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Transport for London Bill [HL]

Volume 768: debated on Monday 8 February 2016

Motion to Take Note

Moved by

That the Grand Committee takes note of the delays in the passage of the Transport for London Bill [HL] and the case for land disposed of under the provisions of that Bill being used to increase social housing.

My Lords, it is quite unusual for a private Bill to be the subject of a certain amount of political attention and controversy. I have had a bit of a job explaining to friends what the difference is between a private Bill and a private Member’s Bill—it is not that widely understood.

Let me explain what my concerns are, because I put a stop to a fairly smooth process so that there would be a chance to have a debate, which is what I was after. Why has this Bill been around for so long? I understand that it first got to Parliament in 2010, nearly six years ago. It may have got stuck in the House of Commons—or it may not—but I am puzzled as to why it has taken so long. It is important to note that the time lag has meant that the housing market in London has changed, becoming much more acute and difficult. In one sense, the Bill is a bit out of date because of the passage of time. I have had quite a large number of representations about the Bill and am grateful to Transport for London, which came in to discuss it with me.

I have mentioned my first concern—the length of time the process has taken. It is quite difficult to remember the situation when the Bill first came to this House. It may have been more recently but it still means that some of us are not as up to date as we might be on what happened when it was before the House. What is not controversial is that the property market has changed quite a lot in the last six years, especially in residential housing. There are far more housing pressures and many people in London are finding it hard to find property to rent or to buy.

I understand that Transport for London is facing a large cut in its budget—up to £800 million in the year and £2.8 billion over a five-year period. I may be corrected on the precise figures, but it is a large cut. The politics of the Bill are that TfL has been told that its funding has been cut and it has to raise money by some other means. The main means open to TfL as far as this Bill is concerned is to dispose of assets of land at or near stations. In the initial phase, most of the sites—there are about 50—have been in zones 1 and 2 but the plan is to expand into wider zones. Of course, the value of the sites in zones 1 and 2 far exceeds the value of the sites further out.

TfL is intending to dispose of land for housing; some will be used for offices as well. It is obviously a good thing to use the land for housing but the next question is what sort of housing. Will it be for more affluent people or for ordinary people who are bearing the brunt of the housing crisis in London? The Minister wrote me a letter, for which I thank him, about the Bill and about housing. He mentioned three ongoing planning applications at Nine Elms, Northwood and Parsons Green, saying that these,

“will deliver … affordable housing levels ranging up to 40%”,

of the total.

The problem is: what is affordable housing? I have spent some time doing research into this. We understand what social housing is but affordable housing is variable and there is no clear indication as to whether housing that is affordable can be accessible to ordinary people. I have been looking at various definitions. For example, from the national policy and planning framework there is a glossary that mentions affordable housing. It says:

“Eligibility is determined with regard to local incomes and local house prices”.

and it talks a lot more about affordable housing. I find it difficult. If the answer is that all the housing, or a large part of it, will be affordable then that is not quite clear enough and I would like to know more about what sort of housing it will be. I appreciate that London boroughs decide how they define affordable locally and that is a difficulty. London-wide, a lot of the affordable housing is beyond the reach of ordinary people. Therefore, whereas I welcome the idea that the land to be disposed of is for housing, I question for what sort of people it will really be intended for. Of course we could discuss the definition of social housing and affordable housing for a long time but I put it as a question.

As I said, TfL is under enormous pressure from the Government to maximise its return. In a way I have sympathy for TfL, which is caught between pressure from the Government who are cutting its money and pressure from people who want better housing for Londoners at prices that Londoners can manage to pay. It is a bit unfair that TfL is put in this difficult position. Furthermore, TfL has the power via the Greater London Authority to make compulsory purchase orders for land adjacent to these properties. That will of course be a way of increasing the return but, again, it might be a way of taking housing away from ordinary people. So that is also a matter of some concern.

The land we are talking about is currently public land: it is a public asset. It is not a matter of one private developer selling to another, and it is a pity that some of that is not going to social or decently affordable housing. We are talking about public assets spread where there are TfL assets, particularly at stations. I believe the priority in disposing of public land should be land that would be used preferably for social housing or affordable housing at a price that would mean something significant.

