Transport for London Bill [Lords]

Bob Blackman Excerpts

3rd reading: House of Commons & Report stage: House of Commons & Report stage & 3rd reading
Tuesday 12th April 2016 Commons Chamber

[Daniel Zeichner]

That is a fine distinction. Most of us understand that the reason we pay our taxes is for exactly the kind of high quality transport system that a capital city such as London needs, and it is a huge risk that this Government are taking. The Government are forcing TfL to limit the damage, and they are using ingenious means and utilising existing assets to do so. The Budget indicates that there will be a move towards the full retention of business rates by local authorities, and we welcome the ability of local councils to have control over funding, but this is uncharted territory and we should be in no doubt about the risks to our transport system in London—risks that are a direct consequence of the political choices of this Government.

We want TfL to be modernised and to become a highly efficient public sector organisation. TfL has been making savings, some very difficult and controversial, but in its annual budget in 2014, TfL said that it is

“becoming progressively more difficult to achieve this without compromising our core services.”

This pattern of cuts is visible not just in the capital, but across the country. Cuts to local authority budgets have been extreme, leading the Local Government Association to point out that even if councils stopped filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light they would not have saved enough money to plug the financial black hole they face by 2020. Department for Transport resource funding has been cut by 37%, from £2.6 billion in 2015-16 to £1.8 billion in 2019-20, representing a real terms decline of 71% since 2009-10.

Let us consider the fact that last year a record 8.6 million people were living in London. By 2030, that figure is predicted to reach 10 million. That is the pressure under which TfL finds itself. We are not ideologically opposed to TfL’s maximising the value of its assets to increase the revenue seized by the Treasury. They do what they have to do, and using resources efficiently is important to keep our capital city running.

On Second Reading, my hon. Friends and I expressed concern about certain measures in the Bill, including clause 5, which we have discussed. We are happy with the principle and understand the necessity of TfL’s having greater commercial freedoms, but the implications of those so-called freedoms were problematic. The controversial Earls Court development, a joint venture between TfL and the private developer Capital & Counties, set a worrying precedent for further public-private partnerships. Clause 5 would allow TfL to enter into limited partnerships with private property developers. Those partnerships are vague in legality and opaque in accountability.

I said on Second Reading that we must consider carefully the long-term impact of introducing powers to enter into those partnerships. We are reassured both by the fact that TfL has noted those concerns and by its decision to table amendments to remove clause 5 and references to limited partnerships from the Bill. It is encouraging that our opposition to that problematic part of the Bill was taken into account, and we are pleased with the outcome.

I also spoke on Second Reading about the importance of putting public needs above private profit. Property development to increase TfL’s revenue must not happen without the backing of local communities—those who are affected most directly. Those who bankroll projects should not subsequently be able to steamroller over local people. TfL is obliged to obtain the consent of the Mayor to dispose of an interest in land by sale or by granting a long-term lease. If that land is operational or has been in the previous five years, the Secretary of State for Transport must give his or her consent. It must be noted, however, that that did not prevent the unhappy saga around the developments at Earls Court from unfolding. The balance between the provision of affordable homes on the one hand, and maximising revenue to reinvest in transport, is an extremely significant and fine political judgment. We will be watching closely to ensure that proper balance is secured.

In conclusion, as clause 5 has been shelved, I think we are all hopeful that TfL can now move forward. We are keen to see how TfL uses its commercial freedoms to develop and improve the transport network that keeps our great capital city moving, but we will be watching closely to ensure that profit is used to benefit the public, and not the other way round.

[Bob Blackman (Harrow East) (Con)]

I support amendment 1, and consequential amendments 2 to 6, which I tabled on behalf of the promoter.

This is a private Bill promoted by Transport for London, as has been said. It was submitted to the House of Lords in November 2010, and reached this House on 4 March 2014. It took rather a long time to get through the other place. The Commons gave the Bill a Second Reading on 9 September 2014, and it was considered by an Opposed Private Bill Committee on 13 January 2015, where clause 5 was substantially amended. I shall come on to discuss that briefly.

A debate on the consideration stage took place in the last Parliament on Monday 16 March, and those of us who were Members then remember that as an epic occurrence. Many amendments were tabled, and the time allocated for debate expired before proceedings could be brought to a conclusion. Following the agreement of both Houses to the revival of the Bill in this Parliament, consideration was first proposed on 22 February 2016, but there was an objection, resulting in the need for today’s debate.

