Transport for London Bill [Lords]

Christopher Chope Excerpts

Tuesday 9th September 2014 Commons Chamber

[Bob Blackman (Harrow East) (Con)]

I beg to move, That the Bill be now read a Second time.

This private Bill is promoted by Transport for London. It was deposited on 26 November 2010, and ordered to commence in the House of Lords. It was read the First time in the other place on 24 January 2011, and it was read a Second time on 13 December 2011, when it was debated. It was a further two years until the Unopposed Bill Committee took place on 28 January 2014. It was read the Third time in the other place and transferred to this Chamber on 4 March, when the First Reading took place. It is therefore fair to say that the Bill has had a long gestation period.

The Bill’s purpose is to provide Transport for London with a broader set of powers so that it can meet its business needs more flexibly and take advantage of more efficient arrangements for the stewardship of its financial affairs. Transport for London has identified various opportunities for maximising the value of its assets, but at the moment they cannot be fully realised unless it acquires new statutory powers or restrictions on the exercise of its current powers are removed. The Bill is also an opportunity to save money for taxpayers and fare payers. It has only four substantive clauses, but its principle is of importance to TfL, not least because the benefits deriving from the Bill will enable TfL to deliver much better value for money for the fare payer and the tax-paying public at large.

The first three clauses broadly concern bringing the Bill into operation. The first substantive clause is clause 4, which allows Transport for London subsidiaries to borrow and grant security over assets and revenue streams, enabling TfL to have cheaper finance for projects and greater flexibility in how it borrows. TfL currently has the power to borrow and it has a borrowing programme, but it may offer lenders only a non-specific charge over revenues, not over properties.

Borrowing on a secured basis will allow TfL subsidiaries to achieve lower interest rates than can be obtained through the Public Works Loan Board or through issuing bonds—the original aim under the legislation initiated by the previous Government—which are two of the significant debt financing options available to TfL. The clause will allow TfL to borrow money in circumstances where granting security is done predominantly or exclusively on a secured basis, and unsecured borrowing is either not possible or very costly. For example, property developments are usually financed by the lender taking a charge over the land being developed, which accordingly leads to a lower interest rate and means less risk to all parties.

Clause 4 allows TfL’s subsidiaries to borrow for a discrete purpose and to structure security so that a creditor has recourse only against the subsidiary borrowing and not against TfL and its other subsidiaries. That protects the fare-paying and tax-paying public from any liability that arises on TfL debts.

Clause 4 allows TfL to purchase subsidiary companies that already have secured debt. TfL will no longer be required to restructure secured debt when it purchases a company with such existing debt. TfL had to acquire Tube Lines Ltd and Tube Lines Finance plc at very expensive rates—I well remember the fiasco, as I was a member of the London assembly at the time. Had clause 4 then been in operation, TfL would have been spared significant costs, which ultimately have been borne by fare payers and taxpayers and resulted in lenders receiving enhanced value for their loans for nil consideration to TfL.

Clause 4 includes important safeguards and limitations. It provides that TfL subsidiaries must obtain the consent of the Secretary of State to grant security, except in respect of categories of property included in the schedule to the Bill, which Members can go through in detail if they are interested. The exempt property may generally be described as property that is ancillary to TfL’s core function of providing passenger transport services and includes such categories as property that is used for the purposes of car parking or retail units, for example. The consent of the Mayor of London is always required, irrespective of the type of property being changed.

Clause 4 provides that the rights of existing TfL creditors are preserved in full. A secured creditor may have priority over an existing creditor only where the existing creditor consents to the arrangement, so all parties are protected. TfL subsidiary borrowings will still be subject to the relevant provisions of the Local Government Act 2003. Borrowings must only be for any purpose relevant to a local authority’s functions or for the prudent management of its financial affairs. TfL subsidiaries will also be subject to existing borrowing limits set by the Secretary of State, so the public sector borrowing requirement is protected and security is granted.

Clause 5 expands TfL’s power to form different types of entities for the purpose of carrying out its functions. I understand that this is the most controversial clause for those who object to the Bill. I understand that the sponsors have had meetings with several of the individuals who are concerned and that undertakings have been given in that respect. Currently, TfL may only form bodies corporate, which includes companies and limited liability partnerships. TfL is seeking a new power to form, or join others in forming, limited partnerships and to invest in those partnerships once formed. TfL would like the option of using a limited partnership when seeking third-party investment, which seems a sensible process.

