Crossrail delay: cash flow and psychology

Crossrail delay: cash flow and psychology

As the Crossrail blame game slows to an attritional low-scoring draw, it’s becoming easier to quantify the damage done by the delay to the opening of the service and to identify some lessons to be learned. Last week, Moody’s, the influential credit rating agency, produced its analysis of the financial implications for Transport for London, following Crossrail Ltd’s announcement that the central section of the Elizabeth Line won’t open until somewhere between October 2020 and March 2021.

Moody’s describes TfL as “relatively insulated from the delay’s capital cost” – the price of building everything – which is now £17.6 billion, as agreed with the government last December. But the real problem is that it will be around two years before the Elizabeth Line starts bringing in money from fares.

The Moody’s headline estimate is that that between the financial year’s ending in March 2020 and March 2022 TfL will lose £1 billion in badly-needed income from passengers it had planned for, which is £300-£400 million more than its business plan anticipates. That amounts to about five per cent of its total yield from public transport passengers – its “operating revenue” – during those two years. With passenger numbers on the public transport network stagnating and the continuing impact of Sadiq Khan’s fares freeze, TfL had been depending heavily on this extra income. How can it cope with its non-arrival?

Moody’s highlights accelerating its cost savings programme, saying TfL has done well with this so far, with financial benefits accruing earlier than expected under an efficiency drive demanded by Sadiq Khan (“good but flabby” was his regular characterisation of the organisation during the 2016 election campaign).

Another suggestion is that TfL cancels or delays parts of its capital programme. “This will enable it to use more business rates revenue within its operating budget,” Moody’s says. TfL has already done quite a bit of that, delaying capacity improvements at Camden Town station and the Piccadilly Line signalling upgrade, partly as a result of the problems with Crossrail. However, Moody’s say there are also “a number of other short-term, flexible projects and programmes” it could delay. Watch this space.

Meanwhile, allocating fault for the sheer size of the projected overrun and the timing of its acknowledgement remains an imperfect science. Sir Terry Morgan, Crossrail’s jettisoned chairman, and TfL chief Mike Brown have flatly contradicted each other about who told who about what they knew about the problems when. The latter has offered a firm defence against London Assembly transport committee criticisms that he watered down bad news in his briefings for the Mayor and called into the question the arms-length relationship between Crossrail Ltd – a private company – TfL which owns it and its co-sponsor, the Department for Transport.

Was there a political failure, as Assembly Conservatives have asserted? Speaking to people who’ve had some input into the project, there is a bit of a feeling that City Hall’s grip wasn’t as tight as it might have been, or would have been in the good years of Ken Livingstone. That said, warnings were being publicly sounded from early 2018 and even before that. Lord knows, it’s nothing new for major rail schemes to run late, be re-jigged and cot more than they were meant to – the fortieth anniversary of the Jubilee Line opening is a reminder of that. But with so much falling so far short, the mystery is why the earliest anyone even claims to have known the December green light had turned red is last July.

Did no one recognise that mid-December was a non-starter until halfway through the year or was it more a case of various someones not seeing the picture or perhaps not really wanting to? This is speculation, but it has one foot in the reality of human nature. Who wants to face the unhappy fact that something so important they been working on for so long just isn’t going to happen on schedule? Who wants to be the first to put their hand up? Who wants to be the one who gives the bad news to their boss so that he or she can give it to their boss and so on up to the highest levels? Don’t all rush at once.

This might seem an unsatisfactory explanation and it is certainly an unsatisfying one. But maybe something of the kind needs to be taken into account if and when the moral of  Crossrail’s long distance, short notice overrun story is to be taken fully on board.

Categories: Analysis

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