Evaluation of Value Capture Mechanisms as a Funding Source for Urban Transport: The Case of London's Crossrail

Abstract

Crossrail is a new project that will develop a high frequency rail corridor across London. Once completed in 2018-19, the link is expected to add 10% to London's rail capacity and substantially reduce congestion on the Tube, Dockland's Light Railway and National Rail services. The expected cost of the whole project is £14.8 billion, with a total workforce of 14,000 people. Within the financial portfolio of Crossrail, £4.1 billion of the costs will be generated by the Greater London Authority (GLA) through the Business Rate Supplement (BRS), a fiscal method based on Land Value Capture Finance. The objective of this paper is to evaluate the effectiveness of the Business Rate Supplement as a mechanism to capture value accrued from the Crossrail project. After having examined the financial consequences of the BRS, a modified fiscal financial mechanism is proposed, which is estimated to yield a greater financial return on the investment over the duration of the project compared to the government's existing plan (BRS). The proposal consists of two separate taxes combined into one scheme: a modified version of the current BRS, and a Stamp Duty levy. The GLA's BRS scheme and the aforementioned proposal are also evaluated using four main qualitative criteria: efficiency, equity, sustainability, and feasibility.