(12 years, 8 months ago)
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Baroness Grey-Thompson
My Lords, I have an interest to declare in that I am a paid board member of Transport for London, or TfL, which is a public body constituted under the Greater London Authority Act 1999.
This is a Private Bill that was promoted by Transport for London, deposited on 26 November 2010 and ordered to commence in the House of Lords. The Bill was read for the first time on 24 January 2011. Its purpose is to provide Transport for London with a broader set of financial and disposal powers to meet its business needs more flexibly and to allow it to deliver better value for money for the farepaying and taxpaying public.
Specifically, Clause 4 will remove the requirement for the Secretary of State’s consent to the disposal of surplus land from Section 163 of the GLA Act, as that consent imposes an unnecessary restriction on TfL, given that the Mayor of London is required to provide an opinion in advance of sale that the land to be sold is surplus to the requirements of TfL in conducting its functions. Clause 4 will reduce uncertainty for TfL when selling land, while maintaining the Mayor's opinion’s statutory safeguard that the land to be sold is surplus to requirements.
One petition was deposited against the Bill by the West London Line Group. The petition primarily concerns Clause 4. TfL has entered a dialogue, having met the petitioners' representative, and is hopeful of reaching an agreed position with the petitioner, rather than an opposed Bill Committee being required.
At present, TfL and TfL subsidiaries are not permitted by law to grant security, such as a mortgage, over their assets and revenue streams. That reduces TfL's capacity to finance projects and functions at the best available interest rate or at the lowest risk. That extra cost or risk is ultimately borne by farepayers and taxpayers through higher costs or greater risks on TfL.
Clause 5 will allow TfL subsidiaries to borrow and charge against assets and revenue streams. This will provide TfL with cheaper finance for its projects and more flexibility in how it borrows. Under secured borrowing, TfL subsidiaries can achieve lower interest rates than can be attained through the Public Works Loan Board or issuing bonds—two of the significant debt financing options for TfL now. TfL subsidiaries can also borrow for a discrete purpose, and the security can be structured so that a creditor has recourse only against the subsidiary borrowing, but no recourse against TfL and other TfL subsidiaries. That can better protect the farepaying and taxpaying public from liability for TfL debts.
Clause 5 also allows TfL to purchase subsidiary companies with secured debt. TfL would not be required to restructure secured debt once Clause 5 is operating, as was the case with the purchase of Tube Lines Ltd and Tube Lines (Finance) plc. Had this been operating at the time of those acquisitions, it would have spared TfL significant costs at the time of purchase—ultimately borne by farepayers and taxpayers. Importantly, existing TfL creditor rights are reserved in full by the Bill. Also, TfL subsidiary borrowing under Clause 5 will be subject to existing borrowing limits set by the Secretary of State as applied to TfL, operating as an effective limit on the new power.
Clause 6 will allow TfL to form or join others in forming limited partnerships. TfL would like to be able to use a partnership structure to seek third-party investors in its property estate and to manage secondary income generated from that investment. Pension funds are identified as likely investors who often prefer limited partnerships to other legal structures in which to invest. A partnership structure can better attract long-term investors to property development, because partnerships are tax-transparent.
There is very limited tax benefit to TfL from using a limited partnership vehicle, as Clause 6 provides that a TfL subsidiary company will bear the incidence of the tax liability generated by the partnership, as a subsidiary company is not exempt from income, corporation or capital gains tax. The exemption to that relates to stamp duty, where TfL will be subject only to a proportionate share, should any charges relating to stamp duty arise.
At present, TfL is limited to exercising its functions only through a company limited by shares. Clause 7 expands the list of legal structures through which TfL functions can be undertaken to include a company limited by guarantee, a limited liability partnership or a limited partnership. This will allow TfL to conduct its functions more flexibly and better enable TfL to seek third party investors in its property estate.
Clause 8 amends TfL’s hedging powers and responds to changes in the way that financial institutions hedge risk away from specific commodity trading to trading by indices. It also expressly permits TfL to hedge risks that impact the rate of contributions that TfL is required to make to the TfL pension fund, including for membership longevity. It also responds to the evolution of the financial markets.