The promoter, TfL, has considered carefully the strength of feeling expressed in the previous debate in the House about clause 5. If the clause was introduced, it would allow TfL to engage in limited partnerships. TfL recognised, notwithstanding the amendments to the clause made by the Opposed Private Bill Committee, that serious concerns remained about the possible exercise of powers conferred by the clause and about the lack of transparency arrangements, which was raised by objectors. Accordingly, TfL took the decision not to press for clause 5 to stand part of the Bill. The amendment to which I am speaking would leave out that clause, and the further minor amendments grouped with it are consequential upon the removal of clause 5. I understand that that is accepted across the House.

[Andy Slaughter]

As I understand it, the hon. Gentleman is saying that TfL has listened to the democratic voice of this House and to the wishes of the elected representatives here. Is it as simple as that? If so, that is quite refreshing.

[Bob Blackman]

We have had substantial debates. The promoters listened to those debates, considered them carefully and decided that in order to ensure the passage of the Bill, rather than prolong the agony and the disputes, it would be better to withdraw the clause and demonstrate in good faith that they would not proceed with that element. That means, of course, that the Bill is substantially changed from its original form.

I shall touch on the amendments proposed by the objectors—in principle, the hon. Member for Hammersmith (Andy Slaughter). If I miss one of the amendments that he is pushing, he will no doubt intervene to clarify that. New clause 1 is substantially that which was debated on 16 March 2015. We had a very long debate on consideration at that time and it was clear that that was not going to proceed.

The present new clause would impose restrictions on the disposal of land and on the development of the land. Prior to the disposal of any land, various tests would have to be satisfied. Prior to carrying out any development other than the development of the land for rail maintenance facilities, consultation would have to be undertaken with a range of consultees, including unnamed trade unions and the London boroughs.

TfL is subject to the normal legal requirements relating to the development of land. Accordingly, prior to carrying out development of land, including for rail maintenance facilities, TfL has to undertake consultation in accordance with the rules and procedures relevant to the consenting process in question. Adding a further layer of consultation there is unnecessary. Furthermore, the process for securing consents for disposal of land is well established under section 163 of the Greater London Authority Act 1999. I believe the hon. Member for Hammersmith was a member of the Government at the time. Section 163 provides the statutory regime for the disposal of former operational land, including requirements for the Secretary of State’s consent. The promoters therefore consider that a further consenting process is neither necessary nor desirable.

Amendments 9 to 12 would lengthen the period of consultation. No solid argument seems to have been put forward by the proposer of the amendments on why that should take place. There would be a severe impact on TfL were that to take place. It would delay TfL improving its financial affairs and managing its operational undertakings, which would be detrimental to the tax-paying public and the fare-paying public. It is not clear what the impact of amendment 12 would be. It refers to a report being produced. TfL’s view is that the Bill, together with the existing processes and procedures under the 1999 Act, ensures that the exercise of the powers conferred by clause 4 will be properly exercised in discharge of statutory functions under the 1999 Act. That set of proposals is therefore unnecessary and unreasonable.

[Andy Slaughter]

The hon. Gentleman asks what the point is. The point is bitter experience. I bet that he could give just as many examples from his constituency as I can from mine of projects that TfL has gone into without proper risk assessment or consideration, and which have invariably wasted millions of pounds. What we are looking for here, before steps are taken, is a proper process of review; of stepping back and thinking.

[Bob Blackman]

Requiring the Secretary of State to go through a process of producing risk assessments and so on is clearly extremely burdensome. It is quite clear that TfL will have to carry out those functions itself in order to justify what it is seeking to do.

Amendments 7 and 8, which the hon. Gentleman pressed in particular, are new and were not considered on 16 March 2015. The clear issue here is that exercising powers under clause 4 is subject to the consent of the Mayor, when he is granting security on borrowing or acquiring companies, and the consent of the Secretary of State, in respect of core assets and revenue. I could go into a long and detailed explanation of why that would be unnecessary. The point is that these amendments would create legal uncertainty over the whole question of what the requirements would be. They would also create uncertainty about TfL and its subsidiaries exercising the necessary flexibility around assets and revenue streams.