In the Bill, TfL is to engage with property developers and there is this slightly puzzling concept of limited partnership; it has been much criticised for being less transparent and is a device used to minimise tax obligations. I am not certain whether joint ventures and limited partnerships are the same thing or whether there are technical differences between the two. All I know is that in joint ventures the private developer can have anything between a 10% and 90% stake. Therefore, there is an issue that is of real concern. Those of us who believe passionately that London has a housing crisis that should be tackled urgently do not want to support anything that means moving backwards and losing valuable land that can be used for ordinary people.

I understand that the contentious clause—Clause 5 —may be taken out of the Bill when it gets to the House of Commons. I do not think it is a secret so I am not giving anything away in saying that. First, I hope that can be confirmed. If it is taken out, can we have some indication as to the remaining basis on which TfL will be able to sell land? It still has the powers to do it though it will be more limited if Clause 5 disappears. Therefore, I would find it useful to know what sort of powers TfL will have left and whether there will be sufficient safeguards in that arrangement to meet some of the concerns that I have expressed. The proposition is a very simple one. I beg to move.

My Lords, I apologise for not having put my name down to speak. I support the noble Lord, Lord Dubs, because the whole issue of affordable housing is very complex. The waters have been completely muddied by the Mayor of London, who changed the whole concept.

Another issue that I want to put on the table in an urgent way is what is already happening on some of these sites; for example, at Parsons Green there is a thriving artisans’ hub and it seems very strange that those people should be driven out without any confirmation of where they can go or the possibility of return. So I stress to TfL that the direction is not only about housing. We all want housing, we all want affordable housing—some of us even want social housing—but we also want jobs and it is incredibly important that those factors are brought in as well with this Bill.

My Lords, I thank the noble Lord for initiating this debate. It is important, given the age of the Bill, that we have the opportunity to say something about it. As the noble Lord said, it has been around for a long time and I would argue that the financial and political mood has changed in that time. The Bill may no longer be as in tune with its time as it was four or five years ago.

There is greater concern now about corporate social responsibility, financial transparency and corporate taxation. Tied up with all this is a general public unease about the predominance of foreign ownership of much of our infrastructure. TfL itself has an excellent reputation for what it does and it is essential that it does not undermine that reputation. As a company owned by the public and working for the public, it needs to set the highest possible standards of social and financial responsibility and transparency.

I understand the imperatives behind the Bill. They have been reinforced since it was introduced. The Government’s spending review last November cut the revenue grant faster than ever—faster than expected—and it will be cut by £2.8 billion over the period up to 2021. In addition, the London housing crisis has intensified. The truth is, we desperately need the land that TfL will sell as surplus for new homes. So I support TfL in doing that, but with caveats.

First, Clause 5 deals with limited partnerships, which in my view are a step too far for a public body. It could mean additional risk for TfL and it certainly would mean a lack of transparency on ownership of land and who exactly the partners of TfL are. In addition, I urge TfL not to repeat the mistakes that have been made, for example, at Earl’s Court. That really is a recipe for how not to do it. I very much hope TfL will learn from that situation. There are too many flaws and disadvantages to that development for it to be called a bonus for the people of London. I would like TfL to commit very strongly and transparently to social housing and rentable housing—not just the umbrella term of “affordable housing”—on the sites that it sells.

Secondly, we need more public consultation and engagement, and more transparency, please. With that in mind, I strongly welcome the announcement last week that Transport for London is partnering with 13 specific organisations with which it plans to undertake long-term development. That is a really good step.

Finally, I urge TfL to take a long look at the mistakes of the past in the transport industry in general. Too often, land used for transport infrastructure was sold off too quickly and was then discovered to be strategically important. I know that there are clauses in the Bill—and indeed TfL manages its business in this way in general—which require it to get permission from the mayor and, in some cases where the land is of strategic importance, from the Secretary of State. However, there is no role, for example, for the National Infrastructure Commission, although that is understandable because it did not exist until recently. However, I ask both the Minister and TfL to consider whether there should be a role for the infrastructure commission in advising on the sale of large parcels of land, which could well prove to be of strategic importance.

