Lewisham to Fund Surrey Canal Road


Lewisham Council have agreed, in principle, to provide the missing funding needed to complete Surrey Canal Road station.

TfL had estimated the cost of completing the station at £10m, but claimed that they were unable to budget for that expenditure themselves. The DfT had agreed to put £7m towards the stations construction, but that still left a gap of £3m to be filled from elsewhere.

TfL, the DfT and Lewisham appear to have been in negotiations since November over the possibility of the Borough picking up the cheque for the remaining amount. Sources indicate that Transport Commissioner Peter Hendy, acting on behalf of TfL, wrote to Lewisham Council to indicate that TfL would be prepared to effectively provide an “interest-free loan” to meet the up-front cost of completing the station, if the Borough would agree to pay back the money in installments.

After negotiations, it is believed that the two parties have agreed in principle to accomplish this through the garnishing of Lewisham’s Local Implementation Plan (LIP) Payments – the money that TfL provide the boroughs with each year to be spent on local transport infrastructure.

Based on the recently updated LIP formula, Lewisham’s annual LIP funding is likely to increase from £2.5m this year to £2.9m from 2011/12 onwards. The Borough has thus agreed that it will forego up to £0.5m of that payment each year to “top up” the station’s budget until 2017/18, or until the excess cost of completing the station has been met.

As the station was a key reason for Lewisham’s initial support for Phase 2 of the ELL Extension, and because building the station after-the-fact would see the construction cost increase further, the Borough have decided that the above financial arrangement would be a valid use of LIP funds.

Although this deal has been agreed in principle by the Borough, there are a few things that still need to be resolved before it can be finally rubber stamped.

Firstly, TfL have indicated that financial authority will need to be secured for the station from its Finance Committee and then the Board, on the basis that it is an increment to the existing ELL2 project. This is not anticipated to be a problem.

What will need to be resolved, however, is the issue of risk. TfL’s estimate of £10m for the station is conservative, and an estimate that has been backed up by Lewisham’s own assessors. The responsibility for the risk of overrun costs, however, needs to allocated. The DfT have indicated that their £7m contribution is contingent on the Department having no risk responsibility, which means that either (or both) TfL and Lewisham will have to be responsible. Similarly, the financial agreement will need to be rubber-stamped before final design begins on the ELLX2 in May. An agreement will, therefore, need to be reached on what contribution Lewisham would make to design costs incurred by TfL if the station’s cost was determined to have escalated at this point and the two parties thus agreed to abandon it.

Overall, however, it seems an agreement on the station is now likely to be reached, with the final financial arrangement signed off in March.

Thanks to Anonymous for the spot.

Written by John Bull
John Bull is the Editor of London Reconnections. A transport journalist and historian, his writing often focuses on the political or strategic challenges facing London's transport network and beyond.