Appendix 2

Briefing for Budget & Performance Committee February 2019

Transport for Business Plan Capital Programme Prioritisation Methodology and list of portfolios by prioritisation category

The 2018 Business Plan Context

1. At TfL we are managing a number of financial challenges. A subdued national economy has slowed ridership across the country and reduced fare revenue. Despite a recent upturn in Tube ridership, passenger numbers have been down, particularly on buses.

2. Against a cautious set of forecasts in our last annual budget, overall fare revenue is up two per cent compared to last year - just above expectations. However since the Mayor’s first TfL Business Plan in December 2016, our predicted fares income for the next five years has been re-forecast to be around £2.1bn lower than originally expected, due to the state of the wider economy.

3. We have also experienced unprecedented cuts to our operational funding from the Government over the last five years, with funding cut by on average £700m a year. Since March 2018, London has become one of the only major cities in the world not to receive a direct Government operational grant for day-to-day running costs. The announcement by Ltd that there will be a delay to the opening of the Elizabeth line has also meant that we must absorb the impact of the fare revenue foregone.

4. While our capital investment funding now comes from business rates allocated to the Mayor, the arrangements are currently only in place until 2020/21 and there is therefore no certainty of capital funding beyond this point. This is why the timing of some transport schemes will need to be confirmed once the level of capital investment available is known following the outcome of the Government’s planned Spending Review (CSR), until then we have had to take a prudent view.

5. Ahead of the Spending Review, we will be making the case for long-term steady and sustained investment to ensure critical infrastructure projects can continue. The future of vital transport infrastructure upgrades is reliant on us having certainty over our long-term funding settlement. That is why we hope the CSR will deliver long-term certainty over business rate funding. In particular, we need to agree with the Government how to fund future elements of the upgrade programme. The Four Lines Modernisation, Extension and Crossrail were all part-funded by government and it is vital that we establish with government a long-term plan for upgrading the Piccadilly, Bakerloo, Central and Waterloo & City lines, which are not fully funded in this Business Plan.

6. It is also important for us to have certainty around future funding in order to commit to other long-term projects. As is normal, not all the funding for future transport infrastructure schemes beyond the 5-year Business Plan has yet been identified, and we did not categorise these projects during business planning. We will continue to develop potential funding packages for a number of major schemes, including , the extension, the scheme, the , the Elizabeth line extension to Ebbsfleet and a potential DLR extension to Thamesmead. These packages could include funding from a number of

1 different sources, including additional government funding, tax increment financing or other local sources.

Prioritisation process

7. Our starting point for the investment programme prioritisation during the 2018 Business Planning was to define the guidelines for the investment programme and articulate why each area of spend is important to us including referencing safety, the Business Case, Equality Impact Assessment and contribution to the Mayor’s Transport Strategy.

8. We analysed our investment programme into four priority areas:

 Priority level 1, Critical: Necessary to maintain the current level of safety; or legally required to be safe and operable  Priority Level 2, Central: most aligned to Mayoral/government priorities and Transport Strategy outcomes and central to our strategy which need significant further progress. [This includes portfolios where spend is already committed]  Priority level 3, Desirable: important to do for London and to deliver the Mayor’s Transport Strategy, but contingent on multi year funding agreements which we currently do not have  Priority level 4, Deprioritise: Projects that could be deprioritised and are more discretionary in nature (e.g. no specific capacity uplift depends upon it)

9. We agreed this approach to capital programme prioritisation with our Board at the start of our Business Planning process.

10. We have acknowledged that it is not possible to commit to long-term projects unless and until there is long term funding available to ensure they can be completed. A lack of long-term certainty of funding can therefore delay the start of key projects.

Rationale for portfolios categorised as Desirable: a) Portfolios contingent on third-party funding which we expect to proceed

station and capacity enhancements – this will proceed if funding from the Government’s Housing Infrastructure Fund (HIF) is confirmed.

 Third party funded stations portfolio: station – a third-party funding package is in place.

 Wandsworth Gyratory – this scheme has a confirmed funding package including funding from the TfL Growth Fund, a substantial contribution via the London Borough of Wandsworth from section 106 funds and the Community Infrastructure Levy as well as TfL capital. Some additional funding will also be realised upon project completion through land sales.

 Tooting and town centre pedestrianisation schemes – these schemes have confirmed funding, including contributions from the boroughs.

 Silvertown Tunnel – this project is central to our strategic approach for London but is in this category because it is contingent on signing a Design, Build, Finance and Maintain contract 2

for its delivery – it will be funded through a toll. We expect to conclude the procurement process this summer to appoint a contractor. b) Portfolios which can begin once funding is confirmed:

This category predominantly refers to multiple year, large scale capital investment where long- term funding certainty is imperative to enable us to commit to the projects. The current set of large scale upgrades, such as the Four Lines modernisation programme, all had 10 year funding agreements with Government and we will need a similar level of certainty before we can commit to these important projects.

 Deep Tube Upgrade Portfolio: signalling – there remains an imperative to upgrade the Piccadilly line signalling, which will be required as demand grows and the existing signalling ages. However, as mentioned above, such large-scale investment will not be possible without capital funding from the Government. The new Piccadilly line Rolling Stock contract is committed and required to replace a life-expired fleet - and will provide significant additional capacity, including increasing the number of trains per hour from 24 to 27, ensuring the line can meet demand prior to the new signalling being completed.

