Government backing for the Docklands Light Railway extension to Thamesmead was the capital’s big win in the budget, even though it wasn’t actually mentioned in Rachel Reeves’s speech.
The green light for the £1.7 billion scheme, which will support up to 25,000 new homes, has been welcomed across the city: by London Councils as “essential for accelerating growth…and supporting the delivery of new housing”; by employers’ group BusinessLDN as a budget “high spot” unlocking “billions of private investment”; and by Sir Sadiq Khan, who called it “a massive vote of confidence” in the capital.
Good news, then, for a city that’s become used to being sidelined by Whitehall in recent years. But where’s the money coming from? The detail remains sketchy, though one thing is clear – Whitehall won’t simply be handing over the cash. Budget documents say the scheme will be substantially funded through Transport for London and City Hall borrowing, albeit with the government “also contributing over the long term”.
A government loan seems the likely way forward, though even with favourable rates compared to commercial borrowing this poses challenges for TfL. It hasn’t maxed out on its credit card, but its current debt stands at almost £14 billion, with the £1.2 billion cost of the Silvertown tunnel, though funded by toll charges, an added balance sheet liability nudging it towards its agreed borrowing limits.
Previous loans, for the Elizabeth line and the Northern line extension to Battersea Power Station, are being repaid through a mix of developer contributions and “tax increment financing” (TIF), capturing Business Rate increases as new building comes forward, rather than drawing on fare or Council Tax revenue. But a similar arrangement has not currently come forward for the DLR.
What about that “long term” government contribution? TfL has already secured £2.2 billion in its four-year spending review deal, but that is earmarked mainly for renewals: new signalling, new Piccadilly line and DLR trains and trams, as well as extra Elizabeth line trains. More cash would have to be additional to that agreement. The budget papers are non-committal, saying simply that the government “will continue to work with London to finalise funding details”.
Significant uncertainty then. But if all goes to plan, trains to Thamesmead should be running in 2032. Other important schemes though – the £8 billion Bakerloo line upgrade and extension to Lewisham, and the £700 million West London Orbital rail link, both on Khan’s and TfL’s wish lists – remain on the shelf, while that erstwhile priority, Crossrail 2, looks like a far distant prospect.
There may be just a glimmer of hope in the budget papers in the form of a pledge that the government “will continue to work with the GLA [Greater London Authority] to look at options for innovative financing to support the delivery of infrastructure projects in the capital.” One port of call will be BusinessLDN, which has already developed a model for borrowing against future tax increases from housing development. Meanwhile, we wait for the outcome of those Whitehall and City Hall discussions.
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