the tendency of projects to underestimate the cost uncertainty that exists at an early stage. Experience from Crossrail suggests that Optimism Basis describes a reasonable upper bound, and that as the project develops costs can not only be contained within that number but can reduced by focusing on the control of scope and the management of risk.

4.2.3 Expenditure Profile

We are in the process of refining the modelling of cost profiles based on a more accurate assessment of the construction schedule. Figure 16 illustrates the capital expenditure profiles for the Regional Scheme via Balham (RV1) used in the SOBC and reflecting a 2017 Bill submission date (green), relative to a Scenario 1 (blue) – that assumes a 2018 Bill submission date and a more recent version of the construction schedule.

Figure 16 - comparison of expenditure profiles

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There is significant further work to be done on the construction schedule, in particular to smooth the peaks in activity. However, this preliminary analysis suggests that the peak expenditure is likely to fall in the second half of the 2020s, with approximately 76% of total capital expenditure occurring after 2025.

4.2.4 Full Regional Scheme – Transport Benefits

The strategic goals and objectives for Crossrail 2 were set out in Appendix B. These derive from the Mayor’s Transport Strategy (MTS) and London Infrastructure Plan and have been used to derive a Multi Criteria Assessment Framework (MCAF) tool which has been used to inform the scheme specification and design choices. The extent to which different components of the scheme contribute to the scheme’s objectives represents a crucial consideration when examining the impact of cost saving options. The proposed service pattern under the Full Regional Scheme is set out below:

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Figure 17 - Full Regional Scheme Proposed Service Patterns

* latest modelling assumptions; may vary from latest public domain or NR assumptions

Overall, Crossrail 2 provides a 10% increase in rail capacity into and through central London, operating a high capacity, 30tph service through the central core, with capacity for 270,000 journeys into and across central London during the morning peak in both directions.

It also enables at least an additional 7 main line trains to be operated into Waterloo in the peak hour - thereby addressing one of Network Rail’s key capacity gaps, as outlined in Part 2 of this submission. It does this by diverting inner suburban services currently running into Waterloo into the Crossrail 2 tunnel. In addition, through 4- tracking the West Anglia Main Line (which forms part of the Crossrail 2 scope), Crossrail 2 provides journey time and capacity improvements on the West Anglia Main Line, providing a step change in connectivity for the region.

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These improvements in national rail services are a key feature of the Regional scheme (in contrast to the Metro scheme which was assessed as an alternative in the SOBC), and a critical source of benefits:  Around 40% of total transport benefits are from trips originating outside London (to the South West and North East, including on Crossrail 2);  Around 40% of total transport benefits accrue to passengers boarding on the four south west branches - including main line paths relieved into Waterloo. There is some overlap between these two.

The regional distribution of transport benefits is shown in Figure 18 below:

Figure 18 - Regional distribution of generalised PT benefits

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4.3 Scope for Cost Reduction

4.3.1 Introduction

The previous section considered the basis of the current cost estimate, and the opportunities to reduce cost through value engineering and driving out risk and uncertainty. Identification and capturing of value engineering opportunities will be required under all funding scenarios, and will form part of ‘business as usual’ for the project.

The remainder of this section considers options to reduce or defer expenditure, in order to improve the scheme’s affordability, but in such a way as to minimise any significant adverse impact on the scheme’s objectives. The objectives include transport objectives, wider growth / regeneration objectives and value for money, and are set out in Appendix B.

The NIC has requested two specific pieces of analysis:  Whether construction can be phased, through deferral of one or more branches; and  An assessment of the costs of each station and the contribution each makes to the business case for the scheme.

4.4 Phasing of construction

4.4.1 High level assessment of branches

In order to assess the potential offered by phasing, we first carried out a high level appraisal of the relative performance of each branch within the scheme, based on some key metrics, in order to prioritise further work on phasing. This is presented in Table 3 overleaf.

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Table 3 - High level branch assessment

West Anglia Mainline (WAML) New Southgate South West Mainline (SWML) branches Core (Wimbledon to portal)

Capex 2014 prices £3.7bn (11%) £4.7bn (15%) £2.2bn (7%) £22.0bn (67%)

Cost per KM £m 204 588 55 846

Number of 13 4 25 9 stations

AM Peak CR2 26,000 (12%) 30,000 (13%) 35,800 (16%) 130,500 (59%) Boarders*

% of Total PT User 18% 11% 45% (includes benefit long distance 26% Benefits, by trip paths into Waterloo) origin…

…by destination 4% 3% 7% 86%

Operational Provides turn-back and stabling Provides service resilience from a Crossrail 2 Provide turn-back and stabling / depot Requires branches, stabling and factors facilities sufficient to support its exclusive terminus (similar to CR1 Abbey facilities; reduces risk of excessive turnback locations to enable a 30tph own services. Wood) with turn-back and stabling facilities. interchange at Wimbledon and service. Provides tunnel maintenance facility Clapham Junction. Mixing with residual SWML services into Waterloo represents operational risk to core.

