A “revolution” in how tax is shared out could finally bring the Bakerloo Line to Lewisham after years of delays.

John Healey, the chancellor, announced in the budget on Wednesday that regional mayors would be allowed to keep a share of income tax, while mayors and local councils will eventually allowed to keep all their business rates.

Healey said the move would allow London to finance projects such as the Bakerloo Line extension, which would run from Elephant and Castle via the Old Kent Road and New Cross Gate.

Successive governments have declined to fund the extension, with Labour’s Rachel Reeves, who was born in Lewisham, among the chancellors to turn the project down. Sir Sadiq Khan, the mayor, even introduced an express bus – the BL1 “Bakerloop” – along the route to show what demand it could generate.

Now SE Londoners could have Yorkshire-born Healey to thank for finally helping to bring the Tube to Lewisham.

New bus in Bakerloop livery
The BL1 bus follows the route of the planned extension. Image: Transport for London

Lord Khan of Tooting branded Healey’s decision a “devolution revolution” and said it was a “really positive and significant day for London”.

The new deal brings hefty powers for London mayors. At present, all income tax goes to central government, leaving mayors to lobby Whitehall if they want some of that money back for major infrastructure schemes. 

From 2028, a share of income tax will go straight to City Hall, meaning the mayor can then use that upfront cash to finance new schemes. 

The share of tax that could go to the capital has not been announced, but the London Centric newsletter reported that it could unlock up to £10bn in borrowing. Two years ago, TfL said a Bakerloo extension to Lewisham could cost £8bn.

Bakerloo line extension map
The Bakerloo Line route is safeguarded from development. Image: Transport for London

Where the Bakerloo Line would go

While Healey’s budget opens the way to an extension, the final decision would be with Khan – or whoever succeeds him if he does not stand in or loses the election in 2028.

Plans to extend the Bakerloo Line have been around for many years, while the existing line is in need of refurbishment and a new set of trains to replace the existing models, built in 1973. The proposal to extend to Lewisham was in progress in 2020 when the pandemic ruined Transport for London’s finances, and the scheme was put on hold the following year.

Land has been safeguarded from development along the route, while work on extending a ticket hall at Elephant & Castle is already under way as part of a new development.

New tower blocks and a building called Castle Square
The line would serve new developments including those at the Elephant & Castle. Image: The Greenwich Wire

Three of the stations would be on land currently occupied by supermarkets: the Tesco near Burgess Park, Lidl on the Old Kent Road and the Sainsbury’s at New Cross Gate. The Lewisham station would be built on TfL land at Thurston Road. A depot would be built at a Lewisham Council refuse yard at Wearside Road in Ladywell.

The first trains are not expected to run until 2040, TfL said earlier this year.

TfL’s full plans include a further extension to Hayes and Beckenham Junction, using the existing National Rail line via Catford Bridge and Lower Sydenham, which would free up capacity on other rail routes. Bromley Council has long opposed a takeover of the Hayes line.

Independent analysis from the consulting firm Hatch published in January suggested that 107,000 new homes could be built along the Bakerloo Line if it was eventually extended to Hayes.

Healey said the money could also help fund the proposed West London Orbital rail route, which would turn a quiet freight route into an Overground link between Hounslow and Hendon.

Man in a shirt and tie sat in a kitchen
John Healey announced the move in his budget Image: HM Treasury via CC BY-NC-ND 4.0

‘We can invest billions of pounds’

Khan said: “Working with No 10 North we’re delivering the largest devolution of powers to London seen in a generation.

“By giving London the ability to keep more of the money we raise, we can invest billions of pounds more in our future, helping to finally unlock transformational infrastructure projects such as the West London Orbital, the Bakerloo Line Extension and the Euston knowledge quarter project, supporting tens of thousands of new homes, jobs and economic growth. 

“Proper devolution is something I have been calling for years, and this government gets the scale of the ambition needed where previous governments have failed.” 

The chancellor said the government would also work with the mayor on plans for cross-Channel trains to stop at Stratford International, which was built for European services but has had trains speeding through it since it opened in 2007.

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