In summary, the Bill will assist TfL in seeking the most cost-effective borrowing. It also allows TfL to mitigate the risk that applies to its pension contribution liabilities through improving the hedging power. The Bill will assist TfL to maximise income from and investment in its assets and allow TfL to deliver better value for money for fare payers and taxpayers. I beg to move.
Lord Berkeley
My Lords, I welcome the Bill. I think that TfL generally, since its creation, has been a success under both its mayors, and it has certainly improved the general transport in London. Therefore, I congratulate the noble Baroness on achieving a Second Reading for it, which is often quite difficult in this House. I have one concern about Clause 4, which I have already informed the noble Baroness about. Whereas most of the Bill is to do with the financial issues for TfL, which is very useful, TfL has managed to slip in a little clause about selling off land, which one might suggest is necessary to help finance some of the new projects. There is nothing wrong with that.
However, my concern is that TfL needs to take a long-term view on the land that it holds and might need in the future. Experience to date is that it is very difficult to forecast with any certainty what land transport, and in particular railways, might need in the future. One recalls Dr Beeching’s slashing of lines—closing them down over the years because everyone was going to go by car, and how wonderful that was going to be. Now, of course, everyone is struggling to reopen lines. There was a very welcome announcement last week in the autumn Statement about reopening the Oxford to Cambridge line. The problem is that it goes from Oxford as far as Bedford and no further, because the land was sold off for building probably 20 years ago, and there is a problem—somewhere near Bedford, I think—where the line should have gone across a boating lake. Whatever one thought of Dr Beeching, no one thought that there would be such a demand for new rail transport in the future.
I had an issue about 15 years ago with the then British Rail Property Board, encouraged by the Department of Transport, over a freight terminal. I declare an interest as chairman of the Rail Freight Group. There was a lovely piece of land in Battersea that was ideal for building a concrete batching plant. All the materials could come in by rail and then be distributed locally as concrete to the local buildings. However, there was a competition between the concrete company and Battersea dogs home to have this piece of land because the dogs needed more land for exercise. I made the point to anyone who would listen that dogs do not need to be rail-connected, whereas it is quite useful for concrete work to be rail-connected. No one thought it was particularly funny and Battersea dogs home won, probably with lots of extra traffic on the road.
My message is that it is very difficult to forecast what bits of land might be needed for what in the future. We can talk about station extensions, but we know that no one wants to build extra stations or extra platforms because the services work fine at the moment, except when one suddenly discovers that one cannot lengthen the platforms any more or that one needs to lengthen them or put an extra platform in because of the demand. Then one needs land. Extra land might be needed for the maintenance of new bits of rolling stock or small rail freight terminals around London. The problem is that once these bits of land are sold off, it is almost impossible to get them back again at any reasonable price. Compulsory purchase is a very long and tortuous thing and no one likes doing it. Basically, one is always told, “Can’t you go somewhere else?”.
I suppose I do not trust anyone to have a long-term policy to hold on to land. That comment applies to what remains of the British Rail Property Board before it gets subsumed into the Department for Transport, to the department itself, and to Transport for London. They all do it with the best of intentions, but my issue with Clause 4 is that whether one trusts everyone or no one, it is useful not to have the beneficiary of a sale being the organisation that organises the sale. In this case, the beneficiary is clearly TfL.
I would like to see some wording in the clause—and I am very happy to discuss it with the noble Baroness and Ministers in the future—that retains the requirement to get permission from the Department for Transport, which presumably would not have an interest in the land, for such a sale. I would feel comforted that as much protection as possible had been given to these pieces of land, which are necessarily near railways. If they are miles from a railway line, it probably does not matter very much, unless one is going to talk about river transport, and I have not looked at the land holdings for that. That is the kind of wording that I would like in Clause 4, and I look forward to discussing it with the noble Baroness in the next few days.
Baroness Kramer
My Lords, I am not sure whether it is an interest because it is a former one, but I am a former member of the board of Transport for London and have an ongoing interest in transport within London which, like most Members of the House, I use extensively. I rise not in opposition to the Bill but to raise issues and questions that could use exploring. The noble Lord, Lord Berkeley, has raised one of the central issues of the Bill, which is whether an outsider—someone other than Transport for London—should be engaged in the authorisation of the sell-off of operational land, particularly if it has implications for overland railway in contrast to simply the tube, bus and tram services that we most often associate with TfL itself.
