Billions of pounds to help pay for extensions to London’s Tube network could be unlocked if the Government granted Sir Sadiq Khan new fundraising powers, according to a recent report from BusinessLDN. The major business group is urging ministers to allow the mayor to raise funds for key projects, including the Bakerloo line extension to south-east London and the Docklands Light Railway (DLR) extension to Thamesmead, by "borrowing against" the future economic benefits these schemes are expected to generate.
BusinessLDN highlights how improvements to transport, such as the opening of the Elizabeth line in 2022, have historically boosted property values and enhanced areas’ attractiveness for businesses. Their report advocates for the Government to enable Transport for London (TfL), under Khan's leadership, to borrow money aimed at financing Tube and railway extensions. The repayment would be based on anticipated future local tax revenues generated by the enhanced economic activity surrounding these developments.
The proposed funding mechanism, known as ‘tax increment financing,’ would involve the mayor collecting a proportion of locally paid residential taxes, such as Stamp Duty Land Tax, as well as the additional business rates resulting from increased property values. This approach is modeled after similar financing strategies employed previously, such as for the Northern line extension to Battersea Power Station.
According to BusinessLDN’s projections, implementing this mechanism could generate over £4.5 billion over the next 25 years for three significant projects. Specifically, the Bakerloo line extension could potentially raise up to £2.2 billion, with the DLR extension estimated to bring in around £1.5 billion. An anticipated £1 billion could be allocated for the West London Orbital scheme, which proposes extending the London Overground network from Hounslow to Hendon.
John Dickie, Chief Executive of BusinessLDN, emphasized the necessity of investing in transport to spur productivity and broader economic growth. "Against a backdrop of stretched public finances, the Government needs to explore innovative approaches to commence these projects. Allowing local governments to borrow against future tax revenues is a sensible step to kickstart the funding process," he noted.
The sentiment resonates deeply within transport planning circles, as this model could reignite momentum for much-needed infrastructure enhancements, especially considering the pressing demands on London’s transport network. Dickie added, "This model has the potential to be applied across the UK, helping to get key projects off the drawing board and unlocking new homes, creating skilled jobs, and fostering economic growth."
A spokesperson for TfL welcomed the report, noting it brings to light various innovative funding possibilities. They stated, "This report demonstrates how wider funding opportunities can facilitate transport schemes, which would not only benefit local communities but also support the broader UK economy." The spokesperson hinted at the need for collaboration with various Government bodies to refine these funding options, indicating optimism for future discussions.
These discussions come at a time when London’s transport infrastructure is under immense pressure. With growing populations and increasing demand for sustainable transport options, extending the Tube network could play a pivotal role in addressing these challenges. By utilizing innovative funding strategies, the city hopes to meet its transportation needs without placing excessive strain on public finances.
With the Government yet to respond to the report, the proposal finds itself at a crossroads. The success of these extensions not only hinges on the availability of funds but also on the political willingness to adopt new funding paradigms. Observers note this is not just about improving travel times but about fostering economic resilience and urban development across the capital.
Therefore, the stakes are high as BusinessLDN and other stakeholders urge the Government to act decisively. The prospect of financial empowerment for local authorities—enabling them to capitalize on the economic benefits of transport projects—could turn theoretical plans for Tube extensions and enhancements from mere aspirations to tangible realities.
The outcome of this proposal could well dictate the future of how London manages its transport infrastructure, the economic vitality of its neighborhoods, and the overall quality of life for its residents. The push for granting Sadiq Khan these new powers reflects broader trends toward decentralization and localized decision-making within urban planning. The road to expanded and improved public transport is long, but with innovative strategies like tax increment financing, it could be traveling on the fast track to realization.