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Volume 696: debated on Monday 26 November 2007

My right honourable friend the Secretary of State for Transport (Ruth Kelly) has made the following Ministerial Statement.

I am today placing in the House Library a copy of the heads of terms for Crossrail that has been agreed between the Department for Transport and Transport for London. Having passed through the necessary approval processes, this document has now been signed and is being released into the public domain accordingly.

The heads of terms details the agreements between DfT and TfL that underpinned last month's announcement on the funding of Crossrail. It sets out, with only those redactions necessary to prevent harm to commercial interests, the agreements that have been reached between DfT and TfL on the future funding and governance of the Crossrail project. I have also put in the Library a shorter explanatory note for the heads of terms—this sets out the main points, but should not by itself be treated as comprehensive.

As the Chancellor explained in his Pre-Budget Report, DfT will contribute more than £5 billion in grants to the cost of the project. It will additionally be responsible for procuring contributions from the City Corporation and BAA. In total, DfT will be responsible for securing funding for Crossrail of £5.6 billion.

The Mayor, through TfL and GLA, will be responsible for total funding of up to £7.7 billion. He has indicated that he would raise this from a combination of debt raised on the back of a new levy on national non-domestic rates in London, TfL prudential borrowing, developer contributions along the Crossrail route and other sources. A letter from the Mayor setting out how he envisages doing so is also being placed in the House Library. For TfL to raise this funding, there will need to be changes to existing legislation—both to allow the NNDR levy and to facilitate the planned contribution from developers through a new planning charge. As CLG Ministers have already announced, these changes will be brought forward in due course.

DfT and TfL will remain as co-sponsors of the Crossrail project, jointly specifying the outputs that the project is expected to deliver. This reflects the very substantial financial contributions that both will make. A new joint high-level sponsor board will be established between DfT and TfL to act as the single client to supervise CLRL's delivery of the sponsors' requirements for Crossrail.

The Crossrail delivery company, Cross London Rail Links, will also be restructured. It will become a 100 per cent owned TfL subsidiary, but one with the level of autonomy necessary if it is to focus solely on the delivery of the Crossrail project, in line with the sponsors' requirements. The successful delivery of the Channel Tunnel Rail Link has demonstrated the importance of this single focus. Importantly, CLRL's board will include a majority of non-executive directors, bringing with them added experience of how best to manage risk on projects of this scale.

As the heads of terms set out, the current intention is that TfL should be responsible for procuring the Crossrail rail services, but DfT will be closely involved in detailed service and timetable planning so as to ensure that proper account is given to interests both inside and outside of London.

DfT will also retain significant rights during construction, including the right to consent to the identity of any new chairman of CLRL, to nominate a non-executive director, and to appoint a project representative to monitor delivery of the project. These rights are similar to those that DfT had on the successful delivery of the Channel Tunnel Rail Link.

We are confident that the identified capital budget for the project of £15.9 billion will be sufficient. Ultimately, however, if TfL's ability to take risk on Crossrail should be exhausted or if it should default on its agreements with DfT more widely, then DfT will be able to take CLRL back into its direct ownership.

Over the coming months, DfT, TfL and CLRL will work to turn the heads of terms into full and binding agreements, with the aim of having these in place by the time that the Crossrail Bill achieves Royal Assent. This should allow construction to begin in earnest in 2010, with the first services following in 2017.