My Lords, I thank my noble friend Lord Dubs for enabling us to have this debate today in Grand Committee. We should all be grateful to him for enabling us to highlight the important issue of social housing in London.

As we have heard, we have a housing crisis in London, and in particular a social housing crisis, which the Government are doing nothing to help us with. Only 11,000 council homes were built last year compared to 33,000 across the country in Labour’s last year in office. It is so disappointing that we are seeing people on modest incomes being driven out of central London. London is a wonderful city—probably the best city in the world. That is why the Olympics and Paralympics were such a success—the languages spoken, the community ties from all over the world, the art scene, the sport, the history, and the spectacle of London. However, for that to continue to grow and to keep London at the top we have to make proper provision for people on all incomes doing every job you can imagine to be able to live in this great city, from emptying your bins to sweeping the street, to working as a classroom assistant through to social workers, lawyers and business men and women, to some of the highest earners on the planet, who run some of the biggest companies in the world. Social housing provision with proper social rents has to be part of the housing tenure throughout this capital city.

If the noble Lord, Lord Ahmad of Wimbledon, comes back and talks about all the affordable housing in London, it would be better if he called it “unaffordable housing” for large numbers of people living in the capital. Where I live in Lewisham, which is a lovely part of London with rows and rows of Victorian terraced housing, people in the private rented sector pay over £2,000 a month to live in an ordinary terraced property, which is £24,000 a year. The new national minimum wage, which will come into force in April, will mean that you will earn £14,000 a year. Even if two people earn £20,000 in London, paying rent of £24,000 a year does not give a huge amount to live on for all the other expenses.

I am very grateful for the briefing note and for the meeting I had with TfL last week. I can understand that TfL must be very frustrated at the time the Bill has taken and the fact that it is still making its way through Parliament. It was originally deposited in 2010, as my noble friend Lord Dubs said. It is in everyone’s interest that these private Bills from TfL and other public bodies make much speedier progress through Parliament. I am sure that TfL would have preferred that the Bill was decided on, either way, in a much more timely fashion. It is probably not in his remit but can the noble Lord, Lord Ahmad of Wimbledon, talk to whoever is responsible for managing the process of getting these Bills through Parliament? I suggest that the time for a review is well and truly upon us. Six years on an eight-clause Bill, even though it is opposed, is far too long.

The most controversial clause is Clause 5; it is connected with the Earl’s Court development we heard about before, which delivers such a poor rate of return on affordable homes. TfL will say that the development would have gone ahead anyway, as the land it controls is not crucial to the development. I also understand and accept that in order to deliver a transport system that can meet the ever-growing demands of London, options need to be looked at for maximising revenues and minimising costs. That is of course due to the budget cuts we heard about earlier in today’s debate. However, when it comes to the redevelopment, rezoning and using public land to build housing, TfL has a responsibility to London and Londoners not only to seek to maximise the money it receives for the assets but also to ensure that it understands its responsibility and demonstrates its commitment to using its assets in a way that delivers the housing schemes, big or small, which it is involved in. That will enable Londoners to live in their community in a property they can afford to live in and be a part of this great city—and the affordable rent model is only one part of that. As I said, charging 80% of market rent is not affordable for many people in parts of London; in fact, it is totally unaffordable. My plea to TfL would be to make proper provision for property at social rents in schemes that it is involved in.

I understand that we will shortly be advised by the noble Baroness, Lady Grey-Thompson, of some amendments to be made to the Bill later, and I am happy with what is proposed. I concur with the questions of my noble friend Lord Dubs. With that, I welcome the Bill back to your Lordships’ House and we will look with interest at its progress through this House and the other place with the amendments we will shortly be advised of.

My Lords, first, I join other noble Lords in congratulating the noble Lord, Lord Dubs, on securing this important debate. I have listened with interest to the contributions that have been made by noble Lords.