In the spirit of the Localism Bill, as well as prudent practice, I would rather see the Greater London Assembly, which has an expert transport scrutiny committee, taking on that kind of responsibility rather than the Secretary of State. Understanding the implications of changing the use of land in London requires a real awareness of the intricacies and complexities of the city. I think that the Secretary of State, sitting up at that distant central government level, has relatively little understanding of the detailed dynamics of London. It is within the Greater London Assembly that that range of experience is present in people who understand what may be housing issues, dealing with waste management, transport issues, the whole range of elements that impact on decisions about land use in London. That would be the more appropriate body.
As the Greater London Assembly is not under the control of the mayor, which is evident from the institutional structures, it can provide independent scrutiny just as effectively, if not more effectively, than the Secretary of State. I raise that as a significant element. Transport for London is, after all, the transport arrangement for one particular city and it is certainly not a national transport arrangement, so detaching the Secretary of State from such an entity has a great deal of logic to it in the spirit of the Localism Bill, which we have recently taken through this House.
I raise one other set of issues—again, not in opposition. There is interesting language in the Bill on the securitisation of revenue streams from assets. I understand from earlier discussions—I have a letter here from Transport for London that goes into a little detail on it—that the concept behind this is that Transport for London owns property that it happens to rent out, as it sometimes does when it holds property for a period of time but which it believes it will need at some point in the future for a transport project. Alternatively, it has land that is used for parking, perhaps on a temporary basis, and again that land is set aside for some future transport purpose but can generate revenue in the mean time, or it may just have parking land because that is the only way it feels it can safeguard parking that is necessary for various transport facilities. Those revenues could be securitised as a mechanism for creating efficient borrowing. To me, that makes eminent sense.
It seems to me that this language also covers quite comfortably the notion of securitising the fare box. Revenues from the fare box seem to fall within the definitions in the Bill, and I support that. It is an important step forward in providing Transport for London and London itself with the mechanism that is needed to continue building our infrastructure. However, I should be interested in understanding whether that is the perception of Transport for London or indeed the perception of the Government. If so, that makes the Bill increasingly interesting.
None of the other issues covered here, such as the ability to do sensible kinds of hedging or to form partnerships with somewhat more flexibility in the current environment, seems at all controversial. However, I should be interested in hearing comment and response on the issues that I have raised.
Lord Davies of Oldham
My Lords, I congratulate the noble Baroness on her introduction to the Bill. In a lucid contribution she made clear that which for some of us may have been a little opaque and she resolved many of the anxieties that we might have had.
It will be recognised in the House that Transport for London is a greatly envied transport authority. Many other transport authorities in the country would wish to have the existing powers of Transport for London, let alone the minor additions produced by the Bill. Of course, you cannot discuss bus services in our cities and in our countryside without recognising the advantages that Transport for London has had, and continues to have, in providing such services. It goes without saying that I would be even warmer in my thoughts about Transport for London if it were under a different political direction from the one that it enjoys at present. Nevertheless, the point still holds that it is an authority which we hold in high regard.
In passing, I indicate my regret at the role that TfL might have been able to play, if the financial arrangements had been arrived at differently, in guaranteeing that rolling stock for Crossrail would be provided by a company in Britain. However, it apparently lost that battle in the Department for Transport, so the decision is much more likely to follow the regretted Thameslink decision—namely, the company that may well win the contract will be an external company with the carriages and rolling stock being made elsewhere.
However, that is not really germane to the Bill. What is germane to the Bill, and I am very grateful to the noble Lord and the noble Baroness who have spoken thus far, is the critical issue of the disposal of assets. I was at a meeting only the other day with the Enfield authority, which I have always held in high regard—I certainly did when I was a Member of Parliament for the area. The Enfield authority has ambitious schemes to improve transport links in the area. Crucially, rail links are determined by the very thing that my noble friend Lord Berkeley identified—namely, that land held by the railway has been sustained and there is therefore capacity for putting down additional tracks to improve a service when that would not have been the case if the land had been sold. Therefore, we have a real interest in the land held by this public authority, and I hope that reassurances can be given on how such decisions are to be made.