Contribution to Significant enhancement in Relieves Piccadilly Line at Turnpike Lane, and Relieves severely crowded SWML rail Relieves severely crowded Victoria and transport benefits connectivity and capacity for the Victoria Line and London Overground at Seven services, facilitating growth in capacity Northern lines, and also Piccadilly, WAML corridor. Relieves Sisters. Helps create capacity for those for both inner and outer suburban Jubilee and Waterloo & City lines. severely crowded Victoria Line boarding the Victoria and Piccadilly lines at services. Reduces interchange Provides substantial National Rail services via Tottenham Hale Finsbury Park and Highbury and Islington. pressure at Vauxhall and Waterloo, termini dispersal benefits at Waterloo, interch7ange. particularly impacting Victoria line. Victoria, Euston, King’s Cross St Pancras.

Additional homes 80,000 15,000 55,000 50,000 by 2051

68 * excluding development impact Crossrail 2 NIC Supplementary Submission

It is operationally essential to serve at least one branch in the north, in order to provide a reasonable service through the core.

Of the two northern branches, in comparison with the New Southgate branch, the West Anglia Main Line (WAML) would deliver:  better crowding relief on the severely crowded Victoria Line;  a more significant step-change in public transport connectivity for the corridor served;  a significantly lower cost per route kilometre;  a greater number of stations served directly by Crossrail 2;  a significantly greater proportion of the housing growth unlocked by Crossrail 257.

It is worth noting that four-tracking of the WAML is necessary to deliver the Crossrail 2 service, and therefore forms part of the Crossrail 2 scope and cost. It is also being considered as a standalone scheme by the West Anglia Taskforce which could potentially be delivered in advance of Crossrail 2 opening. It would provide some early benefits including improvements to train frequencies, faster journey times to Stansted and Cambridge, and support housing delivery along the route. However, without Crossrail 2, the increase in transport capacity / connectivity (and therefore housing) is relatively modest given constraints at Stratford and Liverpool Street, and analysis for the Taskforce suggests that the value for money offered by four-tracking on a standalone basis is low. The West Anglia Taskforce is due to report in summer 2016, to inform Network Rail’s planning process for CP6.

4.4.2 Impact of London Underground’s Deep Tube Programme

Whilst a greater level of crowding relief for the Victoria line is forecast via the WAML branch (at Tottenham Hale) than the New Southgate branch (at Seven Sisters), the New Southgate branch provides an interchange with the Piccadilly line at either Turnpike Lane or Wood Green. The Piccadilly line currently operates at a low frequency (23tph) compared with other deep tube lines such as the Victoria or Jubilee lines (30-34tph). The line has an ageing signalling system and operates with trains that are more than 40 years old. This leads to significant crowding on this line today, and this is forecast to get steadily worse as demand grows.

57 If boarding numbers included additional demand that would be generated by development unlocked, this would further strengthen the case for focusing on WAML as a “Phase 1”.

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The New Tube for London Programme on the Piccadilly, Central, Bakerloo and Waterloo & City lines will be completed by the early 2030s, and will start with a significant capacity enhancement on the Piccadilly line. Signalling works will begin at the end of this decade with the first new high-capacity, energy-efficient trains expected during the early 2020s.

Once fully complete, peak capacity will be increased by more than 60% by 2025, significantly cutting levels of crowding. This big capacity opportunity and the current old age and poor condition of the fleet and signals mean this is a priority for TfL to proceed with. This is underlined by the recent issuing of the ITT for the rolling stock.

An interchange between the Piccadilly line and Crossrail 2 would provide improved connectivity and enable further growth on the Piccadilly line corridor. However, the capacity boost and reduction in crowding provided by the Piccadilly Line upgrade, along with good access to other lines into the CAZ, e.g. via an interchange with the Victoria line at Finsbury Park, means that further relief of crowding in the 2030s on the upgraded Piccadilly line is less urgent than for other lines, notably the Victoria and Northern lines.

Given these factors, under a phased scenario, the New Southgate branch appears to be the more appropriate northern branch for phasing than the WAML.

4.4.3 Challenges and risks of phasing the New Southgate Branch

Phasing of the New Southgate branch raises a number of operational and engineering issues:  The New Southgate branch provides several essential operational features, which would have to be re-provided elsewhere in a “Phase 1” scheme. Some, such as the infrastructure maintenance depot, might be able to be relocated to the south of the core operating section; others, such as stabling for trains on a site directly connected to the core operating section58, would have to be provided at Tottenham Hale.

58 It is currently a high-level scheme requirement that the stabling be directly connected to the central operating section in order to be able to provide a resilient minimum service in times of NR disruption.

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 The turnback / stabling infrastructure required at Tottenham Hale would be far more complex than that at New Southgate. A sunken facility with a grade-separated connection is likely, with sprayed concrete tunnels at shallow depth.

The site identified for the facility may fall short of the resilience which New Southgate provides; is in a flood zone; and forms a key part of LB Haringey’s housing aspirations (although the site identified could potentially support over-site development). With three of the New Southgate branch stations in Haringey, deferral of the branch therefore risks losing an important stakeholder’s support.

The analysis of phasing is based on limited engineering work as against the Full Regional Scheme, and the cost inputs therefore have a higher level of uncertainty associated with them. It is possible that “showstoppers” may still remain; formal design work must be considered a high priority if a phased option is to be progressed.

