Treasury backs slimline Crossrail

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Alistair Darling is considering radically shrinking Crossrail - the proposed railway linking east and west London - to secure financial backing from the Treasury.

The Secretary of State for Transport is expected to make an official announcement on the go-ahead of Crossrail next week. But sources close to Mr Darling said that one plan under serious consideration involved reducing Crossrail's estimated £10bn project costs to £4bn to £6bn by cutting the length of the route.

It is understood that the Treasury has told the Department for Transport that it will invest £2bn in the project, but this is on condition that it is reduced to a more manageable size.

A further £2bn could come from an increase in London business rates. Ministers are hoping that the private sector will also stump up billions for the project through the Private Finance Initiative.

A slimmed-down Crossrail would run from Paddington to Liverpool Street. Plans to extend it west to Heathrow and east to Stratford and the Isle of Dogs would be shelved.

The move would anger London Mayor Ken Livingstone, who believes that the full Crossrail route would generate £19bn in economic benefits for London. It would also be a blow to Canary Wharf Group. The property company had indicated that it was prepared to contribute to the project, as it would bring huge benefits to the Docklands development.

Construction companies are already positioning themselves to bid for a role in building and running the rail link. Bovis Lend Lease and WS Atkins confirmed that they were interested. London & Continental Railways (LCR), the consortium building the second phase of the Channel Tunnel Rail Link, is also angling for a role.

LCR, whose largest shareholder is US construction company Bechtel, is in talks with the Government about bailing out Eurotunnel. It is understood to have asked for a role in Crossrail as a sweetener. However, a Department for Transport spokesman said: "There is no link between Eurotunnel, LCR and Crossrail."