London's Bakerloo line extension gets Budget boost as mayors gain powers to keep more local tax revenue

Chancellor John Healey used the Budget presented on October 28 to hand more tax powers to local and regional government, and named London's Bakerloo line extension as a project that could benefit. The long-delayed extension finally has a possible route to funding that does not rely on asking Whitehall each time — but the Budget itself is not approval to build.

What the Budget gives

Under the roadmap, local and regional government are intended to retain 100% of business rates income before the end of the decade, with mayors receiving 20% of business rates from 2027 and a share of income tax receipts from 2028, replacing central grants. The package includes an initial £285 million pot to kick-start local infrastructure funding, plus mechanisms letting mayors borrow against future tax receipts — powers that previously tended to be limited to smaller local projects, or, as with Crossrail and the Elizabeth line, required an Act of Parliament. London will also be able to set up a successor to the Elizabeth line Business Rates Supplement, and fund the Euston Underground station upgrade through a tax increment financing zone.

Where the extension runs, and what it costs

The Bakerloo line extension would run south from Elephant & Castle to Lewisham, with stations at Burgess Park, Old Kent Road and New Cross Gate, and a possible later extension past Lewisham to Hayes and Beckenham Junction. Transport for London's estimate published earlier this year put the extension to Lewisham at between £4.2 billion and £7.5 billion in 2025 prices, with a further £1.9 billion to £3.3 billion to reach Hayes; the figures rest on an estimate prepared in January 2024 and remain subject to revision as designs develop. The ageing Bakerloo line trains and depots also need replacing, and doing both jobs together is generally seen as cheaper.

What happens next

Transport for London will run a public consultation on the Bakerloo extension between December 2026 and February 2027, but detailed business cases, statutory approvals, local agreement and specific financing decisions are all still required, so no construction timetable is set. The Mayor of London, Sadiq Khan, welcomed the Budget as “a really positive and significant day for London,” saying the ability to keep more of the money London raises could unlock billions more investment in projects such as the West London Orbital, the Bakerloo line extension and the Euston knowledge quarter, supporting tens of thousands of new homes and jobs. Commentators caution, however, that the changes phase in over the decade, so early years may lack income even as spending begins, and very large cross-regional projects may still struggle to finance.