4.4.4 Train service under “Phase 1”

Figure 17 on page 65 showed the proposed service pattern under the Full Regional Scheme: 15tph serve the New Southgate branch and 15tph serve the WAML branch, giving a 30tph frequency in the core. It is unlikely, for a number of operational and engineering reasons, that the full 15tph scheduled for New Southgate could be diverted to the WAML under a first phase.

Analysis has therefore focussed on more realistic core frequencies of up to 24tph in “Phase 1”, but this should be treated neither as a cap nor a guarantee at this time.

The choice of “temporary” northern destination for up to 9tph trains implied by a 24tph core frequency (and associated infrastructure requirement to turn those trains around) is influenced by the degree of commitment the sponsors may have to the future construction of a New Southgate branch. There are two possible approaches:  If the New Southgate branch is treated as a later phase of the same project (and it is therefore included in the Bill) then there is merit in considering Dalston as the additional northern terminus. This would entail de-training up to 9tph at Dalston (depending on core frequency), with the trains turning back using one or two reversing tunnels. These reversing tunnel(s) would form the first element of infrastructure for the scheme’s next phase to New Southgate.

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The key advantage of this approach is that it avoids the need to reduce Crossrail 2 services at Tottenham Hale, or any other station, when Phase 2 services are introduced – potentially from 24tph to 15tph. However, the de-training and reversing activities required under Phase 1 are operationally unattractive, and this would lead to significant abortive infrastructure (£250m – 500m, depending on core frequency under Phase 1) should New Southgate not be pursued. This approach would also provide less significant Victoria Line relief than the alternative approach (described below) during Phase 1.

 If the New Southgate branch is to be treated as a separate project (with consent secured through a separate Bill – as HS2 have done), then abortive costs would be minimised and the greatest flexibility retained by running all trains through to Tottenham Hale. Under this scenario, passive provision would be made for “Phase 2” branch(es) at relevant junctions, in order to minimise serious disruption when Phase 2 is constructed. This approach would retain the most flexibility in relation to ‘Phase 2’ (and any potential subsequent phases). TfL is currently considering the case for an Eastern branch and examining a range of options as part of its ‘East London Transport Options Study’ (ELTOS), working with the boroughs concerned, and provision for a future eastern branch forms part of the safeguarded alignment as shown in Figure 13. However, the key disadvantage of retaining flexibility in this way is that Tottenham Hale could see a reduction in Crossrail 2 services when Phase 2 operations began at a later date.

4.4.5 Economic analysis of costs and benefits of phased construction

A first set of tests looked at frequencies which could be operated in the core under Phase 1, and the associated infrastructure costs. This showed that the best performing option maintained a 24tph core frequency in the core; below this frequency, the saving in infrastructure costs is significantly outweighed by loss of benefits of frequency reduction.

The impact is presented in Table 4 below, which compares the Full Regional Scheme against a ‘Phase 1’ scheme on a standalone basis.

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Table 4- Economic and Financial Impact of Deferral of New Southgate Branch

Full Regional “Phase 1” alone Scheme

Capital cost (2014 £32.6bn £27.9bn59 (saving of £4.7bn) prices)

BCR (excluding 1.360 1.3 Wider Impacts)

Impact on London 56.5% 64.8% contribution61

Impact on wider Reduction in ca 15,000 new homes on the objectives corridor, and associated regeneration benefits.

Increases London’s potential share of funding by around 8 percentage points on a standalone basis.

Greater stakeholder risk, particularly if New Southgate treated as a separate project.

4.4.6 Phasing construction – summary

Deferring the New Southgate branch seems feasible in engineering terms, however the operational, engineering and stakeholder risks are higher (particularly in terms of resilience, flood risk and the reaction of LB Haringey to the proposal). Showstoppers” may remain and formal design work must be considered a high priority if a phasing option is to be progressed seriously.

59 2014 prices, including the costs of re-providing stabling, infrastructure maintenance depot and turn- back facilities and with optimism bias at 66%. 60 BCRs shown exclude Wider Impacts or the effect of dependent development. They do not represent a formal update as they do not take into account updated analysis in a number of respects, so should be used for comparative rather than absolute purposes. 61 ‘Impact on London contribution’ applies cost and revenue impacts to 2015 SOBC funding position holding everything else unchanged, so should be treated as a indicative.

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The impact on the business case is minimal if looking only at transport benefits. However, there would be a delay or reduction in delivering the housing and regeneration opportunities associated with the New Southgate branch (although these are not as significant as for the WAML).

It is important to note that total costs are likely to be higher under phased delivery than single phase delivery, for example due to re-mobilisation, loss of economies of scale, and the need to provide additional infrastructure during Phase 1. The approach taken to phasing of construction would depend heavily on the trade off between future flexibility / abortive costs and the need to avoid reducing services at Tottenham Hale at a future date. Further consideration would need to be given to the consenting strategy.

4.5 South Western branches

Over the next thirty years, 40 per cent growth is forecast on the SWML, across both inner and outer suburban services62. Network Rail’s 2015 Wessex Route Study acknowledged that an additional 60 per cent capacity is required in the high peak hour to meet the forecast demand in 2043 on the outer suburban services alone63. The case for the SWML capacity was described in Part 2.3.3 and set out in Network Rail’s submission to the NIC.

