Surrey Canal Road: The Curious Case of the Disappearing DfT

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The Story So Far…

With construction of the ELL Extension Phase 2 (ELLX2 to its friends) due to begin this autumn, one particular question related to the line is becoming increasingly urgent – will a station be constructed at Surrey Canal Road?

The Surrey Canal Road saga is one that has now dragged on for some time.

Originally the station was not included by TfL as part of ELLX2 because they felt the cost could not be justified. This situation changed, however, when TfL found that they lacked sufficient capital to fund the ELLX2 work. In a move that remains controversial, TfL approached the DfT and requested that £24m earmarked to provide a Victoria – Bellingham service from 2012 onwards (which would replace the expiring South London Line) be allocated instead towards funding ELLX2.

The DfT agreed, but imposed some conditions (this is why Shoreditch High Street is a zone 1 station on the ELL, for example). They also requested that the case for a station at Surrey Canal Road be re-examined, and offered to provide £7m towards the construction of Surrey Canal Road should it go ahead.

For a brief period, therefore, there seemed hope that the station might go ahead, but soon it seemed once again that the station would not appear. TfL turned down the funding offer, concluding – as they explained during Mayor’s Question Time at the beginning of last year – that £7m was insufficient to cover the cost of building the station (which they estimated at about £10m), and they simply didn’t have the capital to meet any excess.

The DfT’s £7m offer thus remained, untaken, on the table until March 2009 when it expired, as did most people’s expectations of seeing a Surrey Canal Road station.

Behind the scenes, however, there was still movement. The DfT indicated both privately and publicly that although the offer had expired, they were still prepared to commit the £7m should an alternate source be found to meet the remaining balance. TfL and the London Borough of Lewisham – for whom the station would be beneficial – therefore began negotiations to see whether an alternate source could be found for the missing £3m. The DfT were party to this process as well, continuing to indicate that they would contribute £7m to the station’s construction costs.

By November 2009 it seemed increasingly likely that a deal of some kind would be reached, although both parties remained tight lipped about what that deal might be.

By December, TfL and Lewisham had reached an agreement in principle that would meet the missing costs. TfL would provide the £3m capital, which Lewisham would effectively pay back by receiving slightly less money from TfL for local transport projects over the next 7 years (full details here).

There were still elements that needed to be worked out, a report presented to Lewisham’s Mayor revealed, such as who would take on the risk of cost overrun, but both parties were happy in principle that these could be worked out.

To the surprise of virtually everyone, a deal had been found – the funding gap would be met and the station constructed.

On the 14th December 2009, the Mayors of London and Lewisham therefore jointly wrote to Lord Adonis, The Secretary of State for Transport and the DfT confirming this state of affairs:

Dear Andrew,

With reference to your letter of 5 October about Surrey Canal Road station, we are writing to update you on progress.

Our officers have now met your officials on two occasions to discuss the nature of the property developments around the station and the technical detail of the value for money assessment that we have jointly undertaken. We understand that the matters arising from these meetings have been satisfactorily dealt with.

Therefore, we would like to request formally that you approve the additional contribution of £7 million for the station to be paid in phases during the station’s construction during 2010/11 and 2011/12 financial years.

The London Borough of Lewisham plans to bridge the residual funding requirement for the construction of Surrey Canal Road station by using a £3m advance of its future Local Implementation Plan funding allocations from TfL. Formal agreement for this will be proposed to a meeting of Lewisham’s Mayor and Cabinet on 20 January 2010.

As a result, we are confident that the means exist to open the station during 2012, subject to there being no unforeseen difficulties with the site or other matters that would raise costs.

We understand that your position is that there should be no further contribution from the Department should costs increase, and we will need to consider this as part of our formal decision to proceed how the associated risks should be managed.

Yours ever,

[The Mayors of London and Lewisham]

Surrey Canal Road, therefore, now looked reasonably likely to happen. All that was needed to progress the project was confirmation of funding commitment from the DfT…

…who, it seems, promptly stopped answering the phone.

The Lady Vanishes

In the report presented (and provisionally approved) by Lewisham in January, it was indicated that both TfL and Lewisham hoped to have all the details worked out by the end of March when a final report would be presented to the Mayor of Lewisham for sign-off.

When March came round, however, the issue failed to appear on any of the Mayor’s Cabinet meetings for that month. This was not necessarily cause for alarm – and indeed Lewisham themselves later confirmed that it had been moved to April’s meeting – but in the meantime worrying noises begin to appear elsewhere suggesting that TfL and Lewisham may have been having some problems with the DfT.

The first of these came in Peter Hendy’s report to the Board in March:

A commitment from the DfT for an additional £7m funding contribution towards a new station at Surrey Canal Road station has still not yet been received, although a contribution from the London Borough of Lewisham of £3m as part of its LIPs has been agreed. However TfL understands the Minister of State for Transport has concerns that the case for the station is overly reliant on a single planning application, which has not yet been submitted for approval by the Developer to the London Borough of Lewisham. The DfT has also questioned the station’s demand projections. These issues will be further discussed between the DfT, TfL and the London Borough of Lewisham. The timing of DfT’s contribution is now critical to enable more than passive provision.

This understandably set alarm bells ringing in certain quarters of South London, and Simon Hughes took the issue directly to the DfT in parliament on the 29th:

Simon Hughes: To ask the Minister of State, Department for Transport whether his Department has informed (a) Transport for London and (b) Lewisham Council that it will contribute to the funding of a new station at Surrey Canal Road on the extended East London Line.