Since the Bill was deposited—this is a very important aspect—the operational funding from central Government has been reduced, as has been said during the debates. It will now be removed entirely, but much earlier than anticipated. The Bill, including clause 4, will assist TfL in its efforts to achieve further savings and efficiencies, while at the same time upgrading transport networks, which, I remind the House, support new jobs, new homes and economic growth in London and right across the UK. I therefore hope that the hon. Gentleman will not press those amendments to a vote, because they are completely unnecessary, would create tremendous uncertainty and, indeed, would impact on TfL’s ability to generate the sorts of savings and to create the types of work that we all want to see.

[Andy Slaughter]

rose—

--- Later in debate ---

[Bob Blackman]

I will give way very briefly.

[Andy Slaughter]

I think I want the long and detailed explanation to which the hon. Gentleman referred. What I want to know—this is not about the first part of clause 4(2), which I understand, about

“security for money which it borrows”—

is how

“the payment of which it guarantees, or in respect of which it gives an indemnity”,

first, improves TfL’s financial position, and secondly, does not create risks to TfL.

[Bob Blackman]

It is quite clear that the operation under clause 4(2) mirrors what TfL can do anyway under section 160 of the 1999 Act, and the scope of what a subsidiary can lawfully do by way of offering a guarantee or indemnity is not changed by this Bill whatsoever. From that perspective, the proposals to delete these references are almost irrelevant, given that the same powers exist under the 1999 Act. TfL is merely seeking to ensure that it has got this flexibility under those arrangements.

[Andy Slaughter]

Will the hon. Gentleman give way?

[Bob Blackman]

I have given way on a couple of occasions. If there is something else the hon. Gentleman wishes to raise, he will no doubt duly do so.

Most of the other proposals appear to have been put forward at consideration stage on 16 March 2015—they certainly formed a great part of the debate, but they clearly did not secure the agreement of the House. I therefore suggest that all the proposals put forward by the hon. Gentleman should be rejected and that we should end consideration stage and allow the Bill to proceed to Third Reading so that we can discuss its general merits.

[Andy Slaughter]

I appreciate the way the hon. Gentleman has approached the debate, but he will understand that I am a little disappointed by his response and by that of the Minister, who gave the proposals a cursory few moments. However, I am grateful to my hon. Friend the Member for Cambridge (Daniel Zeichner), who is on the Opposition Front Bench, for at least making some thoughtful comments.

It is not my fault, or that of any of the other opponents of parts of the Bill, that it has dragged on for five and a half years, and we will perhaps look at that issue on Third Reading. As I said, most of the proposals were probing or, I hope, improving proposals, and I am disappointed that they have been dealt with in a fairly cursory manner. However, I also said that I would not press them to a vote.

Let me go back to amendment 7. As I said, the powers in clause 4(2) already exist, but there is no ability to secure borrowing, or an indemnity or guarantee, against property. I asked what I thought were quite reasonable questions about that. I said that, whereas I understand the advantage of securing borrowing against property, I do not understand the benefit to TfL, the fare payer or the taxpayer of an indemnity or guarantee. I have not really received an answer on that from the Minister or the sponsor. I do not really blame the hon. Gentleman, who drew what turned out to be the short straw in being the sponsor of the Bill. TfL has serried ranks of experts in these matters—consultants, lawyers and property people—and the fact that we have not had an answer shows a certain amount of arrogance in the way this issue has been dealt with throughout.

I am not persuaded, but I am not going to push the proposals to a vote this evening. I hope, as I have said, that we have a new Mayor who will take a different view of how these matters are dealt with and how these powers are used. I agree that these issues are not at the centre of the Bill. As I have said several times, I appreciate the concessions that TfL has made. In that spirit, I am not minded to stop the Bill going forward now.

I simply think that it shows a lingering lack of candour and transparency and an attitude of “It’s none of your business how we run our railway” when those involved cannot give a simple explanation of a fairly simple, albeit technical point. However, there it is. I have made the points I want to make on the proposals, but I do not propose to put any of them to a vote tonight. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Amendment made: 1, page 1, (Recitals) leave out lines 6 and 7. —(Bob Blackman.)

Clause 5

Power for TfL to form and invest in limited partnerships

Amendment made: 2, page 3, line 24, leave out clause 5.—(Bob Blackman.)

