The opening of Crossrail has been thrown into further doubt as the government announced a further bailout of up to £2.15bn for London’s new east-west railway line and suggested it may not open until 2020 at the earliest.

Sadiq Khan, the mayor of London, said that Transport for London would seek to repay the money through two existing business taxes in the capital. It marks the third financial rescue in a year and could take the project’s budget to about £17.6bn.

The increase will come as a significant blow to Transport for London and businesses, which had hoped to be celebrating the opening this week of the new railway, which will run from Reading in Berkshire to Shenfield in Essex and has involved building 10 new stations and 42km of tunnels under the capital.

Europe’s biggest infrastructure project and the first significant addition to the British capital’s Tube network for 30 years, the project was seen as a model for the delivery of large-scale construction projects but its opening had already been delayed until next autumn.

TfL said that core elements of the infrastructure, including the stations and the fitting out of the tunnels were at “varying stages of completion and more funding is therefore required to complete it”.

Mark Wild, who joined as chief executive of Crossrail in November, said: “This means that I cannot at this stage commit to an autumn 2019 opening date.”

Bernadette Kelly, the permanent secretary at the Department for Transport, told the House of Commons public accounts committee that Mr Wild would provide a timetable in January for the opening of the railway.

READ  Four things that happened in Scotland in 2003 now revealed with release of official papers

Terry Morgan, the former chairman of Crossrail, has claimed that he advised the mayor that finishing the work in 2019 was no longer feasible.

Among more than 100 Crossrail documents released on Monday was a revelation that Sir Terry had told Mr Khan in July that plans to open on December 9 were at “high risk” of not being met.

This was a month before the delay was formally announced, raising questions about what Mr Khan knew and when.

In a statement, Mr Khan, who chairs TfL, which owns Crossrail, accused the former leadership of the project of having “painted a far too optimistic picture” of its prospects. “I haven’t hidden my anger and frustration about the Crossrail project being delayed,” he said.

Gareth Bacon, chairman of the Greater London Authority budget and performance committee, said: “This financing package reveals the extent of the shambles that the Crossrail project has become. While Crossrail will one day prove a huge boon to the capital’s economy it is currently a drag and an embarrassment.

The London mayor has appointed KPMG to investigate the cost overruns but the consultancy was auditor to the project until 2015, raising conflict of interest fears.

The National Audit Office is planning to investigate Crossrail, and Mr Khan said that the KPMG reports and minutes of board meetings would all be published in the interests of transparency.

Crossrail was originally estimated at £15.9bn in 2007 but increased to £17.8bn in 2009 before the coalition revised it to £14.8bn.

The latest rescue package will include a £1.3bn loan from government and £100m cash from the Greater London Authority. The government will also loan an additional £750m to TfL for contingencies, which replaces a £350m loan provided by the government in October.

READ  Stocks making the biggest move premarket: AMZN, WMT, M, TGT, GM, CPB & more

The bulk of the money will be repaid through an existing business rates supplement on London corporations as well as the diversion of a “community infrastructure levy” which had previously been earmarked from next year for a new north-south scheme called Crossrail 2. The community infrastructure levy has raised over £500m since 2012.

Ms Kelly said that the interest rate on the £1.3bn loan would be gilts plus 80 basis points.

TfL is already battling a financial crisis caused by disappointing passenger numbers and Mr Khan’s “fares freeze” as well as a decision by the coalition to slash the government grant. Mr Khan will later this week set out various cuts to projects in the city to help fill the financial black hole left by Crossrail’s problems.

Bent Flyvbjerg, professor of major programme management at the University of Oxford’s Saïd Business School, said the project was now 11 per cent over the 2008 estimate of £15.9bn — but still compared favourably with other large-scale rail projects, which on average run 38 per cent over budget.

But Mr Flyvbjerg added that he “was beginning to fear this was just another step in a long line of bad news, instead of their end. I hope I’m wrong, but this is what we have seen with other similar projects”.

“Once you start getting the bad news coming out in dribs and drabs, that is a bad sign,” he said.

“It often means the project leadership has kept bad news to themselves in the hope they would find some solution — or be gone before the news broke — instead of escalating problems immediately to have them solved, which is the better course of action.”

READ  Customers could veto executive pay under Labour proposal

David Leam, director of Infrastructure at London First, a business lobby group, said: “After all the mudslinging, this new funding and financing package must signal the final chapter for Crossrail. It’s vital that all efforts now focus on getting it completed.”

Additional reporting by Josh Spero



READ SOURCE

WHAT YOUR THOUGHTS

Please enter your comment!
Please enter your name here