The proposed configuration of the Crossrail 2 Regional Scheme, to serve four branches of the SWML inner suburban network, is based on maximising benefits in order to strike a balance between:  providing enhanced services to South West London and Surrey, through higher frequencies on inner suburban lines (‘Crossrail 2 benefits’); and  facilitating a release of capacity to the outer suburban / SWML services into Waterloo.

62 Percentage increase in the number of rail passengers travelling to central London during peak hours (2011 to 2043), taken from the London and South East Market Study, Network Rail, October 2013 63 Wessex Route Study, Network Rail, August 2015

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4.5.1 South Western cost drivers

The key cost drivers in the June 2015 estimate are set out in Figure 19 below. They are: Wimbledon (station remodel, track re-modelling, additional turn-backs and associated land and property); Weir Road depot; 6-tracking; and “mainline enabling” works (infrastructure required to enable mainline capacity uplift into Waterloo station), which together amount to over 85% of the total cost of on network infrastructure in the south west.

Ongoing work is reviewing the engineering configuration in the south-west of Crossrail 2; this includes investigation of tunnelling the fast lines as an alternative means of providing the capacity uplift that 6-tracking provides. However, this work is not anticipated to deliver cost savings, and instead aims to reduce the impacts on the local area.

Figure 19 - SWML costs

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The signalling required for Crossrail 2, including re-signalling of the Wimbledon area to ETCS (including the approach to the Crossrail 2 tunnel, but not the branches themselves), is assumed to have been delivered by NR as part of planned enhancements in CP7. This assumption reflects the life expiry of the current signalling equipment. Resignalling the WAML is included within the estimate. The assumption is that some of the branches of Crossrail 2 will continue to operate with conventional signalling, controlled via a Traffic Management System. There is therefore a risk that resignalling of Wimbledon area is delayed beyond CP7, and / or does not proceed in ETCS form necessary to provide Crossrail 2 services to the core, which the sponsors will need to consider as appropriate. Further work on signalling is ongoing.

4.5.2 SWML benefits

The services enabled by Crossrail 2 serving SW branches and freeing up paths to Waterloo are particularly large contributors to the following Crossrail 2 scheme benefits and objectives, constituting 45% of total public transport (PT) benefits by journey origin:  Reduce congestion and crowding on services and at key stations on the national rail network, particularly on the South West Mainline  Improve the efficiency and resilience of the existing transport network  Accommodate housing growth (though to a lesser extent than the West Anglia route: SW unlocks approximately 55,000 homes with WA unlocking approx. 80,000).

4.5.3 Options for phasing of SW branches

The options for phasing delivery of the SWML branches have been considered and tested to understand the scope to defer costs and the resulting impact on benefits, on the basis that the phasing must leave open the option of delivering all four branches of the Full Regional Scheme with minimal abortive cost and disruption.

Key conclusions of this work are:  There is a high element of fixed cost required under all scenarios in order to deliver the SWML capacity uplift and leave open the possible end state of 4 branches. This includes the costs of reconfiguring Wimbledon and of 6-tracking, without which the majority of the capacity benefit (and contribution to scheme objectives) is lost.  If branches are deferred, only a small amount of cost is saved (and this may result in additional costs to turn trains around in order to maintain service frequency, which may be abortive under later phases.)

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A summary of the options considered is set out in Table 5 below.

Table 5 – Options for SW branch phasing

Options for Benefits / Impact on Objectives branch Cost Savings compared to Regional Scheme compared to Regional Scheme deferral 6-tracking and Wimbledon costs required. Alternative turn-back and stabling may be needed depending on branch. Cost saving of branches themselves is very minimal: of the total Southwest cost c£5bn, each Fewer mainline paths are released branch (incl. stabling) is: so fewer NR congestion benefits. Deferring Slight to moderate negative impact one branch  Shepperton: c7% ~£0.35bn on benefits (expected loss of around 10% of PVB*) compared to very  Hampton Court: <1% ~£0.01bn minor cost saving.  Epsom: c3% ~£0.15bn

 Chessington: c4% ~£0.18bn

Wimbledon costs still required. Many fewer paths to Waterloo Full 6-tracking required for Shepperton / Hampton released so less NR crowding relief. Deferring Court branches. Potential for partial 6-tracking to There may be operational resilience two and be deferred if Epsom / Chessington served. if 2 branches are Crossrail 2 delivering Individual branch costs savings only minimal. exclusive, but this is at the expense two Turning 30tph core frequency starts to become of connectivity to Waterloo. branches problematic with only 2 branches and additional Slightly larger impact on benefits cost may be required, or frequency and benefits (expected loss of up to 20% of PVB*) lost. compared to minor cost saving. Retaining 30tph core frequency becomes unlikely. Congestion relief Same Wimbledon and 6 tracking requirements as Deferring on SWML is dramatically reduced as with two branches. three only 1 branch results in the least Minor cost savings from branches removed. With branches, amount of mainline paths are some branch choices alternative turn-around / delivering released. Negative impact on stabling solutions may be required and therefore one only benefits (expected loss of up to cost, abortive cost or reduction of core frequency. around 25% of PVB*) compared to minor cost saving.