As we have already heard, the Bill will enable Transport for London to use financial practices and mechanisms which will allow it to release greater value from its assets and financing arrangements.

Before I come to that, the noble Lord, Lord Dubs, and others raised the issue of the time it has taken for the Bill to reach this stage. It is not often during my five years or so in your Lordships’ House that I have taken up a Bill which was commenced prior to my joining, but this is one such.

If we look into the history of the Bill for the record, it is appropriate to note that it was read for the first time in the House of Lords on 24 January 2011, and received its Second Reading on 13 December 2011, when it was debated. As noble Lords may recall, the Bill was petitioned against by the West London Line Group. This petition was withdrawn when TfL agreed to delete a clause, and an Unopposed Bill Committee took place on 28 January 2014. The Bill was then read for a third time on 4 March 2014, and transferred to the House of Commons, where it had its First Reading that day. The Bill’s Second Reading took place on 9 September 2014, and the Opposed Bill Committee eventually took place on 13 January 2015. However, the Bill was blocked when it came up for consideration on 12 February 2015; that necessitated a debate, which was held on 16 March 2015. Time then ran out to debate all the amendments tabled by opposition MPs, which included the honourable John McDonnell and the right honourable Jeremy Corbyn.

We are back, however, in this Committee today to debate the use of financial practices and mechanisms which will allow TfL to release greater value from assets for financing. This is a principle that I welcome, especially given the Government’s continuing commitment to finding significant efficiencies in public spending, in the interests of both the taxpayer and the travelling public.

The noble Lord, Lord Dubs, raised the issue of the settlement. As the Minister responsible for London at the Department for Transport, I am acutely aware of the challenging budget discussions that we have had with Transport for London, but they have been held in a very co-operative climate, including those meetings we have held with the Mayor of London.

For information, as noble Lords may well be aware, TfL will receive about £11 billion of government support for the next control period, which runs from 2015-16 to 2020-21. This is a good settlement for London, and will enable TfL to continue to deliver the biggest ever investment across London’s roads and streets. TfL has confirmed that the settlement will ensure that it can continue the modernisation of the capital’s networks across transport, support thousands of jobs and the creation of new homes and promote economic growth across the UK.

I concur with noble Lords that London is an important city—indeed, it is the capital city of our great country—and therefore requires support and investment. The Government have underlined their commitment. I continue with other colleagues to work very closely with TfL to ensure the delivery of the infrastructure required so that London not only sustains its position on the global stage but strengthens it.

I understand from TfL that the Bill could realise in excess of £50 million in immediate benefits by improving its hedging power, enabling it to borrow money in a more cost-effective way and allowing it to make the most of its assets.

The department supports TfL’s commercial programme, and we want it to maximise its unique commercial position to ensure its assets are generating revenues to their greatest potential. We believe absolutely that giving TfL greater financial flexibility will provide it with the opportunity to run its business in a more efficient way.

I know that we will be hearing from the noble Baroness, Lady Grey-Thompson, shortly on some of the matters relating to revised amendments to the Bill but, in principle, for all of the reasons I have given, the Government continue to support this Bill and hope that, after the long delays it has suffered in its passage through Parliament, it can soon be enacted.

My Lords, I declare an interest as a board member of Transport for London, which is a public body constituted under the Greater London Authority Act 1999, as listed in the register of interests.

The first part of the Motion of the noble Lord, Lord Dubs, asks the Committee to note the delay in the progress of the Bill. I thank the Minister for giving a brief history of the slow transition of the Bill. Following the debate on 16 March 2015, time ran out to debate all the amendments tabled by opposition MPs, and the debate was adjourned. At that point, TfL asked the House authorities to table a revival Motion following the State Opening of Parliament. This was tabled and the Motion was blocked. TfL subsequently asked the House authorities for a debate on the revival Motion in order to overcome the blocking Motion. Time was allocated on 16 November 2015, when the Commons voted to revive the Bill. On 30 November 2015, the revival Motion in the House of Lords was withdrawn when the noble Lord, Lord Dubs, asked to speak to the Bill, leading to this debate before the revival Motion on the Bill can be tabled again. The revival Motion is tabled for 9 February, after this debate, and only at that stage can the Bill progress through its next stages in the Commons.