Pension funds and foreign entities are likely investors, so we are likely to see greater investment in joint arrangements with TfL, which will represent good value for the taxpayer. Those investors often prefer to invest in partnerships, rather than company structures, because of the tax transparency that partnerships afford. If TfL can offer a partnership as the joint venture vehicle, it is likely that there will be increased interest in the investment opportunity and that the maximum value of the asset will be realised. TfL proposes that it may form a limited partnership only for the purpose of carrying out its functions, which prevents speculative arrangements.

There is a limited tax benefit from using a limited partnership, but it is confined to stamp duty land tax, which is payable when land is transferred into a partnership. Stamp duty land tax is levied only on the proportionate share of the land being acquired by fellow partners, rather than the whole part. That benefit is conferred on any partner of a limited partnership irrespective of their status and is not unique to TfL. Indeed, many local authorities use limited partnerships for joint ventures and have been supported in doing so by the Treasury.

[Mr Christopher Chope (Christchurch) (Con)]

I am fascinated by what my hon. Friend is telling the House, but surely there is a bigger picture. Would it be better for TfL effectively to be owned by the people of London? They could have shares in TfL, so it would therefore be funded to a larger extent by equity capital without the need to borrow.

[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.

--- Later in debate ---

[John McDonnell]

What those who work in the industry want is a consistent plan for the development of the transport infrastructure, but what the Bill does is give more power to TfL to enter into speculative developments on the sites that it owns, along with developers. In the case of Earls Court—on which I am sure my hon. Friend the Member for Hammersmith will wish to elaborate—we have seen property development for short-term financial gain override the needs of the travelling public and the need for long-term investment in the future of the transport infrastructure. That example illustrates the loss of confidence in Transport for London among the public that will result from its exercise of the new powers, if they are given to it. We may well see a speculators’ charter in relation to properties that are currently in public ownership under the auspices of TfL.

People are worried not only about the desire to gain income, but about the fact that the current property developments are based largely on the selling off of land for the building of residential properties. Transport for London, as a public body, might well want to enter into a partnership with, in particular, local authorities, in the hope of combining the advantages of improving the transport network with the provision of residential homes. However, it seems from the examples that we have seen so far—notably in Earls Court—that the residential homes will not necessarily be for local people: in fact, that applies to a relatively small percentage. Most of the sites are being used for speculative development, and many are being bought by overseas landlords with a view to letting properties at extremely high rents.

People fear that if TfL is given these powers, it will go on a development binge with the private sector throughout London, without taking into account either the needs of the transport infrastructure in the long term or the needs of local communities. The Bill seems to take no cognisance of the need for TfL to bear in mind the social criteria or social objectives relating to any future development when using the powers.

As the hon. Member for Harrow East pointed out, there also seems to be a lack of accountability in the case of some of the partnerships. We received that letter on Friday specifically because concern after concern had been raised consistently over the years—for instance, regarding the fact that even the Secretary of State did not have the authority to be consulted about the exercise of some of these powers. We have now been told, in a letter that we received at 3.30 yesterday afternoon, that an amendment will be tabled to deal with that. It would have been helpful to have seen at least a draft of the amendment; all that we have is a letter of comfort, or discomfort, depending on people’s judgment of it .

If we look at TfL’s record of participation in developments with private sector entities, we see that it is the commercial entity that has gained the profit and TfL that has been left with the responsibilities and, often, the liabilities. In the case of some of the partnerships that have already been entered into, ownership of some of the sites is so diffuse that it is difficult for the public, in particular, to hold anyone to account when it comes to some aspects of the deals.

[Mr Chope]

I am listening with fascination to the hon. Gentleman. Does he agree that the whole purpose of Transport for London should be to concentrate on its core business—providing transport infrastructure for the people of London? It is unlikely that Transport for London will be capable of doing things that are not its core business as well as they are done by specialists in those alternative businesses.

[John McDonnell]

The concern that many of us have is that Transport for London is not a property developer. It is not a developer with expertise in developing sites for high-value residential properties, yet that is the venture that it seems to want to enter into across London on most of its sites. There is an in-built lack of expertise in Transport for London. Many of us think not only that Transport for London is putting sites at risk by removing the possibility of their being used to develop transport infrastructure, but that Transport for London as a whole will be at risk from some of the liabilities that it will take on as a result of going into limited partnerships, which are not protected, with developers. The Bill has consequences not just for specific site development but for the stable funding of TfL in the long term.