One dimension that has not been mentioned thus far in the debate is that any sale of urban land has an impact on neighbours. It has an impact on the people who may already be using the land as tenants of TfL but it also has an impact on those immediately adjoining the land. I accept that it is difficult to put this within the framework of legislation but I hope it is recognised that TfL has obligations as a public authority to engage in proper consultation locally when the disposal of significant pieces of land occurs.
However, in broad terms we very much welcome this measure and I congratulate the noble Baroness once again on having introduced it so ably.
Earl Attlee
My Lords, I congratulate the noble Baroness, Lady Grey-Thompson, on moving her Bill so expertly, and I am grateful for the contributions of other noble Lords. I shall resist the temptation provided by the noble Lord, Lord Davies of Oldham, to discuss rolling stock purchases.
I do not oppose this Second Reading. However, I should make it clear that the Government also have some reservations about the powers in the Bill as presently drafted. Officials from the Department for Transport are currently in discussion with Transport for London on these provisions and I look forward to a more detailed examination of them in Committee.
Lord Berkeley
As the Bill was, as I understand it, introduced about a year ago, have these discussions been going on continuously for a year? They are taking an awfully long time if that is the case.
Earl Attlee
My Lords, Transport for London is responsible for progressing the Bill. I am just giving some comments on behalf of the Government.
On the subject of the disposal of land and Clause 4 of the draft Bill, which has been one of the principal subjects of this debate, the Government are clear that the protection of strategically important assets must remain a priority. Furthermore, it would appear reasonable for the arrangements in London to parallel those on the national rail network, where there are restrictions analogous to those currently placed on Transport for London. I should also point out that Transport for London already has the power, without prior consent, to lease operational land for less than 50 years and to dispose of land that has not been operational for five years or more. I understand that Transport for London is looking further at this option and I look forward to its revised proposals.
Baroness Grey-Thompson
My Lords, I thank all the noble Lords who have taken part in the debate this evening on what I think everyone will agree is a very technical Bill. It appears that Clause 4 has raised the most interest.
In response to the Minister, TfL is in discussion with the Department for Transport on the drafting of Clause 4. It recognises that the protection of strategically important railway assets must remain a priority. I understand what the Minister said about the scope of the existing Section 163 to dispose of operational land, and I confirm that TfL is looking further at this option and will be in touch with the department in due course to take this forward.
I understand the concern raised by the noble Lord, Lord Berkeley, on the long-term view that must be taken on the protection of land. TfL wrote to the noble Lord on 20 April 2011, and I reiterate what was said in that letter. TfL is now persuaded of the merit of retaining the requirement for the Secretary of State’s consent in circumstances where Network Rail or the British residuary board is an adjacent landowner or has land in close proximity to the land to be disposed of. TfL is liaising with the Government about Clause 4 to resolve their concerns. I hope that that goes some way to easing the noble Lord’s doubts over the disposal of land, but I would welcome continued discussion on this matter.
The noble Baroness, Lady Kramer, raised the issue of independent scrutiny and Clause 4. I thank her for mentioning the letter that TfL wrote to her. TfL does not feel that it would be appropriate to move to a consent mechanism which is entirely different from the Secretary of State’s consent if it were retained in certain cases. The noble Baroness also mentioned securities. TfL currently has no plans to securitise revenue generated by the Tube. Instead, TfL may use the power to grant security to raise finance from assets generating a secondary revenue scheme, such as car parks and property with a rental income.
TfL subsidiaries may grant security over both physical assets and revenue streams under Clause 5. However, TfL has no plans to do this over key infrastructure such as the Tube. TfL’s expectation is that the power to grant security may be used on car parks or property with a rental income, such as office space and new infrastructure that generate specific income. The noble Baroness also raised the issue of limited partnerships. TfL would like to form limited partnerships so that it can utilise a partnership structure to manage secondary income generated from its property estate; to better attract long-term investors to property development on non-operational land, because partnerships are tax transparent, which can be attractive to particular investors; and to better attract pension funds to invest in these developments as likely sources of investment. I am very glad that the noble Baroness mentioned the pension fund. If members of the TfL pension fund live longer than the actuarial estimate then TfL will have a prospective liability that is not currently accounted for. Hedging that potential risk is one way that TfL can offset that liability if eventuated.
Once again I thank all noble Lords who have taken part in the debate this evening. I have taken all the points on board, and no doubt all the Bill’s provisions will be closely considered in Committee.