Clause 6

Specified activities

Amendments made: 3, page 4, line 19, leave out “or a limited partnership”.

Amendment 4, page 4, leave out line 21 and insert “a member; or”.

Amendment 5, page 4, leave out lines 37 and 38.

Amendment 6, page 4, line 39, leave out “(c)” and insert “(b)”.—(Bob Blackman.)

Third Reading

Motion made, and Question proposed, That the Bill be now read the Third time.—(The First Deputy Chairman of Ways and Means.)

--- Later in debate ---

[Bob Blackman]

It is a pleasure to rise at what I hope will be the end of a very long journey. The purpose of the Bill is to provide TfL with additional powers, so it can meet its business needs more flexibly and take advantage of more efficient arrangements for the stewardship of its financial affairs. TfL has identified various opportunities for maximising the value of its assets. They can only be realised if TfL acquires the new statutory powers or if the restrictions on the exercise of its current powers are removed.

This has been mentioned before, but let me put it on the record: TfL is one of the biggest landowners in London, with 5,700 acres of land. Clearly, there is a pipeline of some 300 sites, with 50,000 new homes to be provided in London. We know above all else that in London, the capital city of this country and one of the major cities of the world—if not the major city in the world—we need to provide more new homes and to keep people moving to create investment for the opportunities for jobs and for a better quality of life for everyone. The Bill enables TfL to play its part. It is clear that from October 2015 we already have 75 sites that will generate 10,000 new homes over the next two years. Two thirds of them, contrary to what the hon. Member for Hammersmith (Andy Slaughter) said, will be in zones 1 and 2. It is not true to say that sites are not being provided for new homes for Londoners and for people who want to make London their home.

[Andy Slaughter]

Will the hon. Gentleman give way?

[Bob Blackman]

I will make a bit of progress and then maybe give way. The hon. Gentleman has had plenty of opportunities to put his own perspective and spin. I want to set the record straight.

Four sites in particular have been invested in recently by TfL: 360 homes at Nine Elms tube station, with 25% affordable; 55 homes in the Fenwick Estate near Clapham North tube station, of which 100% are affordable; the development at Northwood is only 20% affordable housing, but TfL has respected local demand to invest in a brand new tube station with step-free access; and at Parsons Green TfL has submitted a scheme with 40% affordable homes, which it has now withdrawn to allow further time for consultation with local businesses and residents. It is clear that TfL is responding to the request and demand for additional housing to be provided in the capital.

The Bill contains only three substantive clauses but is of great importance to TfL because it will enable it to deliver much better value for money for the fare payer and taxpaying public. The growth in London is relentless and driving up demand for services. The tube has record ridership year on year and our roads are also under great pressure. To keep London working and growing, TfL has to invest just to keep the assets in good repair, modernise the rail and road networks and improve reliability. The reality is that all its revenue is reinvested in TfL projects, be it on the roads or rail. Clearly, the issue that will be debated in the run-up to 5 May is how we keep that revenue stream increasing and ensure a fair balance between the taxpayer and the fare payer.

TfL’s £11 billion capital funding settlement from the Government runs from 2015-16 to 2020-21—the life of the Parliament—and includes a total of £5.8 billion in investment grant, £1.4 billion in general grant from the Department for Transport and, crucially, £3.8 billion in borrowing powers. That allows TfL to invest £1.7 billion a year to modernise the road and rail networks. The Circle, District, Hammersmith and City and Metropolitan lines will be the next four tube lines to be upgraded. I would have thought the hon. Member for Hammersmith would welcome that, seeing as his constituents use those lines, as do mine—I think, in particular, of the Metropolitan line.

[Andy Slaughter]

rose—

[Bob Blackman]

No, the hon. Gentleman has had plenty of time to put his point of view.

From 2019, TfL’s objective will be to cover all the operational costs of running the tube and bus networks through non-DfT grant sources of income. It plans to do this over an extended period by running the business more effectively and efficiently. The continuous savings programme has generated a 15% reduction in costs. Following the November spending review, TfL has had to accelerate and build upon that because, as has been alluded to, its overall income is set to reduce by £2.8 billion over the period to 2020-21. The Bill will provide TfL with additional powers to run its business more flexibly and take advantage of more efficient and economic financial arrangements. This will allow TfL to maximise the value of assets, bear down on fares and deliver significantly better value for money to the public.