I say to the hon. Member for Harrow East that the Bill seems to be an attempt at a quick fix by an organisation that does not have the expertise to enter the activity that it wants to enter. I would be more convinced that it had that expertise if the progress of the Bill had been more efficient and effective. The legislation has been hanging around since 2011. At this late stage, the clauses have still not been drafted properly. Clause 4 has been redrafted three times in that period. We have just received the letter of comfort on clause 5, but no amendment. That does not inspire confidence. This organisation could sit down with some of the most rapacious developers in the history of property development and secure deals without satisfying not just community interests but the long-term financial security of the sector.

I agree with the hon. Member for Christchurch (Mr Chope): when an organisation is called Transport for London, it should concentrate on providing transport for London, rather than go into property speculation in this way. The argument may be that Transport for London is under financial pressure from the Government or others and needs to look at other ventures, but we must take into account its record of working with the private sector to gain additional income or increase efficiency.

There was the debacle of the public-private partnership under the last Government—this is not a party political point. That demonstrates an inherent lack of expertise—I put it no more strongly than that—in the organisation; it lacks the expertise to be able to do deals with the private sector that deliver the service and that avoid the scale of liabilities that we saw under that partnership. It was extraordinary. Members who were here may recall that throughout that period the House was not kept informed. On both sides of the House there was shock at the scale of the incompetence and risk that TfL ventured into in those developments.

Those are the main concerns. The organisation is strapped for cash, by the sound of it, although the Government advised us earlier in the year that it received a significant grant. However, TfL says that it is strapped for cash and needs another source of income. It is looking at developing its sites to provide that and it wants to do it through partnerships with the private sector. As a result there are concerns that the overall operation of TfL will be put at risk. Those are the general concerns.

Let me turn to the individual elements of the Bill. I advise Members to go to the minutes of evidence taken before the Unopposed Bill Committee in the other House under Lord Sewel. TfL, with the Department for Transport present, took the noble Lord through the details of the Bill. As the hon. Member for Harrow East has said, it went to clause 5 in particular, and it said:

“Clause 5 would allow TfL subsidiaries to borrow and charge against assets and revenue streams. This will provide TfL with greater flexibility on how it borrows. Under secured borrowing, TfL subsidiaries may borrow for a discrete purpose, and the security could then be structured so that the creditor has recourse only against the subsidiary borrowing and not against TfL or other TfL subsidiaries.”

It went on to say:

“TfL subsidiaries may not grant security without the consent of the Secretary of State, other than in respect of those matters that are specified in a new schedule proposed to be included in the Bill.”

The hon. Gentleman referred to that.

Let me take Members to that new schedule. This is not a delaying tactic; I would like TfL to come back with some clarity on all this. The schedule means that it can, without the Secretary of State’s approval, enter into agreement with regard to subsidiaries to borrow and charge against assets and revenue streams. As I have said, it can do that with regard to activities identified in this schedule without Secretary of State approval. Let me give a selection of them. It can borrow against assets including

“property related to a tolling scheme…property related to the generation of power…property related to sponsorship activities being carried out by third parties”.

It can also borrow against

“property related to the use of land for commercial letting”.

I have no idea of the scale that is envisaged, but it means that TfL, without Secretary of State approval, can become a sizeable landlord with commercial lets and borrow against those revenue streams. I would like TfL to say what is meant by this and I would welcome some clarity as we move into the next stages. What is the scale of operation that it is looking at?

The schedule also refers in sub-paragraph (n) to

“land which is not operational land”.

Again, it would be useful to know from TfL what its definition of “not operational land” is and what the scale of that is in its portfolio.

I raise this because many of our individual constituencies will contain pieces of TfL land which are set aside for future transport developments, and it looks as though this will enable TfL to raise revenue or borrow against those pieces of land without any Secretary of State approval whatsoever. It would be useful to know the scale of that and to have some form of report setting out where these pieces of land are. They could be fairly sizeable.

Again, I would welcome clarity about the purpose of this particular venture in this particular case. As Members have said earlier, we all have sites in our constituencies that TfL may want to borrow against and therefore develop with a private sector subsidiary. If it then removes a transport operation from that site, it will have a knock-on effect on other sites because of the shift of functions, as is planned at Earls Court. I am concerned that there seems to be a lack of clarity from TfL in its dialogue with the petitioners on some of these issues with regard to the supply of information.