*potential loss of benefits varies depending on service pattern, frequency and choice of branch(es) deferred – estimate is indicative only – further testing is required to provide an accurate forecast.

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4.6 Stations and Route Variants

4.6.1 Approach

In response to the NIC’s request, we have examined the cost of each station and its contribution to the scheme’s overall benefits.

It is important to note that, whereas branches can be considered for a phased approach to construction (as outlined above), it is much harder to apply the same approach to stations. If it is intended to include a station in the scheme’s ‘end state’, then the alignment must allow for that and the majority of the civils costs are incurred in order to make provision for a future station (including the need for ventilation / evacuation shafts where a future station will be). So the costs deferred are often small; and the local communities would continue to experience the majority of the impact of construction.

It is also important to note that many of the stations perform a critical operational function, and / or perform an essential function in relation to the delivery of the scheme’s strategic goals and objectives, e.g. by improving network connectivity by interchanging with other lines.

4.6.2 Review of scheme section station costs and categorisation

The costs associated with the stations on key sections of the scheme are presented in the table below.

Table 6 – Costs of stations on key sections

WAML NSG Southwest Core Stations Branches

Number of stations 13 4 25 9

Cost of stations works £0.5bn £2.3bn £0.6bn £8.5bn 2Q2014 prices

This shows that the stations on the on-network branches represents a very small proportion of overall scheme costs, reflecting that these are upgrades of existing surface stations. Station costs are (unsurprisingly) most significant on the Core and New Southgate sections, reflecting the fact that these are substantial new deep tube stations. The potential to reduce the number of stations has therefore been considered for these respective sections of route.

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4.6.3 Stations assessment

The following stations were not assessed, owing to their operational or interchange role: Key interchanges, providing essential connectivity with other services:  Euston – HS2 / national rail interchange  Tottenham Court Road – critical Crossrail 1 / LU interchange  Clapham Junction – key national rail interchange Key operational stations:  Wimbledon – vital turn back station and point of SW branch integration  Tottenham Hale – vital turn back and interchange station  New Southgate – vital turn back, essential to New Southgate branch

The remaining stations were assessed, to consider:  The cost of serving each station  The ‘demand’ forecast at that station in 2041, excluding any growth from local development;  The station’s contribution to meeting Crossrail 2’s strategic objectives;  The net impact on transport benefits (journey time and crowding) if the station were to be omitted from scope, on the basis of ‘fixed demand’64. This will comprise a balance of time saving benefits to through passengers (which generally fall into the range of between 1.5 and 2 minutes depending on route realignment) against a loss of local and network connectivity benefits. The analysis excludes revenue, highway decongestion and station decongestion impacts, which would typically be driven by changes in demand, as well as wider economic impacts. There is a specific question regarding whether Wood Green could replace Alexandra Palace and Turnpike Lane on the New Southgate branch. This has the potential to save around £600m with a minimal impact on benefits, and has the support of the borough of Haringey. It is the subject of the recent consultation, and a decision will be taken once the results have been thoroughly assessed.

64 In other words, the impact of the change on ‘generated demand’ (e.g. due to faster journeys) has not been taken into consideration. This ensures a common basis for comparison.

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The conclusion of this high level assessment65 is that, although removal of any given station may appear superficially attractive as a means of reducing cost, each of the stations contributes to the scheme’s goals and objectives – either operationally, or through providing the critical network interchange and connectivity required to meet strategic objectives. The fact that stations cannot be added at later time under a phased strategy means that the omission of any station from the scope would represent a significant lost opportunity.

65 See Appendix J.

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Appendix A Programme

See over

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2016 2017 2018 2019 2020 2021

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Development Funding Confirmed Review Bill Review General Review Milestones Royal Assent Point 1 Submitted Point 2 Election Point 3 SOBC Approved (OBC) (Funding in Principle) (Delivery Funding Confirmed)

Business Case Start SOBC Strategic Outline Business Case Approved Update Outline Business Case initial Final Business Case Final Business Case

Funding Funding Funding and Finance Strategy Heads of Funding & Finance Agreements Terms Single Preferred Option Option Selection 2016 Baseline Targeted Routewide Public Information Consultation Consultation Round Environmental Consultation Statement

Hybrid Bill Design Initial Interim Final

2017 2018 Environmental Planning & Surveys Baseline Baseline Statement

Impact Assessments Initial Interim Final

Bill Production Planning

Production

Deposit Bill Royal Assent Parliamentary Process House of Commons Select Committee HOL Select Committee November 2018 March 2021 2nd Reading Agreements & Undertakings Pre-Bill Agreements / Undertakings Bill Agreements / Undertakings

Planning for Delivery Planning for Delivery Phase (in keeping with agreed Delivery Strategy) Delivery Phase Phase Starts

External Events HS2 Phase 2a Hybrid Bill HS2 Hybrid Bill TfL Submissions assumption HS2 Phase 2b Hybrid Bill