Although the Bill has had a long passage through Parliament, it remains relevant and important as it will provide TfL with additional 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. London’s growth is relentless. It is driving up demand for our services. There is record ridership on the Tube and on the roads. To keep London working and growing, TfL has to invest just to keep assets in good repair, modernise the rail and road networks and continue to improve reliability. TfL’s £11 billion capital funding settlement from government covers the period from 2015-16 to 2020-21, and includes a total of £5.8 billion in investment grant, £1.4 billion in general grant from the Department for Transport, alongside £3.8 billion in borrowing powers. This allows TfL to continue to invest some £1.7 billion a year to modernise London’s road and rail networks. The Circle, District, Hammersmith & City and Metropolitan lines will be the next four Tube lines to be upgraded.

From 2019, TfL’s objective is to cover all the operational costs of running the Tube and bus networks in London through non-DfT grant sources of income. It has planned for some time to achieve operational breakeven by running its business more effectively and efficiently. As part of a continuous savings programme, TfL has already taken 15% out of its costs.

Following the spending review in November, TfL must now accelerate and build upon its cost reduction programme because the revenue grant is being cut faster than anticipated, reducing its overall income by £2.8 billion over the period to 2020-21. The Bill will help TfL with this task by providing it with additional powers so that it can run its business more flexibly and take advantage of more efficient and economic financial arrangements. This will allow TfL to maximise the value of its assets, bear down on fares and deliver significantly better value for money to the public.

The second part of the Motion of the noble Lord, Lord Dubs, asks the House to note,

“the case for land disposed of under the provisions of that Bill being used to increase social housing”.

The provisions of the Bill do not give TfL any new or additional powers to dispose of an interest in or develop its land, contrary to assertions made. TfL has had powers to dispose of land since it was created in 2000 and the Bill makes no reference to them nor does it expand them in any way.

Under its existing powers, TfL must obtain the consent of the mayor to dispose of an interest in its land by sale or granting a long-term lease. If that land is operational, or has been operational land in the past five years, the Secretary of State must also give his or her consent. The Bill does not affect these arrangements.

Using these existing powers, TfL has already begun to undertake development on its land, and will be developing more than 300 acres of land to help create more than 10,000 new homes across London using its existing powers. TfL is working with the mayor, London borough councils and the commercial property development sector to bring forward developments in an innovative and creative way. TfL is committed to ensuring that it can achieve the right balance between providing affordable homes, delivering revenues to reinvest in the transport network and delivering local transport improvements. Local authorities set the levels of affordable housing in their areas in accordance with local policy. TfL currently works closely with local authorities, and will continue to do so, at each of its sites and engages in active discussions on a site-by-site basis to ensure that development plans reflect local borough priorities and needs.

TfL has established a commercial development advisory group which provides non-executive guidance to its commercial development programme. The group includes experienced advisers who have expertise in social and affordable housing provision. TfL has recently submitted three major planning applications which will deliver £100 million in revenue for investing in the transport network, a new step-free Tube station and 600 homes with affordable housing levels ranging up to 40%.

The proposed development above the new Nine Elms Tube station will deliver 362 new homes—around 25% of which will be affordable—2,318 square metres of office, 550 square metres of retail, a new public square, play space, pedestrian and cycle connections, cycle parking, and disabled car parking. Revenue generated from the new development will support the funding of the Northern line extension.

The proposed development at Northwood will deliver 127 homes, around 20% of which will be affordable, as well as a new Tube station with step-free access and a new bus and train interchange. It will also deliver a new public space and 300 parking spaces, as well as 1,300 square metres of retail floor space. TfL is exploring options to accommodate existing tenants in the development and is providing relocation options to assist them in continuous trade.