In the presentation to the Unopposed Bill Committee in the other House, clause 6 was explained as follows:

“Clause 6 of the Bill will allow TfL to form or join with others in forming limited partnerships. TfL would like to be able to use partnership structures to seek third-party investors in its property estate, and to manage secondary income generated from the estate.”

TfL mentioned, I think to reassure the noble Lord in charge of the Committee, that

“Pension funds and development partners are identified as likely investors, who often prefer limited partnerships to other legal structures to invest in.”

I am sure that we will deal with this matter in Committee, but I would like to ask Members to look—if not today, then in Committee—at some of the concerns raised by the petitioners about the concept of limited partnerships and, in particular, at a petition from Mr Richard Osband and other parties. Mr Osband was with us on Friday when we met TfL. He is a knowledgeable person who has done a large amount of research in this area. He admits that he is not a lawyer, but he has vast experience in property development and commercial activities. He tried to explain his concerns, which I now share, to TfL regarding limited partnerships.

The issue that Mr Osband raised was that a registered limited partnership may not carry out any activities at all. The partnership is between one partner and a general partner, and the general partner largely bears the main liabilities. If the other partner becomes active in some way in the management of the process, it will then become part of the definition of the general partnership and will bear liabilities. Mr Osband argued that the limited partnership concept was opening up TfL to bearing almost unlimited liabilities as a result of the process that the legislation will enable it to enter into. On Friday, we were mystified as to why there was a need for limited partnerships. The legislation itself provides for the ability to enter into partnerships with companies and others. These would be proper legal entities and they would ensure that the burden of risk was shared with the partner rather than falling significantly on to TfL.

We are now at a late stage, and the petitioner has made his position clear. On Friday, he was simply inviting TfL to get further legal counsel’s opinion, because he and a number of others had contested the original counsel’s opinion that TfL had brought forward. I have yet to hear a convincing argument from TfL as to why it would want to enter into limited partnerships, given the element of risk involved. TfL said on Friday and in some of its other discussions with Mr Osband that this was the preferred route of the developer. I am afraid that that does not inspire confidence that any public investment in these developments would be secure.

--- Later in debate ---

[Mr Christopher Chope (Christchurch) (Con)]

As the hon. Member for Nottingham South (Lilian Greenwood) said, these extensive powers must be subject to scrutiny and any safeguards in relation to their being exercised must be included in the Bill. We do not want things to happen in future that we had not expected, because, perhaps, we did not think that Transport for London or its subsidiaries would behave in a particular way. That is why I welcome the fact that we have a full Second Reading debate on this Bill. The promoters of a lot of private Bills that come before this House get agitated because some of us think that such Bills should be subject to scrutiny, but an increasing number of our colleagues now recognise that without such scrutiny we and our constituents can be taken for a ride.

I do not represent a London constituency, although many years ago I was the leader of a London borough, so I take an interest in what happens in London—and of course I am resident in London during much of the week. I go along with the hon. Lady in giving a lot of credit to TfL for the improvements in transport in London over recent years. There have been enormous improvements in the reliability of the services provided, the extent and range of those services, and the sensitive way in which the Mayor and TfL have responded to the developing needs of the populace of London. That is all the more reason for us to ask why, given that TfL has made such an enormous amount of progress, we should want to encourage it, through this Bill, to move its focus away from its main task and responsibility, which is to provide transport for the people of London.

My hon. Friend the Minister set out the financial context and made it clear that, ultimately, Transport for London will need to be self-sufficient and not dependent on grants from the national taxpayer. I am sure my constituents will be pleased with that objective, because it will save them money as national taxpayers and TfL will have to fund its future operations from the income it receives from fare payers, its investments and operational efficiencies. I am all in favour of that.

I was interested to hear my hon. Friend say that, of the £16 billion saving that TfL needs to find by 2021, £12 billion has already been identified. He then said, however, that he thought the Bill might save TfL £50 million, which is of a rather different order from the actual gap between the two figures, namely £4 billion.

TfL should try to save some money. It has a lot of assets and if some of them are not core assets that it requires for its operations, the first port of call should surely be to try to sell off those surplus assets so that they can be utilised by other people. This Bill, however, seems to be designed to discourage TfL from selling off its surplus assets. It encourages it to put them into vehicles such as subsidiary companies and limited partnerships, which are not open to the same public scrutiny as TfL through its annual accounts. Obviously, that raises public accountability concerns.

