Addressing the Liberal Democrats' annual conference in Brighton, the Chief Secretary to the Treasury said that by using the scheme to guarantee finance, the Government would be able to ensure that rolling stock for the "biggest infrastructure project in Europe right now" was delivered on time. The Crossrail route, which runs between Heathrow and Canary Wharf via new tunnels under central London, is due to open in 2019.
"Right now, difficulties raising the necessary private funding in the market could delay their delivery," he said. "[The Crossrail project] will be the first of many across Britain, I am sure. We have rebuilt the confidence in this nation's ability to pay its way in the world; we can now put that credibility to work for the British people."
The 'UK Guarantee' scheme, announced by the Treasury in July, was designed to enable major infrastructure projects which are struggling to obtain funding to take advantage of the Government's "hard-won fiscal credibility". It will be open to financially credible, nationally significant infrastructure projects, provided that work can begin on those projects within 12 months of the guarantee being given.
"In these difficult times, any announcement of concrete support to infrastructure must be welcomed," said infrastructure law expert Jon Hart of Pinsent Masons, the law firm behind Out-Law.com. "The announcement made today seems a step in the right direction and a way of mitigating some of the delays and difficulties that arose in getting the [Intercity Express Programme] rolling stock over the line. That said, it would be interesting to understand how this 'ticks the box' in respect of being a 'shovel-ready' project."
The Government has wide discretion over the type of guarantee it can grant to each project in terms of scale, timing, risk exposure and relationship to the project. As part of its July announcement, it said that the guarantee could cover any of the main types of project risk including construction, performance or revenue risk.
Details of the proposed guarantee for the proposed project are yet to emerge, however the scheme could reduce the cost of borrowing on the private finance element of the project funding. The Government has already committed to providing direct funding amounting to around a third of the cost of the project. However, it will only be able to formally award guarantees once the Infrastructure (Financial Assistance) Bill, which enshrines the scheme in legislation, has been passed. The Bill is due to proceed to committee stage in the House of Lords on 15 October.
The Crossrail tender is for the design, manufacture, finance and servicing of around 60 new trains, which will operate on the existing UK rail network from May 2017 before being put into service on a new east to west route across London. The successful bidder will also be responsible for the construction of a new depot at Old Oak Common in west London. Four companies – Bombardier, Construcciones y Auxiliar de Ferrocarriles, Hitachi and Siemens – have been invited to bid for the contract, which will be awarded in Spring 2014.