Mr. Khan [on behalf of the DfT]: The business case for the proposed new station at Surrey Canal Road was submitted by Transport for London and Lewisham council late last year. The Department for Transport had a number of concerns with the business case provided and officials have been discussing these issues with both parties.

Simon Hughes: To ask the Minister of State, Department for Transport what assessment his Department has made of the demand projections made by Transport for London for the proposed new station at Surrey Canal Road on the extended East London Line.

Mr. Khan: The business case and the demand projections for the proposed new station at Surrey Canal road were provided by Transport for London. Some concerns have been noted with regard to the projected demand levels at the station when compared with other neighbouring stations.

The specific concern was that projected demand levels at the station were similar to or higher than other stations in established residential and shopping locations with significantly higher levels of train service, such as New Cross Gate and Peckham Rye.

The DfT, it appeared, were indicating that they were unsatisfied by the business case, and that they would not provide a final funding commitment until they were. This was a major problem given the urgent need to begin design of the line and stations, as the cost (and disruption) of putting the station in place after the line had been completed would obviously be prohibitive.

Caroline Pidgeon also began to raise the issue:

Despite predictions that a new station would be used by 1.3 million passengers a year and help bring significant investment to the area it seems the Department of Transport are now dithering over whether to support this much needed new station. Without a station at Surrey Canal Road many of the benefits of the second phase of the East London Line extension will be denied to many residents in North Lewisham.

It is time the Department for Transport clarified their position once and for all. Does their previous pledge to contribute £7 million for this much needed station still stand?

The Final Report

Thus with all the above now hinting at a DfT withdrawal, yesterday’s Lewisham Cabinet Meeting became a key event in establishing precisely what the status of the station is – and it didn’t disappoint.

Importantly, there were positive outcomes (more on those below) but both the verbal and written report also highlighted that DfT support does indeed appear to have been somewhat lacking.

The written report confirms the above – that an agreement was reached and presented to the DfT in December for approval. Since then, however:

DfT had been expected to take a decision on whether to release the £7m contribution set aside for the station in December or January, but this has not been taken, despite detailed demand analysis by TfL based on the planned development in north Lewisham which will substantially increase demand for the station.

The report makes clear the problems this has caused:

Had this approval been received when expected, TfL would have been able to commence detailed design work on the station and to refine the cost figure. This work is essential in order to understand and allocate risk between TfL and Lewisham in the proposed funding package agreed in principle in January.

Lewisham has been working with Renewal and Millwall FC on comprehensive regeneration of the area around the proposed Surrey Canal Road station. This is a major regeneration scheme, and is one of the reasons why officers have pressed for approval of Surrey Canal Road station. Because of the tight timescale for the delivery of the East London Line phase 2 TfL and their consultants Mott Macdonald are proceeding with the detailed design of the railway, which includes some elements to facilitate the station, should it be approved.

Officers have looked at the proposed design of the railway and have identified several issues which need to be addressed, whether or not the station is approved, to ensure that the railway is fully integrated with the surrounding area. These are principally about east-west pedestrian movements. Part of the problem is that substantive work on the station design has not started and cannot start until funding is identified.

Officers had, hoped that DfT funding would have been in place by now.

So Where Does That Leave Us?

The implications of the above, and the current situation surrounding the station are blunty laid out in the report:

Because the DfT funding has not been resolved, it has been impossible to make progress on the terms of an agreement with TfL in the absence of greater certainty about the costs of the station which could range between £7m and £10m.

If DfT approve their funding, TfL will need to design the station to an extremely tight timetable to catch up with the schedule for construction of the East London Line Phase 2. It will be necessary to reach timely agreement with TfL on Lewisham’s contribution and the terms of funding.

Because of the local elections it is very likely that the timescale for obtaining a Mayor and Cabinet decision would be incompatible with TfL’s design and procurement process and could jeopardise the station being built.

TfL and Lewisham therefore face a tricky situation – they cannot build the station without the DfT funding, but work also has to begin now, or the station will become too expensive to build at all.

This is a situation that Lewisham’s Mayor and Cabinet seemed well aware of, as well as the added implication that a change of government will mean big changes at the DfT. Their frustration was clear.

One positive did, however, emerge from the meeting. Not only did the Mayor and Cabinet sign off on all the arrangements that have been concluded, but Lewisham also took a rather brave step – they have agreed to commit £200k to fund the design work even without the required DfT approval.

This is a major step forward – it means that Mott Macdonald can at least begin designing the station – but it is also a major gamble. As the report again makes clear:

In the absence of any final commitment from DfT it is possible that the proposed station may not be built. Anything spent towards the station before such commitment may therefore turn out to be wasted. However, if design work is not undertaken very soon it may become impossible to add the station to the line at this stage. Constructing a new station after the line goes live would be significantly more expensive than the current
estimate of a maximum of £10m.

Members are therefore placed in a difficult dilemma. Spending money on design works now may prove to be a waste of up to £200,000 which could have otherwise been spent on the normal LIP programme of infrastructure works.

It’s a bold action to take, and one that keeps Surrey Canal Road on the table, at least for now.

What is clear, however, is that as things stand the problem is no longer with Lewisham or TfL but with the DfT (ironically the people who put the station on the table in the first place).

Surrey Canal Road has found its missing £3m, but somehow it appears to have lost £7m in the process.

Written by John Bull