The first of the substantive clauses, clause 4, will allow TfL’s subsidiaries to borrow and grant security over assets and revenue streams. We have had a long debate about this issue in relation to the amendments. The powers will allow TfL to access cheaper finance for projects and to structure security so that a creditor has recourse only against subsidiary borrowing. TfL will be able to purchase subsidiary companies that already have secured debt without having to engage in costly loan restructures. Very importantly, the Secretary of State’s consent is required if core assets are to be offered as security, and the Mayor must consent to all other arrangements.

Where TfL owns more than 50% of a joint venture, clause 4 will enable TfL’s subsidiary to incur debt using the assets of the subsidiary as security. That does not advantage or disadvantage a private partner involved in the joint venture, as the increased value of the assets will be brought about with the greater flexibility in clause 4 and will be shared by TfL and the private sector partner, in accordance with the terms agreed between the parties.

Clause 5 has now been removed. Clause 6 seeks to expand the type of entities through which TfL’s commercial activities must be undertaken. TfL is currently required to undertake its profit-making activities through a company limited by shares that is either a subsidiary or a joint venture. The clause amends this restriction to give TfL the option of using any type of entities that TfL has the power to form, in addition to a company limited by shares. TfL would be able to use a company limited by guarantee or a limited liability partnership. Importantly, clause 6 preserves the policy that TfL must undertake commercial activities through a taxable entity by requiring that the subsidiary be a member of a limited liability partnership. Clause 6 will enable TfL to conduct its affairs more flexibly and net the maximum value from the assets.

Clause 7 amends TfL’s hedging power, responding to changes in the way that financial institutions hedge risk away from specific commodity trading to trading by indices—as, for example, in the use of an oil price index, as opposed to a barrel of Brent crude oil. It also gives TfL the capacity to enter into a derivative investment when TfL is exposed to a risk by virtue of contractual arrangements for the provision by others of public passenger transport services—for example, if there were movements in fuel prices, it would allow TfL to hedge the costs. Clause 7 also clarifies that TfL may use its hedging powers in respect of its liability to any pension fund. It is not proposed that TfL enter into any derivative investments on behalf of the TfL pension funds, but TfL will be able to hedge its contribution risk to the fund.

Given the benefit to TfL pension fund members, some of whom will be members of RMT, the hon. Member for Hayes and Harlington (John McDonnell), who is no longer in his place, acknowledged the merits of clause 7 on Second Reading. Once again, I find it hard to see the logic of the hon. Member for Hammersmith’s continuing to block the Bill. It seems that my hon. Friends and hon. Gentlemen have misconceptions about the scope of the Bill, but, contrary to assertions made on Second Reading and elsewhere, the Bill does not give TfL any new powers to sell or develop its land. TfL has had those powers since it was created in 2000, and it is not seeking to enlarge them in any way. Neither can TfL act autonomously when it wishes to dispose of its interests in its land, including when granting a long-term lease. TfL must obtain the consent of the Mayor to sell surplus land, and if that land is operational land or has been operational land in the last five years, the Secretary of State must give his or her consent.

Some colleagues suggested on Second Reading that TfL’s track record shows that it is not competent enough to be given greater powers and that it should focus on its core function of providing transport services rather than delving into joint venture projects with developers. It cannot be disputed that TfL serves more customers more efficiently and more reliably than at any point in its history. Providing public passenger transport will always be TfL’s main focus. The powers it seeks in the Bill will not detract from its discharge of those functions, and the discrete scope of the Bill should be taken as indicative of a change in TfL’s priorities.

The Bill will, however, give TfL greater opportunity to secure sustainable income from its assets, rather than a one-off capital receipt from their disposal. Very importantly, that is to adopt a long-term strategy to the management of its property estate, which will allow TfL to maximise the value of its assets and deliver better value for money to the public.

I am somewhat confused because it would appear that the hon. Member for Hammersmith is so lacking in confidence in his candidate for the mayoralty that he would seek to block this Bill in order to get him there. I am looking forward to my hon. Friend the Member for Richmond Park (Zac Goldsmith) assuming his place as Mayor of London on 6 May, and we can look forward to this Bill helping him to deliver more homes, more jobs and better and safer transport for the people of London.