All Recommendations

Improving connectivity between the cities of the North will not be sufficient to create the northern powerhouse, but is necessary. Transformations in transport connectivity should form part of a broader strategy incorporating improvements in education, workforce training, research and innovation, spatial planning and wider infrastructure investment.

Following the submission of a revised business case and agreement on the conditions above, the aim should be for a hybrid bill to be submitted by autumn 2019 – the first step towards the railway opening in 2033.

• Submission of a bill in 2019 would allow significant progress to be made on the passage of a bill before the end of this parliament.
• Completion of the project in 2033 would allow the project to open in time for the planned arrival of HS2 phase 2 at Euston.

The opportunity should be taken to maximise private sector involvement in the development and funding of stations and their surrounding areas.
TfL and DfT should leverage private sector capital and expertise to develop selected Crossrail 2 stations, including both the stations themselves and the surrounding land. Development could also be supported by land purchase powers and the ability to assemble sites.

TfL and DfT in conjunction with other government departments and relevant bodies, should use the next stage of development to set out a clear, transformative plan to turn the proposed 200,000 homes into a reality.

Strong measures to maximise the new housing enabled by the scheme should be included in the ‘London deal for Crossrail 2’–this could include the establishment of one or more development corporations to lead the masterplanning and delivery of new housing and urban realm provision, and revised planning guidance for the whole route. These measures should be considered as a potential model for improving housing deliverymore widely.
For housing provision to be a success across the whole route, the London deal for Crossrail 2 will need to have buy-in from the GLA and London boroughs along the route as well as counties and boroughs outside ofLondon which benefit from the new line. All parties will need to ensure the housing unlocked by Crossrail 2 is sustainable and meets the needs of Londoners and those in commuter regions around London.

A ‘London deal for Crossrail 2’ funding agreement, through which London contributes more than half the costs of the scheme and which includes substantial measures to realise the full housing benefits, should be agreed ahead of hybrid bill submission.
It is vital that a funding package for Crossrail 2 is developed which strikes a fair balance between the contributions made by London taxpayers and businesses and by central government. This should build on the work already undertaken by TfL, which indicated that around half the cost of the project could be funded from London sources.
The government should work with TfL and GLA to explore new funding options, which could include consideration of further devolution. However, even without such devolution, HM Treasury should be in a position to recoup significant receipts from the added Gross Value Added (GVA) benefits and the rising value of property in London.

A London deal for Crossrail 2 will need to cover both the funding of the project and the planning measures required to deliver Crossrail 2’s benefits.

In developing the business case, it is crucial that TfL and DfT identify clear proposals to maximise its benefits and increase deliverability. The costs of Crossrail 2 are high and therefore every opportunity should be taken to improve its affordability.

The updated case should include detailed options to reduce and phase the costs of the scheme. The most promising option identified to enhance affordability would be to delay the construction of the northwestern branch to New Southgate. This could reduce the costs of the initial scheme in the 2020s by around £4 billion. More work should also be done on the costs and benefits of individual central London stations.
If construction of the north-western branch is delayed, this would also provide the opportunity to consider the case for an eastern branch from Hackney as an alternative.

Sufficient development funds should be released in order for TfL and DfT to submit a revised business case for Crossrail 2 by March 2017 and aim to introduce a hybrid bill by autumn 2019. The revised business case should include developed plans on costs, funding, housing and stations. TfL estimates the overall development cost at c.£160m, to which TfL should be expected to make a reasonable contribution.

Crossrail 2 should be at the heart of the new London Plan, alongside existing commitments to upgrades and other pieces of new infrastructure. Crossrail 2 should not, subject to affordability, prevent the development of other high value schemes, particularly where alternative funding mechanisms are available.

• London must continue to plan strategically for the period 2030-2050 through the next iteration of the London Plan. Crossrail 2 should be at the heart of this strategy and TfL’s wider programme of smaller scale interventions on the national rail, road, Underground and cycling networks in London should be integrated with it to complement and enhance its benefits.
• The London Plan should also include a detailed examination of the scope to deliver other strategic projects, such as further east London river crossings and the Bakerloo line extension, through alternative financing mechanisms. This should build on the precedents from the Silvertown Crossing and Northern line extension to Battersea/Nine Elms.

Where upgrades to our networks are needed Ofgem should continue its work in encouraging network companies to make long term strategic decisions. Whilst this does increase the risk of stranded assets, the Commission believes that if there is a potential net gain to future consumers then this approach may be justified. If network owners are not best placed to manage this risk, they should work with third parties to help facilitate these investments.

Enabling the transition to more actively managed local networks should be a government priority. By Spring 2017 DECC and Ofgem should consult and set out how and under what timeframe this transition should best take place.

The System Operator must create new markets that will allow open competition for the services it procures and ensure it keeps pace with the network it oversees.
The creation of an entirely independent System Operator should not be treated as an immediate priority but should be kept under review in light of progress towards strengthening National Grid’s independence.
Ofgem should consider how it encourages the System Operator to develop new markets to provide ancillary services which allow new technologies to participate more easily. The long term goal must be for a more strategic and transparent approach to the procurement of ancillary services and more cost-reflective charging.

The UK should make full use of demand flexibility by improving regulation, informing the public of its benefits it can provide and piloting business models:

• Ofgem should start an immediate review of the regulations and commercial arrangements surrounding demand flexibility with a focus on making participation easier and clarifying the role of aggregators; this should be complete by Spring 2017
• DECC should make future changes to the capacity market to reduce the costs and barriers to entry for demand flexibility
• DECC, Ofgem and National Grid should ensure that large users and opinion formers are aware of the money saving opportunities that demand flexibility can offer and encourage more industrial and commercial consumers to take part.
• pilots focusing on business models which make demand flexibility easy and attractive to consumers should be established and fully evaluated. Government should demonstrate best practice by investigating the scope for demand flexibility on its estate.

Two steps are required:

1. DECC and Ofgem should review the regulatory and legal status of storage and remove outdated barriers to enable storage to compete fairly with generation across the various interlinked electricity markets. The reforms should be proposed by Spring 2017 and implemented as soon as possible thereafter
2. Network owners should be incentivised by Ofgem to use storage (and other sources of flexibility) to improve the capacity and resilience of their networks as part of a more actively managed system.

Interconnection investment decisions should continue to sit primarily with the private sector, but there is a role for government-led diplomacy to unlock those markets that can offer potentially large benefits to UK consumers. The government should therefore focus its efforts on exploring increased interconnection to markets with abundant sources of flexible low carbon electricity, such as Norway and Iceland.