Transport for London Bill [Lords]

Baroness Bray of Coln Excerpts

Tuesday 9th September 2014 Commons Chamber

[Bob Blackman]

I thank my hon. Friend for his suggestion. That would be a very radical move away from TfL’s existing capability and the arrangements that are made. I am sure the Mayor of London will be listening to the debate and will consider that suggestion appropriately, but it is beyond the scope of Second Reading, which is limited regarding proposed borrowing changes.

Transport for London’s subsidiary share of the profits generated by a partnership will be liable to tax in the same way as if a company were used instead of a limited partnership, thereby maintaining appropriate tax transparency. Several individuals, and particularly the National Union of Rail, Maritime and Transport Workers, have been concerned about whether the Secretary of State should give permission for such entities to be entered into. I understand that a written undertaking has been given to the hon. Member for Hayes and Harlington (John McDonnell) and the RMT on the basis that an amendment will be introduced in Committee that would require the Secretary of State’s permission for such an organisation to be permitted, which I hope answers one of the principal objections.

[Angie Bray (Ealing Central and Acton) (Con)]

Is there an awareness of concerns that some of my local residents will have about proposals for the increased use of the Acton depot? As my hon. Friend will know, there is a substantial residential community in that area, which will not welcome the further increase in pollution that I suspect some of these activities will lead to.

[Bob Blackman]

My hon. Friend is a doughty campaigner for her local residents, and she has been at the forefront of the campaign against environmental air pollution and suchlike in her area. One objection to the Bill comes from the hon. Member for Hammersmith (Mr Slaughter), whom we will hear from later, in relation to the Earls Court development. I understand that part of that process is to transfer the depot from the Earls Court area to Acton. Clearly, as sponsors TfL will have to ensure that air and noise pollution is reduced considerably to answer the objections that my hon. Friend has related to the House.

Clause 6 seeks to expand the type of entities through which TfL’s commercial activities must be undertaken. TfL is currently required to undertake profit-making activities through a company limited by shares that is either a subsidiary or a joint venture. The clause amends that restriction to give TfL the option of using any type of entity that it has the power to form. In addition to a company limited by shares, TfL would be able to use a company limited by guarantee, a limited liability partnership, or a limited partnership. Importantly, clause 6 preserves the policy that TfL must undertake commercial activities through a taxable entity by requiring that a TfL subsidiary be member of a limited liability partnership, or a partner in a limited partnership. A company limited by guarantee is itself liable to taxation. Clause 6 will enable TfL to conduct its affairs more flexibly and at the same time preserve tax transparency and ensure that the relevant amount of tax is paid to the Exchequer. That will mean that it can use the structure that best suits the opportunity, and net the maximum value for money from its assets in so doing.

Clause 7 amends TfL’s hedging power, responding to changes in the way financial institutions hedge risk away from specific commodity trading to trading by indices—for example, the use of an oil price index as opposed to a barrel of Brent crude oil—which protects the hedging power considerably. It also gives TfL the capacity to enter into derivative investment when exposed to risk by virtue of a contractual arrangement for the provision by others of public transport services. For example, movements in fuel prices, which obviously affect TfL’s costs, would be protected.

Currently, TfL’s hedging power may be applied only to risks to which a TfL body is directly exposed. Clause 7 clarifies that it may use its hedging powers in respect of its liability to any pension fund, for example. It is not proposed that TfL enter into any derivative investments on behalf of the TfL pension fund, so members of that fund will be protected. It is not inconceivable, however, that the fund might decide that a particular risk is acceptable, given that all its liabilities are long term and that TfL effectively underpins the risks through an obligation to increase its contributions, if necessary, and that TfL might believe that the risk needs to be mitigated. Clause 7 provides for that specific scenario only.

In summary, the Bill will assist TfL in securing the most cost-effective borrowing possible. It will give TfL greater flexibility over how it structures its affairs, while preserving the requirement that its profit-making activities be taxed appropriately in the UK. It will improve TfL’s hedging power by reflecting developments in the derivatives market and permitting the hedging of risks that arise through contractual exposure and as a consequence of its obligations to pension funds. It will allow TfL to maximise income and investment in its assets and to deliver better value for money for fare payers and taxpayers, which we, as London MPs, crave every day. I commend the Bill to the House.