HC Deb 18 May 1992 vol 208 cc119-28

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]

10.23 pm
Mr. Simon Hughes (Southwark and Bermondsey)

I am grateful for the opportunity to raise, at a surprisingly appropriate time, the future of the Jubilee line extension.

I shall begin with a brief summary of the story so far. It began on 16 November 1989 when the then Secretary of State for Transport, Mr. Cecil Parkinson, made a statement to the House in response to a question tabled by the hon. Member for Hendon, South (Mr. Marshall), declaring that he had authorised London Regional Transport to deposit a Bill for the extension of the Jubilee line. The then Secretary of State told the House that the extension would cost £1 billion, of which £400 million would come from private investors. In a written answer he said: I warmly welcome this contribution, which is of an unprecedented scale. This is a further example of public and private sector co-operation to the mutual benefit of both." —[Official Report, 16 November 1989; Vol. 160, c. 398.] The answer was accompanied by a Department of Transport press release to that effect.

It was clear how the Government anticipated the money would be spent in the immediate future—there would be a cost of £40 million to the Exchequer in 1990–91, £150 million and then £240 million in the following two years. It was also made abundantly clear at the beginning that the Chief Secretary to the Treasury had agreed those moneys.

It emerged—not on the same day, but, effectively, immediately—that the main contributors of the private sector money would be Olympia and York, which would contribute £400 million. It was due to pay the first instalment of £40 million on 1 April 1992, the second instalment of £60 million by 1 April 1993 and the rest when the line was functioning. Incidentally, it was announced that a relatively much smaller fish—British Gas—had agreed to pay £25 million.

At the beginning of 1990, it appeared that problems were emerging. It was reported in the daily press that senior London Regional Transport sources had stated that the contribution to be made by Olympia and York was likely to fall from £400 million to £100 million. O and Y reportedly told the Department that it would make its contribution only when the project was finished. O and Y also apparently decided that it wanted to take a percentage of ticket revenue once the line was running. None of that had been foreseen at the beginning.

In the second half of the Second Reading debate of the London Underground Bill, which was to authorise the building of the underground, the then—and current—Minister for Public Transport said: I am sorry if I did not make the position clear. The position is that £40 million is payable on 1 April 1992, £60 million on 1 April 1993—that is, £100 million in the next three years—and the balance, £300 million, is spread in relatively small payments over 10 to 15 years thereafter."—[Official Report, 24 July 1990; Vol. 177, c. 369.]

Financial details then receded from the main part of the debate while other issues occupied the House and the promoters. The Bill had a long passage through both Houses and had contested Committee stages in both Houses. It had a controversial aspect with regard to the route under Parliament square and there was a not insubstantial battle in which I was, for obvious reasons, directly involved not only about whether there would be stations to intersect at Waterloo and London Bridge and at a new station—still called Canada Water, but known to locals as Surrey Docks—but about whether there would be additional stations at Blackfriars and Bermondsey. It looked as if there would, and then it looked as if there would not.

There was intensive lobbying and a meeting—the Minister was kind enough to see us—with representatives of the local authority in Southwark. Eventually, in the autumn of the year before last, it was confirmed that the Southwark and Bermondsey stations were a secure part of the package, and the Minister was good enough to say that, just because they were the last to be finally confirmed, it did not mean that they were at any more risk than other parts of the line. That changed the line from being a commuter drain linking the main interchange stations to Canary Wharf and the Isle of Dogs to being a line that would allow local residential and working communities to profit from it as well.

The Bill involved other controversies in both Houses before it finished in Committee, and it ended its passage through Parliament in March, just before the general election. It received its Royal Assent in March 1992, as one of the last pieces of the previous Parliament's legislation.

At about the same time, it emerged that Olympia and York was facing huge financial problems. It became clear from The Financial Times of 25 and 26 March that Olympia and York was to restructure its finances and that it faced $20 billion of debts.

On 26 March, it was reported that the Department of Transport said that the decision to give the Jubilee line the go-ahead in November 1989 hinged on the agreement of Canary Wharf to contribute £400 million towards the project. A "senior civil servant" said: If for any reason that [contribution] is not possible, then any such radical change in funding will require ministers to consider all the issues before arriving at any decision. For the first time, it appeared that the whole project was expressly dependent on the £400 million from Olympia and York.

On 1 April, in the middle of the general election campaign when questions were being asked about whether the money would be paid and when it seemed that the first deadline for payment had slipped, a "senior civil servant" —we may never know whether it was the same one—said: In our experience deadlines in these situations"— that is, deadlines for payment— are not as absolute as they seem. We are not aware of any agreement being signed in the next couple of days. We arrived at the general election with two things abundantly clear: first, that the £400 million was a pre-condition to the line's extension going ahead and, secondly, that Olympia and York had not fulfilled the first part of the agreement and had not paid the first tranche of money. It was also not clear that it was about to do so.

