2. Caracterización de la investigación
2.6. Reflexiones finales
Operating costs related to affordable units are projected to total some £120 billion to 2050. On-going capitalised maintenance of the affordable housing stock, comprising PRPs’ existing stock renewals, London boroughs’ existing stock renewals, and the renewal new affordable housing units, is projected to total some £90 billion (£21 billion, £61 billion and £9 billion, respectively).219 Rental income is assumed to cover these costs entirely.220 However, a shortfall in funding related to other capital renewals (the ‘renewals gap’), for investment in energy efficiency, achieving and maintaining ‘Decent Homes’ standards and estate regeneration, is evident. It is assumed that funding comparable to previous ‘Decent Homes’ allocation does not exist to support these costs, leaving a renewals-related funding gap of some £11 billion over the study period.
10.1.3
New construction costs and funding
New construction costs related to affordable units are projected to total some £216 billion over the study period. An estimate of the future capital grant available was made based on the GLA’s historical expenditure, as shown in the National
218
Registered providers’ potential funding of £109bn is leveraged private sector income contingent on the £34bn of public sector capital shown.
219
Please refer to the housing chapter of this report for a complete discussion of projected housing costs.
220
This simplifying assumption does not account for the potential for rental income requirements to outpace inflation or income growth or other market changes over the study period. For boroughs, rental income is represented by Housing Revenue Account (HRA) revenues, which include rental income and government support to cover operating costs.
800 437 216 34 363 120 21 61 9 210 11 17 55 109 £ b ill ion
Affordable Housing Programme, equating to £500 million per annum. A gap in London government housing grant/capital funding – additional to renewals identified above - of £34 billion - will need to be funded from newly committed central government grant, access to new funding streams or access to new capital receipts, e.g. developer contributions or housing sales. This £34 billion would be used to leverage in the order of £109 billion of private capital. In this context, London could benefit from central government agreeing a more long-term and reliable funding stream for housing, similar to that secured by TfL, enabling the Mayor to get a better deal for Londoners and negotiate longer-term agreements with PRPs and boroughs to secure housing needed. Until then, PRPs and boroughs will continue to bid for the short-term pots available and leverage borrowing headroom in the HRA to deliver new affordable homes and to balance this spend between new build and renewals of existing stock.
10.2
Transport funding gap
Across London, a number of agencies, operators and authorities pay for and deliver transport infrastructure and services. These include the DfT, TfL and the boroughs, the Highways Agency, Network Rail, train and bus operators and airport operators.
TfL is responsible for the planning, delivery and day-to-day operation of large parts of London’s public transport system. Its role is to implement the Mayor’s Transport Strategy and manage services across London, for which the Mayor has ultimate responsibility. TfL manages or operates London’s buses, the London Underground, the Docklands Light Railway, London Overground, Croydon Tramlink, London River Services, Victoria Coach Station, the Emirates Air Line, Cycle Hire and the London Transport Museum. As well as running London’s Congestion Charging scheme, it manages a 580km network of main roads (Transport for London Road Network or ‘red routes’), all of the city’s 6,000 traffic lights, and regulates taxis and the private hire trade. TfL funds borough transport plans, with support from GLA. London Boroughs retain a key statutory role in relation to highways.
10.2.1
London government costs and funding
It is estimated that London government, including TfL and the boroughs, face a gap of some £89 billion (before debt service costs and other central overheads). As in the housing sector, this gap relates to capital expenses, including renewals, after eliminating the share of costs likely to be met by the private sector and other public bodies. We also have made assumptions around possible future fares income and the capacity of future central government grant. These are outlined below.
We have assumed that all aviation costs, projected to total some £268 billion, will be covered by the private sector. It is likely that the Thames Estuary Airport could require at least some subsidy, but eliminating aviation costs allows our analysis to focus on more certain future costs as the Davies Commission continues to address questions around the region’s aviation capacity. The funding gap therefore could be considered a “lower bound” in relation to the Estuary airport’s development.
We have also assumed that central government, its agencies and other bodies will continue to provide for the transport infrastructure costs that they have funded up to now. This ‘central government share’, projected to total some £174 billion, includes national rail projects, High Speed 2 and Highways Agency projects. It is assumed that all remaining costs, including TfL project costs and other roads costs, will be addressed by London government.
London government’s share of transport costs in the study period is projected to total some £542 billion. Nearly all of these costs relate to TfL investments with a relatively modest portion going to London borough roads projects.
A core revenue funding stream for TfL is the fare and congestion charging base from both existing and new infrastructure. Using the TfL business plan as a base, we projected existing fares out to 2050 using conservative assumptions. We have assumed that fare growth does not outpace inflation in real terms over the study period. In a later section of this report, we consider possible mechanisms for reducing the gap between current revenues and projected costs, including above- inflation fare growth. We also have made an assessment of the possible fares from new schemes by reference to existing modes.
10.2.2
Operating costs and funding
As shown in Figure 60 below some £273 billion of the £542 billion of London government costs is projected to relate to operating costs. Our analysis of the TfL business plan and of future revenue potential shows that fares could meet
operating expenses and provide a significant contribution to capital investment requirements. Projected costs related to borough road maintenance (excluding those which form part of the TfL Road Network or Borough Principal Road Network, both of which are managed by TfL) are assumed to be ‘unfunded’. In other words, the ‘gap’ identified will need to be funded by re-allocating existing resources, identifying new sources of revenue or accessing new capital receipts. These costs are projected to total some £12 billion over the study period.
Figure 60: Chart showing projected costs, revenues and funding gaps for the transport sector, 2016-2050 (£bn, 2014 prices including 2% pa underlying uplift in construction
982 268 172 542 273 269 77 260 12 88 53 51 £ billio n
costs). Costs are shown in blue, revenues in green and the gap in red. Source: Arup analysis
10.2.3
Capital costs and funding
Capital costs (enhancements and renewals) for TfL projects in the period 2016 – 2050 are projected to total some £269 billion over the study period. Our analysis of the TfL business plan and of future revenue potential shows that fares will more than meet operating expenses. Therefore, we estimate a portion of these costs - some £88 billion - could be met by surplus fare revenue.
Other core sources of revenue funding (£51 billion illustrated above) include the General Grant from central government and TfL’s Business Rates Retention (capturing a proportion of the growth in London’s business rates), both of which we assume remain flat in real terms beyond the business plan period. Both of these revenue streams could vary substantially over the period. In particular, the General Grant, negotiated directly with central government, could be subject to periodic/on-going reductions and uncertainty. The core capital funding stream (£53 billion illustrated above) is the Investment Grant from central government. It is also negotiated directly with central government and could be subject to
periodic/on-going reductions and uncertainty. We have accounted for a period of on-going borrowing as per TfL’s current borrowing levels, although we have not attempted to estimate debt service costs.
The remaining gap identified will most likely need to be funded through structuring of fares and charges, agreement of additional central government grant, new sources of revenue or access to new capital receipts. Transport projects in particular often lead to consequential retail, commercial, and/or housing
developments. There is a growing focus on capturing a share of the value from these developments to provide additional funding for new transport connections. Such developer and third party contributions are already being considered in detail for Crossrail 2 with nearly 45% of funding estimated to be raised in this way.