Lead off question - Delays to Crossrail (Supplementary) [5]

Mike Brown MVO (Commissioner, Transport for London):  I will look at this in two different terms, if I may, first of all just going back to the £300 million that I talked about.  That has been something that has been accounted for.  It is something that we have worked on, both in phasing of payments jointly with the DfT ‑ the majority of the payments this financial year come from the DfT ‑ and with provision being made in the next financial year from TfL finances for any additional spend.  As I have just said in response to Assembly Member Pidgeon, we do not have certainty as to any additional costs that may emerge yet because that is very programme dependent, which is the work that continues.  Then, of course, we will be making provision within our own plans, subject to the discussions I am having this afternoon with the Treasury and with the DfT, to work out how we come to an arrangement around those costs.

In terms of revenue, the other key area, it is worth saying that the revenue implications for the first year ‑ the net effect for 2018/19 ‑ is in the region of £20 million.  I consider that to be manageable within the TfL budget.  The reason it is £20 million is because the major movement for the opening of the tunnel section was people moving from using other of TfL’s services, particularly the Jubilee and the Central lines, to Crossrail rather than new journeys being created.  Clearly if there were to be some further challenges to the full stage 5 opening, as Simon referred to ‑ the through‑running from both east and west directly into the tunnel ‑ there will be impacts that would need to be addressed as a result of that.  That is something that we will, of course, have the opportunity to properly assess and review within the context of our Business Plan and, most importantly, as we get greater clarity as to the revised schedule going forward. 

Gareth Bacon AM:  Thank you.  The £20 million you just referred to, is that a loss of what was projected to be net profit?

Mike Brown MVO (Commissioner, Transport for London):  It is not profit.  It was additional revenues that were in the Business Plan.

Gareth Bacon AM:  In the Business Plan it suggests an income stream of £151 million.  I am assuming there would be an operating cost, which is why I have asked you if that was a net profit that you are losing.

Mike Brown MVO (Commissioner, Transport for London):  The £151 million was a revenue line that was the overall increase, including for the already‑operating services to the east of London that we call TfL Rail.  Our forecast projections have held up very strongly in terms that what we expected is being delivered.  Incidentally, for a point of context, the reliability of those railways is very high.  In the last period that was the best performing railway in the country.  The revenue projections are solid from that perspective.  The £20 million is a net figure of revenue.  It is the one bit of new journeys.  Clearly the cost issue is a separate one because of the way the funding works with Crossrail and the allocation of funding to it.

Gareth Bacon AM:  The £151 million in the Business Plan for 2018/19, is that for the whole of the financial year or is it just for the time that Crossrail was due to be open, i.e. December through to the end of March?

Mike Brown MVO (Commissioner, Transport for London):  That is for the whole of the financial year, which is through to the end of March.  It includes the TfL Rail bits as well, just for the avoidance of doubt.

Gareth Bacon AM:  That is what I am trying to unpick.  You are saying that the £20 million, which you are indicating you will not now receive, is the only part of that which is related to the Crossrail delay?

Mike Brown MVO (Commissioner, Transport for London):  That is correct.

Gareth Bacon AM:  One of the things that would happen with any major infrastructure project like this is that it would take time for the various different journeys to change, because obviously significantly people may move from the Central line to Crossrail and so on.  It will obviously take time for people to change their habits and their journey patterns.  The delay is going to delay that, is it not?  Have you done any modelling on projecting what implication that is going to have on the Business Plan forecast going forward from 2018/19 onwards?

Mike Brown MVO (Commissioner, Transport for London):  That is precisely the work we are now doing.  You are absolutely right to raise it.  That will be an important part of assessing, once we know the certainty of the programme delivery, particularly stages 4 and 5.  For everybody’s information, stage 4 is the opening of direct services from Shenfield through Liverpool Street directly into the tunnel, with stage 5 being the full opening, which includes services from the west and Heathrow into the tunnel and through services as well.  That is precisely the bit of work we are looking at now.  I cannot give you the categoric number at the moment because clearly as we work through the schedule implications of the change in the Plan that is what will determine the outcome to that point. 

Gareth Bacon AM:  When do you expect to know those figures?

Mike Brown MVO (Commissioner, Transport for London):  That is the work that is going on at the moment.

Gareth Bacon AM:  I know it is the work that is going on.  I am asking when you expect to know.

Mike Brown MVO (Commissioner, Transport for London):  I would expect it as part of the business planning process.  When we bring the Business Plan back, as part of its normal cycle, ultimately through to the Assembly it will be very clear within that timeline, I have no doubt.

Gareth Bacon AM:  The Assembly Budget [and Performance] Committee at the moment, as I am sure you are aware, is investigating the TfL financial situation.  In June [2018] we had the senior Finance Officers from TfL in front of us.  In line with what Assembly Member Pidgeon referred to earlier on, we were given great reassurance that the project was going to be on time, on budget and so on.  Crossrail income is a major part of your plans for getting TfL back into surplus ‑ I think by 2021/22 ‑ from the £1 billion loss you are going to make this year.  What implications are this going to have on that business planning assumption?

Mike Brown MVO (Commissioner, Transport for London):  That is the work we will be doing during the autumn.  I would say that the evidence of our success here is still there.  By the end of this year we are on track to deliver over £630 million a year in operating cost run rate savings.  Over the course of our Business Plan, by 2021/22, this will have increased to £1.2 billion a year.  Of course, that is impacted by this issue with Crossrail and we will have to ascertain what that is.  This is an incredible track record, under the Mayor’s leadership and direction, of real savings being delivered that most private sector businesses would be extremely proud of, as would their shareholders.

Gareth Bacon AM:  Sorry to interrupt you there, Commissioner, because that is fine but is not what we are talking about today.  We are talking about Crossrail.  The reason we are talking about Crossrail today is because the only real game changer in terms of revenue generation, is Crossrail.  You have made a lot of predictions about increasing ridership on every other mode of travel you are responsible for, and that is another separate issue I do not really want to get into today.  The biggest game changer is Crossrail revenue income, which you do not have at the moment and you are expecting to have.  This delay is going to give a severe knock to that, is it not?

Mike Brown MVO (Commissioner, Transport for London):  That is exactly what we need to ascertain during the business planning process.  As I say, that will only become categoric and clear to me when I see the schedule going forward.  The work with the team is to ensure we can still deliver stage 5, the full opening, as quickly as possible.  Whether that is exactly within the current timeline we will have to ascertain given the work that is going on at the moment.  That has always been, as we have always said ‑ Simon Kilonback [Chief Finance Officer, TfL] has said it to this Assembly and its Committees previously ‑ the thing that is a real step change in terms of new journeys being created, with people moving from main line rail services or people who have not made journeys before to travel on Crossrail.  You are quite right; we need to make sure that we hold the end date as closely as possible to its date because that is the thing that has the greatest impact on our revenues going forward.  You are quite right to raise it.

Gareth Bacon AM:  Will you be revising your Business Plan?

Mike Brown MVO (Commissioner, Transport for London):  We will be anyway because we are working through the Business Plan over the course of the next few months and that work is already underway.

Gareth Bacon AM:  That is it for the moment, thank you.