As London grows inexorably toward 10 million residents by 2025, we not only have a housing crisis, we have a connectivity crisis. Crossrail, or the Elizabeth line to give it its proper name, will help. By the end of 2019, it will carry half a million passengers a day and it will be full from day one.

Steve Norris

But the line on its own is not enough. Already, countless thousands of commuters travel huge distances to access jobs in the capital. London’s travel-to-work area not only reaches Brighton, Bournemouth, Ipswich and Bristol but also Grantham and even Newark.

So next on the wish list is Crossrail 2. The current plan for the line will certainly ease congestion on the South East transport network.

Estimates are that it will cut chronic overcrowding on some tube and rail services by up to 30% as well as reduce journey times.

But - and it’s a big but - it is very expensive. The latest estimate is in excess of £30bn and for that the Treasury is not unreasonably setting a series of tests to underpin its value for money.

Serious compromises

The project has to show how it could create 200,000 new homes and a similar number of jobs. To do so will mean serious compromises on the Green Belt and on strategic industrial land designation.

The line of route is not yet optimal. Rather than go from Victoria to Clapham Junction via the King’s Road, the line will need to go via Battersea Power Station to link with the Northern line extension. There is a case for it linking to Stansted to the north and perhaps even Gatwick to the south. Not all of the proposed extensions look viable.

Crossrail (Elizabeth line) train

But the big question hanging over all of this is quite simple: who pays? When, as transport minister, I pushed through the Jubilee line extension, the only landowner that contributed to the cost was Olympia & York, then owners of Canary Wharf. Every other landowner got the huge uplift in value for nothing.

Or to put it another less comfortable way, hard-pressed taxpayers from way outside London who got no benefit whatever from the line paid for massive profits in the pockets of already wealthy investors.

Don Riley said it all in 2006. “As the millennium was dawning, a miracle happened. The government returned every penny that I had paid in taxes over the previous 40 years. So for four decades I had lived tax free - and I had not dodged the taxman! How was this possible? I ‘confessed’ in [my book] Taken for a Ride: Trains, Taxpayers and the Treasury.

“Taxpayers generously funded the extension to the Jubilee line, one of London’s Underground lines. Two of the stations were located close to office properties that I own. Those two stations raised the value of my properties by more than all the taxes that I had paid into the public’s coffers over the previous 40 years.”

The Elizabeth line hardly did much better. The current owners of Heathrow Airport and Canary Wharf coughed up for obvious reasons but most property owners, as distinct from occupiers, paid diddly squat.

Get more of the cost for Crossrail 2 from owners, not occupiers - they are the ones that benefit. Call it ‘land value capture’

Two new sources of funding were used. The business rate supplement was paid by many occupier businesses that could never hope to benefit and the community infrastructure levy (CIL) paid by developers was of course, if anything, a disincentive to development.

Once again, the majority of the cost falls to taxpayers. And once again, property owners get the big benefit.

Using a business rate supplement and a CIL for Crossrail 2 might raise around 20% of the cost and at the same time suffer the disadvantages I have outlined.

‘Land value capture’

There is only one conclusion we can draw from all this. A way has to be found to get more of the cost from owners, not occupiers, because they are the ones who get the benefit. Call it ‘land value capture’.

In February, a report to London’s mayor estimated that eight London projects costing £36bn could produce value uplifts of around £87bn.

Who would not pay a small proportion of the uplift in value of their asset if their contribution enabled that uplift to happen?

This is not a normal tax. It is an opportunity to earn a big dividend for a modest investment. Over the next few years we have to find a way to translate this obvious logic into a workable mechanism. Only once we do this will the Treasury really open the coffers and make Crossrail 2 a reality.

Steve Norris is chairman of Soho Estates and BNP Paribas Real Estate