The Bill’s promoters have a heavy burden of responsibility and they will have quite a job to persuade the hon. Member for Hayes and Harlington (John McDonnell) and me. We do not always agree on political issues, but the fact that we are both expressing concerns from different angles should cause TfL to think what can be done about it.

[Ms Abbott]

Will the hon. Gentleman give way?

[Mr Chope]

It is a delight to give way to the hon. Lady.

[Ms Abbott]

I am grateful to the hon. Gentleman for giving way. The fact that he and my hon. Friend the Member for Hayes and Harlington agree on something is a sign either that it is absolutely the wrong thing to do or that it might be absolutely the right thing to do. I do not understand why the hon. Gentleman is so opposed to TfL attempting to create arrangements for a long-term revenue stream rather than a one-off profit from simply selling the asset. As the taxpayer subsidy goes down, surely it is prudent for TfL to try to ensure long-term revenue streams for itself, which is what the arrangements are all about. They may not be perfect, but how can the hon. Gentleman deny that that is a reasonable aspiration for TfL?

[Mr Chope]

The short answer to the hon. Lady’s intervention is: once bitten, twice shy. I think that most of us in this House—certainly those of us who have served for a certain time—feel that we were bitten by the enthusiasm of successive Governments for the private finance initiative and the public-private partnership. We were told that they were new ways of financing our public services and public infrastructure and that they could only be good news for everybody. I speak as a member of the Conservative party, which promoted PFI, but what a disaster some of those PFI projects have turned out to be, largely because people thought they could get something for nothing and that, instead of saving on revenue expenditure, they could start borrowing and use rather obscure vehicles and arrangements to do so. Then, however, after reading the small print, we found out that, instead of being transferred, the risk—that was the principle the Treasury kept talking about in relation to PFI: it said it was not possible to have PFI unless there was a transfer of risk—had actually been retained.

As a London Member, the hon. Lady will be all too well aware of the problems in London associated with PFI/PPP projects in the health service, which have been a disaster in many respects. The people or the patients whom we should have helped are finding that the services they want are not now as good as they would like because of the costs of those projects, which in some cases continue to be a millstone around the necks of quite a lot of hospital trusts.

I have answered the hon. Lady by referring to a different sphere, but as soon as people start talking about new practices and methods, as the Minister did when he began his remarks about how the Bill will release a lot of revenue and capital, we need to be suspicious. At the end of the day, the only way to get better quality transport in London is by investing in it, which means using money from fare payers or taxpayers, or encouraging Transport for London to reduce its costs and find alternative revenue streams. Of course, one way would be to sell off surplus assets, and we should use the provisions of the Bill to encourage that, rather than to discourage it.

I do not know about the situation in Earls Court exhibition centre. I have no specialised knowledge about it, and I look forward to hearing from the hon. Member for Hammersmith (Mr Slaughter), who represents the Hammersmith and Fulham interest in it. As a result of the last London borough elections, the issue of political risk has once again raised its head. The people engaged in that project thought that the council was benignly supportive of their proposal, but now that there has been a change of council, the new democratically elected council has said that it wants to revisit it all. I do not know the extent to which the council can do that, or whether the contract was already a done deal.

[Mr Andy Slaughter]

(Lab) (Hammersmith): I have resisted intervening because I want to get my full whack of time, but I have to come in on that point. There was always going to be a political risk in relation to that massive site—it covers two boroughs, with the mayoralty and various other interests, such as that of TfL—because it was a 20-year project. TfL signed up to a 20-year project, and tied its hands. It, above all people with political masters, should have known that that was the case.

[Mr Chope]

That is fascinating. I am glad that I gave way to the hon. Gentleman. When there is talk about reducing risks—the statement from the promoters states that the Bill will reduce risk and the costs of interest—we need to look at such assertions with quite a lot of scepticism.

To finish my point about TfL as the freeholder of Earls Court exhibition centre, let me ask why it is still the freeholder: why does TfL need to own Earls Court exhibition centre, and why does TfL not sell it? I do not know whether it could sell it to Hammersmith and Fulham council. In my view, TfL’s core business should not be to own an exhibition centre. If that had been the situation in my days in Wandsworth, we would very much have regarded it as one of those things to sell and get rid off to benefit local taxpayers, on the basis that if a freehold asset is sold, the receipts from it can be utilised immediately for the vendor’s top priorities. If TfL did not own the freehold of Earls Court exhibition centre, would it think of buying it? That is the sort of question that should be asked by those people who become star-struck by the idea that they are charged with developing some great property.