I thank the noble Baroness, Lady Jones, for her contribution—her comments about Parsons Green have been noted. The proposed development is on the site of a former London Underground depot adjacent to Parsons Green Tube station, which is currently used as workspace. The scheme will deliver 119 new homes, 40% of which will be affordable, as well as over 4,000 square metres of retail, workspace and restaurants. The development will also support around 300 jobs and enable the opening of three arches for commercial use.

The Motion of the noble Lord, Lord Dubs, raises a wider issue of policy concerning the disposal or development of land by the public sector generally, not just TfL. However, the discrete scope of the Bill should be taken as indicative of a desire by TfL to meet its business needs more flexibly and cost effectively. The provisions of the Bill will impact on TfL’s ability to manage its financial affairs more efficiently and flexibly, which will assist it in being able to operate effectively and bear down on fares, while still being able to provide a world-class transport network.

To summarise the Bill’s provisions, Clause 4 will give TfL subsidiaries the ability to access cheaper finance, subject to the consent of the mayor and, in respect of core operational assets, the consent of the Secretary of State. Clause 5 would have allowed TfL to form limited partnerships subject to the consent of the Secretary of State by way of order debated in both Houses of Parliament. However, TfL took note of the strength of feeling in the House of Commons during the revival debate about this clause. TfL recognises that, notwithstanding the amendments which were made to that clause by the Opposed Bill Committee, concerns remain about the possible future exercise of the powers which would be conferred by Clause 5. Accordingly, if the Bill is revived in the House of Lords, amendments will be tabled in the House of Commons at consideration stage to remove Clause 5 and references to limited partnerships from the Bill.

Clause 6 expands the list of entities through which TfL can undertake commercial activities to include limited liability partnerships and companies limited by guarantee, thus enabling TfL to conduct its affairs more flexibly and net the maximum value from its assets. Clause 7 gives TfL greater flexibility to mitigate its risks through hedging, including by allowing TfL to hedge commodity prices when it is exposed to fluctuations as a consequence of a transport contract and TfL’s contribution risk to the pension fund. In view of the significant benefits that it will bring to TfL, it is essential that the Bill becomes law as soon as possible.

My Lords, I am extremely grateful to all noble Lords who took part in this debate. I repeat my thanks to all those who provided me with help in preparing for the debate today. I also thank my friend in the House of Commons, Andy Slaughter MP, who was very useful in giving me helpful advice in preparing for today’s discussions.

One or two things puzzle me a little. I have heard words such as “hedging power”. I am not an expert in finance, and am grateful to the noble Baroness, Lady Grey-Thompson, for the detailed exposition she gave us, but I do not know what hedging powers are, frankly. I do not have a clue what that means. I am suspicious of it, as it seems to be some sort of financial services device.

I am a former financial services professional. In essence, it is about mitigation of risk—lowering risks and ensuring that you can use the markets to minimise your risks in any investment decisions taken.

I am most grateful. I have learned something that is going to stand me in good stead in the future. In giving the TfL position, the noble Baroness said that revenue had been cut faster than anticipated. That is really the clue. Transport for London has taken a bigger hit in its finances that it had expected. We all want more housing in London but we also want housing that people can afford, not in the Government’s definition of affordable housing but in the common-sense definition: housing that ordinary people can manage to buy or afford to rent. The temptation in a debate like this is to range widely over housing policy. Clearly that is a temptation I have to resist because it would not be proper to do so. However, the temptation is very strong indeed.

I hope that when the Bill is revised and goes to the Commons, the Commons will have another good look at it and deal with some of the other concerns that have been alluded to. I also hope that TfL will reflect on the concerns expressed in both Houses of Parliament about the possible danger in its proposals of reducing the possibility of developing social housing for ordinary Londoners. That is the real risk. I hope Transport for London will take that on board. Of course, it is in difficulty. It is caught between two opposing forces and has been put in an almost impossible position, for which I have much sympathy. I hope, nevertheless, that Transport for London will do its best and maybe a new Labour Mayor of London will move things on in a better way. I beg to move.

Motion agreed.