Crossrail 2 Summary Plan to Royal Assent – February 2016

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Appendix B – Strategic Goals and Objectives Strategic Goals Objectives 1 Support the UK economy, by i Increase the potential employment density of maintaining or increasing London’s London's Central Activities Zone (CAZ) and key competitiveness and sustaining its employment centres, and enlarge their catchment position as a 'global city' area ii Support new jobs in key employment centres across London and the surrounding regions 2 Meet the housing and transport i Accommodate housing growth and regeneration needs of a growing and diverse across London and surrounding regions in line with population relevant spatial planning policies, particularly in London Plan Opportunity Areas such as the Upper Lea Valley ii Reduce levels of congestion and crowding on services, and at key stations, on the parts of the Tube network that are forecast to be most congested. iii Reduce levels of congestion and crowding on services and at key stations on the national rail network, particularly on the South West Mainline iv Ensure that passengers can travel effectively and efficiently between HS2 and locations in London and the surrounding region 3 Improve the quality of life and the i Improve the efficiency and resilience of the existing environment in London and supports transport network the UK’s climate change objectives ii Make journeys to, from and within London more accessible, safer, and well integrated with the wider transport network iii Maintain or enhance the quality of the environment, use resources efficiently and minimise carbon emissions iv Deliver positive outcomes for local communities, during both construction and operation, while avoiding disproportionate impacts on any social group 4 Develop a solution that is safe, i Make efficient use of scarce public funds feasible and offers value for money. ii Secure appropriate contributions from the schemes beneficiaries iii Be feasible, operationally viable and resilient

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Appendix C – London Underground Network Crowding, 2031 Baseline, peak direction only

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Appendix D – Summary capacity constraint typology

Infrastructure capacity constraints can manifest themselves in a variety of ways across London’s railway systems, both at stations and on the networks itself. These are summarised in Table 7.

Table 7: Constraints on London's public transport network include:

Station constraints Service constraints

Station access / egress options Train dwell-times

Ticket hall and gateline capacity Train performance (acceleration / deceleration / operating speeds)

Vertical capacity (escalators, lifts, stairs) Train headways

Corridor / passageway capacity Reliability / slack running, ability to (including underpasses) recover from service perturbations

Platform capacity

Station design eg. distribution of passengers upon platform

These constraints can be observed at many locations on London’s public transport network. An example station is illustrated in Appendix D below.

Current station upgrades at Bank and Victoria Station are increasing the capacity of each station to handle passengers by creating more space for passenger circulation and reducing passenger conflict in narrow tunnels; but they are extremely expensive. Each is costing in the region of £600 million, and the schemes are focussed simply on ensuring that individual station performs more efficiently. They will only have a relatively minor effect on the efficiency and effective capacity of the services running through each station. At Green Park, the provision of step-free access to, from, and between all lines at the station cost around £50 million.

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Appendix E Illustration showing constraints at a typical Central London rail (National Rail or Underground) station

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Appendix F – “Peak Tube”

There is a practical limit to the extent to which the current network can be enhanced

Figure a: The relationship between train frequency and overall link capacity

Peak tube! – circa 36 If headways get  At frequencies in the region of 30 tph... too close, trains per hour, per direction, station dwell times (time taken for passengers operational to board and alight trains) are a key speeds have to constraint to the system as well as the reduce. limit to the rate of acceleration / Total braking. transport  Also, the relationship between speed capacity and stopping distance means that, once the interval between trains has (pax per Additional capacity increases in a been reduced to the point where it is hour) the same as the stopping distance, way which is proportional with the train frequency can only be increased number of trains per hour further by slowing the trains down so that they have a shorter stopping distance.

10 20 30 40 50 Number of trains per hour (tph)

Figure b: Relationship between additional demand and LU line capacities

 Continued growth in demand causes Peak tube ! – platforms have an problems for a safely operating railway to approximate capacity which is maintain its peak frequency: extremely expensive to increase o Longer time taken for trains at stations due to more passengers boarding and alighting services. o Inability to recover services Maximum following disruption, causing operable increased risk of delays. frequency  Temporary measures for ensuring the continued operation of the maximum (trains per As demand grows and trains hour) frequency may include assisted boarding take longer at stations, the and alighting or harder closing train maximum operable frequency doors. decreases.

Line demand (pax)

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Figure c: Relationship between station demand and station journey times

 As the number of passengers passing through the stations increases, this can; o Place strain on station Peak tube! – stations have an infrastructure. approximate capacity which is o Cause crowding around extremely expensive to increase escalators, ticket barriers and Time platforms. taken to o Increase the chances of navigate station closures for safety reasons. station  The accumulation of these factors can cause significant increases in passenger journey time. At a certain point, the time taken starts to rise quickly as crowding prevents fluid flow, and station control measures are implemented Demand

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Crossrail 2 NIC Supplementary Submission Appendix G : Impacts at Waterloo Station of an alternative capacity solution on the SWML to Crossrail 2

The diagrams below show the extent of crowding on the platforms and key station concourse pinchpoints at Waterloo Station in a typical AM peak period under the Crossrail 2 alternative scenario compared against today (2012):

Station crowding in 2012

2041 with NR Alternative Interventions

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It can be observed that in a 2041 NR Alternative scenario, several problems occur. At Exit 2 between the national rail platforms and the Jubilee Line, passenger numbers in the peak periods increase by 50% from approximately 30,000 in 2011 to 45,000. This could result in frequent gate line closures at the LU entrance in order to manage crowding as well as difficulties operating the station as a result of the necessary diversions passengers would need to make.