There has always been a glamour associated with owning assets. Municipalisation, whether of race courses or arts and entertainment centres, was often associated with the desire of the mayor and councillors to be able to get free tickets and hospitality by using what they saw as their role in looking after those important assets. My philosophical view is that they should never have had those assets in the first place. They should have sold them off and then enjoyed going out, paying for a drink themselves and saying, “Great. We’ve reduced the size of the local state and its apparatchiks in our area.” I am suspicious and sceptical about all of this. There are some fine people working for TfL, but if they think that they have skills that can be deployed in the property sector, they should go and get a job in the property sector.

I am particularly concerned about clause 4, which is the first clause of substance in the Bill. It proposes that what TfL cannot do itself should be allowed to be done by its subsidiaries. Members often speak of their concern about Henry VIII clauses, and this clause is the private Bill equivalent. It would allow TfL to set up subsidiaries at its own behest without any accountability, and those subsidiaries could then be used to do what TfL itself is not allowed to do. Why are we countenancing that? Why should the original safeguards, which were written into primary legislation—section 164(a) of the 1999 Act—be removed? My hon. Friend the Member for Harrow East (Bob Blackman) said that if one had to go to the Public Works Loan Board or get bonds, one would have to pay higher interest rates than those one could get using these new subsidiaries as vehicles, but I think that is an unproven assertion. Let us consider other ways in which those things could be done.

Clause 5 would extend the power to invest in subsidiary companies to include limited partnership vehicles of one sort or another. Why are we doing that? Surely it would be much more transparent for TfL to set up a limited company that is properly accountable and then ensure that it produces accounts so that people can keep an eye on what it is doing. As soon as we get into the murky waters of partnerships and deal making that is not subject to public scrutiny, the people are not well served. It might be that among the well-paid employees of TfL there is a group of people who are much better than the directors of British Land at making deals to enhance the value of land in their ownership, but I somehow doubt it. Rather than encouraging TfL to aspire to set up subsidiaries that are like British Land, we should say that if it wants to set up subsidiaries, they should be proper companies that, as under the existing law, are subject to limited liability and open to public scrutiny.

We know that when we allow public organisations effectively to engage in devices to get themselves out of a short or longer term financial fix, it often results in tears. I remember when Hammersmith and Fulham was mortgaging all its lamp standards. It sold them—was it to a Japanese bank? I cannot remember—and it then leased them back because it obviously needed to have lamp standards. Those were the early days of what one might describe as a sort of barmy behaviour by Labour councils—that was one of the things that ultimately contributed to Hammersmith and Fulham becoming a Conservative-controlled authority.

There are examples of councils selling their assets then leasing them back and paying a lot more for them in the long term, but in the short term it looks good on the accounts. The council has a capital receipt from the sale of the asset, although local taxpayers will have to pay for the next 50 years for the consequences. That was at a time when the Department of the Environment, as it was then, made clear to the banks that we would not guarantee those assets. The banks thought, “Fantastic. We will buy all these lamp standards from Hammersmith and Fulham, and because we are buying them from Hammersmith and Fulham, if there are any difficulties, the money it owes us will be guaranteed by the Government.” The Department had to make clear to those foreign banks that if Hammersmith and Fulham, or any other council, defaulted on its obligations, the Government were not going to stand behind it.

I fear that some of the same thinking is creeping into this Bill, which is that in order to get over the problem of the £4 billion shortfall we should allow the proliferation of these vehicles. As the hon. Member for Hayes and Harlington pointed out, if one couples clause 4 with the schedule, the mind boggles at all the things that could be charged by a TfL subsidiary without the consent of the Secretary of State—always remembering, of course, that under its existing powers TfL is not allowed to subject those things to a charge. If that measure were to go through unamended, it would create the potential for enormous mischief not just to London taxpayers, but to people who use TfL facilities. If Transport for London gets strapped for cash, it will have to put up its fares, reduce staffing or whatever, so the situation would not be without consequences.

I have a number of concerns about the Bill and I hope that some of them can be ironed out during the opposed Bill Committee. Underlying them all is the fact that I think it would be better if Transport for London concentrated on its core business and sought more equity investment—in other words, shareholder investment. Why does Transport for London not set up a subsidiary company, as it can do at the moment, and say, “We are going to sell shares in this limited company to the people of London”? Why not sell shares to users of Transport for London services? Why does it not raise that sort of money and, for good measure, say, “As an incentive, we will throw the assets of the Earls Court exhibition centre into the subsidiary company”? People who enjoy going to exhibitions at Earls Court could buy into that subsidiary company and perhaps get discounted entry prices, or whatever.