 Further LU Step Free Access schemes beyond those committed - Step Free Access is a key priority for Londoners and the Mayor so as soon as additional funding becomes available we will seek to add projects to the portfolio as a priority.

 Bakerloo line upgrade and extension. There are substantial synergies between the Bakerloo line upgrade and extension, and we are looking at doing both projects together if funding can be secured.

 Central and Waterloo & City line upgrades – we also need to establish with the Government a long-term plan for upgrading these lines, including the priorities for immediate investment and a funding approach that gives the necessary certainty.

 Future stations portfolio: Station Upgrade – this project was not in a contract process and could be deferred beyond the 5-year business plan without impacting safety or significantly affecting the delivery of transport strategy outcomes. While some of its costs were to be re-couped from property development, it required substantial TfL funding. Holborn Station Upgrade, the other station in this portfolio, remains central in the plan but has been deferred by 2 years (as a consequence of the deferral of the Piccadilly Signalling discussed above).

Rationale for portfolios categorised as Deprioritise:

 Energy schemes sub-portfolio – we deprioritised energy schemes that are not consistent with the policies of the new London Environment Strategy, which favours integrated policies over Combined Heat and Power (CHP) schemes that can damage local air quality, including the scheme at Greenwich Power Station and other energy centre schemes. While some schemes did generate revenue it was not of sufficient volume or timing to justify a “Central” rating. We are developing a new pan-TfL energy strategy to allow proper prioritisation of investment in energy infrastructure, not least on the basis of our ability significantly to reduce carbon

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 Elmers End scheme sub portfolio – while this scheme would improve the tram network, no specific capacity uplift depends upon it, and there is limited potential for third- party funding.

 LU core asset renewal spend - activities which supported asset management, “ambience”, customer service and long-term efficiency were reviewed to ensure a focus on safety- critical and other high priority areas. Lift and escalator works have been focussed on critical locations only. This approach has saved c. £1bn since 2015

 World Class Capacity – the decision to cancel the procurement of additional Jubilee and Northern line trains, as benefits could be delivered through smaller scale interventions, including timetable adjustments. This removed c£600m from the £730m programme.

 Dingwall road loop tram enhancements – The Dingwall Loop project was designed to offer capacity enhancements to support future development in central Croydon. In light of the revised Westfield planning permission, which provided no direct funding for the project, new feasibility work has highlighted that there may be more effective ways to achieve these.

We are currently liaising with the London Borough of Croydon to update the tram network strategy which will set out a long-term plan to improve access, reliability and capacity. This will include medium-term capacity options, as well as short-term operational flexibility measures and projects to enhance key town centre tram stops. Along with the London Borough of Croydon, we would welcome further investment in Croydon transport infrastructure and the opportunity to discuss capacity increases with developers.

 Surface highways renewals (capital) - Proactive renewals on the road network were paused for two years, saving approximately £100m pa.

 Surface Rail Renewals (capital) - Proactive renewals on the Surface rail network were reduced for two years in order to save c. £10m p.a. in 2018/19 and 2019/20 from the capital account

 Technology and Data projects - a number of technology and data projects were reduced in scale, deferred or cancelled following an in-depth review.

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Appendix 1 TfL’s Portfolios / sub-portfolios by the 4 categories, as at the end of the process Critical Renewals Tram assets, including post-Sandilands works Emergency Services Network (externally funded) Road Network and Borough Assets (20mph + Hostile Vehicle Mitigation) IT: Replace Enterprise Resource Planning platform Central Crossrail Elizabeth line Rolling Stock Deep Tube Upgrade - Piccadilly line Rolling Stock Four Lines Modernisation Northern Line Extension Major Station Upgrades: Bank Station Upgrade World Class Capacity – a programme to achieve higher frequencies on the Jubilee and Northern lines 2020 Step Free Commitment Old Street, Vauxhall Cross schemes Borough network schemes DLR rolling stock (replace current fleet) Barking Riverside station - White Hart Lane London Overground Minor Stations Air Quality, ULEZ including bus and Dial-a-Ride fleet Commercial Development Tech & Data - remaining IT projects TLRN network schemes Road Technology SITS Cycling Bus Priority Transformational Schemes Growth Fund Rotherhithe to Bridge Holborn Station Upgrade [reflecting 2-year deferral] Desirable - a East London Line (new station and capacity improvements) (HIF funded) Silvertown Tunnel Third Party funded stations portfolio: Elephant and Castle station Wandsworth Gyratory Borough Network Schemes (Tooting and Peckham) Desirable - b Deep Tube Upgrade - Piccadilly line signalling + Central, W&C & Bakerloo line upgrades Camden Town Station Upgrade : Dingwall Road Loop Further LU step-free access schemes Deprioritise Energy schemes that no longer align to strategy Trams: Elmers End LU core asset renewal spend

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World Class Capacity – procurement of 27 Jubilee and Northern line trains Dingwall road loop tram enhancements Proactive Surface Highway Renewals (capital) Proactive Surface Rail Renewals (capital) Technology and Data projects

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