A similar situation occurred during the London Bridge station works in December 2015. Waterloo Station Exit 2 experienced a 25% demand increase which forced the LU station entrance to be closed and passengers were diverted outside the station along Waterloo Road.

Crossrail 2 will divert a significant proportion of passengers away from Waterloo. The total number of arrivals during a typical weekday morning peak period in 2041 is expected to remain below 2023 levels with Crossrail 2, which would mean that major infrastructure investment to accommodate demand at Waterloo would not be needed.

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Appendix H The impacts of Crossrail 2 on crowding across the London and South East Rail and Underground network

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Appendix I The evidence that transport investment supports growth

Transport Investment and Growth

Introduction Transport investment is a central component in delivering housing and economic growth through enhanced connectivity and accessibility. It influences values and development decisions by: • Providing new connections • Increasing property and land values • Facilitating more efficient land use • Supporting economic growth

Providing New Connections New public transport connections create a range of drivers for growth, including provision of: • New links between jobs and homes • Greater destination choice • Improvements in frequency, reliability, and directness of single mode of travel.

These improvements have distinct influences in terms of: • Unlocking previously undelivered sites • Allowing the identification of additional sites and locations which were not previously considered to have substantial development potential.

Evidence of this influence can be found in both London and international locations: • London • The Jubilee Line Extension unlocked significant development capacity and opportunity for Canary Wharf and Canada Water, both of which were previously dormant post- industrial locations until connected to Central London66 • International • The San Francisco Bay Area Rapid Transit District (BART) created new connections with East Bay cities and San Mateo County northern suburbs and has sparked substantial over- site station development projects representing private investment of more than $2.7billion67

Increasing Property and Land Values

66 The Jubilee Line Extension Impact Study, University of Westminster, 2004 67 Bay Area Rapid Transit website, http://www.bart.gov/about/business/development

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New significant public transport provision enhances values over and above historic trends or non-transport corridor averages. The potential to achieve higher values enhances development delivery by: • Allowing financial viability barriers to development to be overcome • Providing higher returns on investment that attracts new/additional private development interest • Allowing sites to be delivered earlier than if there had been no transport intervention • Providing sufficient returns to adopt a comprehensive approach, overcoming fragmented land ownerships • Increasing footfall for retailers

Evidence of this influence can be found in both London and internationally: • London • The Jubilee Line Extension created a total of £2.1billion value at Canary Wharf / Southwark stations, driven by the unlocking of the Canary Wharf Estate. It has also attracted substantial additional investment and development interest, and was responsible for 75% of residential value uplift in Southwark68 • As a result of Crossrail Tottenham Court Road has seen significant uplift in retail values, estimated at 30% in the 2015 alone69. A more comprehensiveness approach to development has been established, overcoming a number of historic issues and addressing previous under-investment, creating a higher quality environment. • International • Portland’s Pearl District showed the impact of delivering development more quickly than originally planned, allowing the delivery of the 20 year housing target in just 7 years70 • The Del Norte BART station catalysed the delivery of the new ‘Transit Village’ using public and private land, with enhanced value and investment returns providing sufficient incentive to take a comprehensive approach and fund land assembly71

Facilitating More Efficient Land Use

New significant transport provision facilitates the delivery of higher density development and more comprehensive approaches to development.

Why is this important? • Density decisions are a function of assessed accessibility – increasing PTAL (in London) allows for higher density development to be permitted/delivered • New stations require a comprehensive/integrated development approach to maximise their functionality, therefore land assembly and coordination to deliver station access overcomes historic fragmented ownership and facilitates the required coordination for future land use.

Evidence of this influence can be found in both London and international locations: • London

68 Property Value Study – Assessing the change in values attributable to the Jubilee Line Extension, Atisreal for TfL, May 2005 69 http://www.theguardian.com/uk-news/2016/jan/26/london-prime-shop-rents-leap-last-quarter-2015 70 Case Studies for Transit Oriented Development, Reconnecting America for LISC, March 2009 71 10 Principles for Successful Development Around Transit, ULI, 2003

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• Delivery of the DLR extension to Lewisham has been the catalysed for significant increases in development delivery around Lewisham station. The Lewisham Gateway for example will deliver 15-25 storey towers aligned with the Station. • Crossrail has allowed coordinated development to come forward at a number of stations. For example Collaboration Agreements were established to deliver integrated over-site development, including at Bond Street West (with Grosvenor) and Bond Street East (with Great Portland Estates)72 • International • Development within Portland’s Pearl District achieved significantly higher densities following delivery of a new streetcar introduction, with an increase in units from 15/acre to 125/acre, achieving 90% of permitted density where the average was 43%. The development of Pearl District was achieved through a comprehensive development approach, with a public-private partnership coordinating land owner investment on privately owned land alongside the streetcar line73

Supporting Economic Growth

New significant transport provision creates greater agglomeration benefits for major economic centres and supports diversification and the complementary role of other employment hubs.

Economic growth is supported by public transport through enabling: • Greater labour accessibility and catchment area • Greater accessibility and connections from outer centres to central locations • New links between economic drivers (institutions and sector specific clusters) • Location choice without transport compromise • Unlocking capacity in areas with lower land costs and greater land availability.