There is a lack of imagination in some of this, possibly because this process has been dragged out for so long that people have got into a tramline way of looking at it. Why do we not think more radically? Why do we need to be stuck with TfL, however good it is, and the same structure? Why do we not allow British taxpayers and property owners to buy shares in TfL, instead of using this sort of device, which will probably give the benefits to sovereign wealth funds, foreign banks, Russian oligarchs and whoever? They will be benefiting at the expense of the people of London. As somebody who was born in London, has spent a lot of time in London and had the privilege of leading a London council, I have the interests of the people of London at heart.

--- Later in debate ---

[Mr Slaughter]

Absolutely. I do not know whether I am right in suggesting that Earls Court was the fons et origo of that, but in any event the potential for it across London is huge. Moreover, as the hon. Member for Christchurch pointed out, the potential for it to go wrong is huge, and I think that that is what is going to happen.

[Mr Chope]

I am grateful to the hon. Gentleman for complimenting me earlier on what I had had to say. May I ask whether he thinks that TfL should sell off many of these surplus assets, rather than risking the setting up of vehicles for their development?

[Mr Slaughter]

I am coming to that point. I have given the House the benefit of what could be described as my knowledge of how things have progressed so far and what concessions have been made, but it is clear that clause 5 is intended to enable such vehicles to be set up, along with deals with pension funds and development partners for the management of secondary incomes to create income streams.

Obviously—this brings me back to the point that I think my hon. Friend the Member for Hackney North and Stoke Newington was making—if TfL manages its property portfolio in the best interests of the farepayer with the aim of keeping fares down and, indeed, reducing them, I do not object to its finding ways of establishing the best return on assets, provided that those ways are legitimate and sound. In some cases, that might involve not selling an asset and investing the money at what would possibly be a low rate of return, but embarking on some form of joint venture. However, let me now deal with the rest of what I am against. I promise that, before I finish, I will respond to the hon. Gentleman’s specific point about whether sales per se are simply a better option, and whether we trust them.

There is a sense in which I would say yes to that. I do not want to be rude to TfL’s management, because I think that many of them are very good at what they do, particularly on the technical side. On the whole, however, they are no match for the major property developers of London. I am afraid that the same could be said about local authority regeneration and planning officers. Property developers see them coming and fleece them for everything they have, which is very unfortunate. It is particularly unfortunate because it is our money. What is presented in the first instance as a way of maximising return for the farepayer ends up with the poor old farepayer— and the taxpayer—picking up the major share of the bill. I think that when I say a little about Earls Court the House will understand exactly what I mean, because that is the best example.

It surprised me to learn that, unlike local authorities and other public bodies, TfL does not have a duty of best value under section 123 of the Local Government Act 1972. It says that it still tries to obtain best value for a site—presumably from a commercial point of view as much as for any other reason—but for a public body such as TfL this is a balancing exercise.

Of course we want TfL to maximise the return on its assets in the interests of its core business, as my hon. Friend the Member for Hayes and Harlington said, but we also want it, as a public body under democratic control, to behave responsibly in environmental, social and economic terms. I fear that we are getting the worst of both worlds. We are getting poor-quality development, poor-quality decision making and poor-quality financial return. Therefore, the point about TfL’s area of competence is a serious one. I do not make it as a debating point to have a go at TfL. I wish it every success. But I have seen the evidence with my own eyes over many years.

Another reservation is to do with the collateral effects. Again, I will be brief on those, because they have been dealt with. According to the committee minutes, there will be some tax benefits in avoiding stamp duty, at least for TfL—it is a moot point whether we think that is a good thing to do or not—but when the benefits of avoiding tax go to the partner, that is a concern. As is the case with the Earls Court partner, major multinational property companies are avoiding paying UK tax by being registered in Jersey. TfL is facilitating that. That is plain wrong. A lack of transparency comes from the limited partnership model, rather than the limited liability partnership model. That is also plain wrong.

I also think, to put it crudely, that TfL is getting into bed with some dodgy characters. If they are not dodgy characters, then the people those people are getting into bed with are certainly dodgy. Capco, developers of Earls Court, has a partnership with the Kwok brothers, who are on trial for fraud in Hong Kong. When I put it to TfL last Friday that it should not be in that company, it said, “We have no association with the Kwoks”, but they signed a section 106 agreement for the site they were developing.