Evidence of this influence can be found in both London and international locations: • London • The Jubilee Line extension provided a connection back to the Central London which unlocked the opportunity for Canary Wharf to provide capacity for the expansion of the financial services sector. • Crossrail has strengthened connections between London’s core markets, Heathrow and outer London hubs to support the delivery of a range of new commercial developments. It has supported growth at Slough, Maidenhead, Paddington, Liverpool Street, Farringdon, Canary Wharf and Stratford. • In North London the Victoria line has unlocked economic growth, most notably in relation to the provision of SME opportunities in Haringey and Waltham Forest. • International • The Paris RER (Réseau Express Régional or Regional Express Network) created a 13% employment increase in municipalities connected to the RER network, compared to those only connected to the existing suburban rail network. This impact was observed in an area within 20km of Paris.

72 Source: Crossrail website news article – 3rd September 2014 73 Source: Case Studies for Transit Oriented Development, Reconnecting America for LISC, March 2009

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Conclusion

The factors explored above demonstrate the role new public transport connections will play in enhancing the growth potential of the locations it serves. Experience in both London and across the globe highlights the potential role Crossrail 2 can play in delivering greater levels of residential and employment growth in London and beyond.

However, it should be noted that whilst public transport provision provides the key to unlocking this capacity it is not sufficient to assume it will be the sole driver of growth. In most cases new public transport services will need to work in tandem with a range of other influences in order to maximise the growth potential including the level of support within the planning and policy context, the existing market strengths, economic fundamentals and a more coordinated approach to public and private investment.

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Crossrail 2 NIC Supplementary Submission Appendix J – High Level Station Assessment

Full Regional Wood Green Scheme Alexandra (replacing Balham Kings Road Angel Dalston Seven Sisters Turnpike Lane Palace Turnpike Lane and (for reference) Alexandra Palace)

Number of Crossrail 2 passengers using station (boarders, alighters and 34,800 16,300 27,100 23,000 10,800 14,400 4,500 15,500 interchangers), 2041 am peak 3 hr

Key function of the station and its Provides key interchange and Provides rail access to a Provides a key interchange Provides interchange to Provides additional Provides interchange Provides interchange Provides interchange with contribution to meeting the vital relief to severely crowded key commercial, retail, and relief to Northern line. Overground, and access interchange and relief to the with Piccadilly line. with national rail and Piccadilly line. Provides strategic goals and objectives section of the Northern line and health and leisure area with Provides additional local to CR2 from local Victoria line. Interchange Provides access to CR2 access to CR2 from access to CR2 from local national rail services. Provides currently poor access to rail. access to a key local residential catchment. with Overground and Great from local residential local residential residential catchment. Will additional transport capacity to Provides additional residential, commercial, Will provide a catalyst Anglia rail. Provides access catchment. Will provide catchment and provide a catalyst for local a corridor with little scope for transport capacity to a business and leisure area. for local regeneration. to CR2 from local a catalyst for local improvement PT employment and district capacity enhancement heavily trafficked corridor Unlocks local housing residential catchment. Will employment and access to Alexandra centre regeneration underground or on surface with little scope for capacity growth. provide a catalyst for local housing growth and Palace as a leisure otherwise. Unlocks local enhancement on surface. regeneration. regeneration venue. housing

Change as consequence of omitting station from Crossrail 2 scope, compared to the Full Regional Scheme

Capital Cost 2Q 2014 prices, £bn 32.6 -1.8 -1.1 -1.0 -1.0 -0.9 -0.8 -0.8 -0.6

PV Costs (Capex, Opex and Whole-life costs, excludes 39.0 -2.0 -1.2 -1.0 -1,0 -0.9 -0.7 -0.7 -0.8 revenue) 2010 prices PV £bn

PV of PT Time and Crowding Benefits (excludes highway and 35.3 -0.3 1.0 -0.5 -0.8 negligible net impact -0.7 -0.2 -0.1 station congestion benefits) 2010 Prices PV, £bn

Journey time reduction for CR2 through passengers including n/a 3.0 2.0 1.5 1.5 1.8 1.5 1.6 1.6 impact of any route re-alignment, in minutes

Change in net new additional homes unlocked by CR2 at each ca 200,000 -1,800 -600 -4,100 -2,300 -800 -1,300 -600 -2,000 location*

SWML + WAML change in AM peak crowded hours (% point -40% -2.0 -1.2 +0.3 -0.2 0 +0.1 +0.1 +0.1 change from Full Regional Scheme)

LU Network change in AM peak crowded hours (% point change -15% +1.7 -0.3 +0.7 +0.1 +0.1 +0.7 +0.1 0 from Full Regional Scheme)

* These numbers represent an estimate of the reduction in the number of new homes that Crossrail 2 could enable at each location, based upon high level assumptions about the relative reduction in public transport accessibility to specific areas. They do not represent the total number of new homes that a new Crossrail 2 station could unlock in specific locations, because the overall network-wide benefits of Crossrail 2 mean that new homes will still be unlocked in locations with good connections to Crossrail 2, even if they are not directly served by the scheme.

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