Let me give this example because it makes the point. The Earls Court area is subject to a masterplan. That was devised by Capco and everyone fell into line: the Mayor of London fell into line, as did TfL and the two Conservative-controlled boroughs. Therefore, we had the obscenity of a planning framework being designed around a planning application and of allowing a developer to act as predator on almost 80 acres of prime land in central London without any competition. The developer dictated its terms over a period of years, feeling that it had such pliant partners that it could do whatever it had to do.

As the hon. Member for Christchurch, who is long in the tooth and rather shrewder than a lot of politicians, said, that may work for a year or two or even five, but it will not work for longer than that and sooner or later there will be a change of regime in Hammersmith and Fulham and the apple cart will be upset. Possibly, in a year and a half, there will be a change of control at city hall and these schemes will still be in their infancy. Yet TfL has signed up to that masterplan, which I can evidence is not just a terrible scheme for the whole of west London but a terrible financial deal for the public sector partners.

All that land is being lost. Those premier exhibition centres in London contribute 16% of exhibition space in the UK and 30% of exhibition space in London. We will lose over 750 good-quality affordable homes, which will be demolished to make way for unaffordable homes. We will also lose the main engineering and maintenance depot for TfL and even TfL admits it does not know how it will cope without it. The first I heard about the move to Acton was when the hon. Member for Harrow East mentioned it today. It may have been a surprise to the hon. Member for Ealing Central and Acton (Angie Bray). It was certainly a surprise to me.

At the Friday meeting and previously, I was told by TfL that there were no plans, and that the operational decisions had not been taken and probably would not be taken until 2020. However, it is a question not only of manufacture and maintenance but of the stabling of the trains. At the moment, TfL says that they have nowhere else to go. Therefore, we have a peculiar situation in which TfL has signed and voluntarily bound itself up to that masterplan, a terrible financial plan, a terrible social deal for my constituents and a terrible deal for the economic life of west London even though it is not in a position to deliver on it and does not look as if it ever will be. I cannot believe that by 2020 there will not have been some change in political control that would rule that out entirely. That is what I mean by the naivety, for want of a better word, in the way it has operated these schemes.

We have some of the players from the earlier debate here. The Minister and the shadow Minister and myself are present, and I wish we still had my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson), because we had a very similar debate about the plans for HS2. As was largely not the case with Old Oak Common but is largely the case with King’s Cross, they involved going into an area that was already populated and already had housing that people wanted to live in and jobs that people wanted to do, and they were sold on the belief that it was a good commercial deal for the owner of that site. In my view it is simply unacceptable for that to happen. It is unacceptable that there should be that loss of homes—affordable, good-quality homes that people have occupied for 40 or 50 years—and their being demolished simply to hand over a site.

Yes, TfL got a terrible deal, but Hammersmith and Fulham council got an extraordinarily negligent deal that has to be investigated. It sold 23 acres of prime residential land for a net sum of £50 million, except within that £50 million it has to pay for the relocation and the purchase of the properties on that land, and with every month that property prices rise, that net sum is decreasing. Hammersmith and Fulham council—under its new Labour ownership, but gifted by its previous Conservative administration—could end up actually owing money for having given away 23 acres of prime land and having to displace 2,000 people who did not want to be displaced. That is what is happening in west London at the moment but it is on the basis of that strategy and plan that TfL wants to go forward with this kind of proposal. Can you wonder, Madam Deputy Speaker, that I am not terribly happy by it pursuing this course of action?

[Mr Chope]

What the hon. Gentleman has said is fascinating. Does he accept that what he has just described is available to us because of the transparency of the existing arrangements? However, if this Bill goes through, it may not be so easy in the future to be able to describe exactly what happens because there will not be that transparency.

[Mr Slaughter]

I have to say that I agree with the hon. Gentleman, although it has not been that transparent: it has taken rather a lot of work, over the last six of seven years and I am probably prematurely grey as a consequence. It has been like getting blood out of a stone, and so much work has been done, not primarily by me, but by the residents, the RMT, and people like my colleague my hon. Friend the Member for Hayes and Harlington and the petitioners. They have worked day and night on this and have harried these people who are so irresponsible with the public assets that they hold—all public land at Earls Court, all being squandered and given away to developers, for losses of hundreds of millions, if not billions, of pounds.