What is the relevance of this to London, to the public infrastructure and to urban regeneration? The Jubilee line extension is relevant as a crucial part of the regeneration package. In 1981, the Government set up the London Docklands development corporation, principally to work in three boroughs: Newham, Tower Hamlets and my borough of Southwark. One of the key development areas was the Isle of Dogs. It was always foreseen that that was central to the development.

Ten years later, with the building of an enormous new complex—I do not know, Mr. Deputy Speaker, whether you have seen it at close hand, but we can all see it from far away—that underground infrastructure was clearly central to the Government's plans to develop east of the City, the beginning of the east Thames corridor and the whole regeneration of that part of the docklands.

According to The Financial Times of 16 May, Canary Wharf is only 60 per cent. let—that is, the main Olympia and York building, one of the largest office developments in the world. Coincidentally, South Quay, another large development, this time of a 300,000 sq ft building on the south of the river, went into receivership on 15 May. At a time when London is suffering from an enormous glut of office space, unemployment in docklands constituencies is at very high levels. My constituency has the seventh highest unemployment in the United Kingdom.

So it was clear that the redevelopment was vital for employment prospects in London. Lord Brabazon of Tara, the Minister of State, Department of Transport, speaking in another place in the debate on the London Underground Bill, said: The Jubilee line … will provide a fast link to all points of the compass … It is these high quality connections which the Isle of Dogs must have if it is to … provide … 150,000 jobs by the end of the first decade of the next century. — [Official Report, House of Lords, 12 July 1991; Vol. 530, c. 1639.]

The Government have announced the creation of a new agency to deal with docklands regeneration, with Mr. Peter Walker as its head. It seems to me and to my constituents, and it must be generally accepted to be the case, that if we are to continue with the work begun in 1981—whatever we may think of that process; already there are many criticisms of it—the offices that are already built must now be let, there must be jobs and there must be transport to allow people to get to and from their new places of work.

It is self-evident—certainly, everyone in the east end knows it—that the road routes into and out of docklands are insufficient, in spite of the widening of the roads; that the river is as yet underused and probably would not be able to provide the capacity to meet all all the demand even if it were given a chance; and that the docklands light railway has proved far too small and inadequate for the task. A tube link is vital. Whatever people may think of the Jubilee line, as opposed to an extension of the Northern or Bakerloo line, being the Government's priority in 1989, the decision was made: a fundamental link was to be provided between the west end, Westminster, Whitehall, the City, the south of the river and Canary Wharf. The final obvious point is that the news of a new line south of the river came as an enormous relief in one sense to those of us south of the river who, for many years—if not decades—have lived in an area that has been the white hole on the underground map.

Rumours are rife that the Government have an interest in this project not only in terms of the £1 billion-plus of public money, but because they are contemplating relocating civil servants to the Canary Wharf development. We know that the Department of the Environment buildings in Marsham street will soon not be able to be used, and it is rumoured, although it is as yet uncertain, that Department of the Environment civil servants may therefore be moving to the new development—"pour encourager les autres", I suppose.

I now want to ask some questions that follow on from my question to the Secretary of State at Question Time today. I am glad to see the new Minister for Transport in London, whom I welcome to his job and with whom I expect to have a worthwhile, positive and constructive relationship. He knows that he commands widespread respect in the House. His first test will be whether he can deliver the right answers tonight.

First, why was no formal agreement signed? The Government let it appear that a deal had been done and that here was a great public and private sector partnership, but nobody appears to have committed the private sector to delivering the readies and, if the development is supposed to be a model to encourage the private sector into the public transport system—whether tube or railway—it does not seem to be a wonderful precedent.

Secondly, have the Government spent the money mentioned as being committed by them in the initial years —the money referred to in the Secretary of State's original statement? What have they spent so far? If that money has been spent, was it prudent to spend it without having secured an absolute guarantee of the money coming in from the private sector? What is the point of the public purse spending the money for a partnership deal when there is no guarantee that the private money will come in and when it is therefore possible that the whole scheme will be aborted?

Thirdly, if backing for Olympia and York was looking shaky as far back as March 1990, why did not the Government do something about securing the deal then?

Fourthly, what is the truth about the proposition that we have been told was put to the Government, to the effect that Olympia and York wanted to gain revenue from ticket sales on the Jubilee line once it was running?

Fifthly, if the "senior civil servant" is right and deadlines are not absolute in this case, is it normal practice for the Government to let the private sector dictate and determine when it pays money that it has said it will pay by a certain day—particularly when the matter has substantial public implications?

Sixthly, why was it not made clear at the very beginning that the Olympia and York contribution was the pre-condition for the whole package going ahead and that, without it, nothing would happen? That was the import of the answer given to me by the Secretary of State at 3.10 pm today.

Seventhly, when the debt was reconstructed—we are talking about very recent history—was the financial contribution of Olympia and York to the Jubilee line reconsidered as well? Is that part of the negotiation? If it is, and as public money is involved, surely the Government have an interest in the renegotiations that we understand have been continuing even today, with a further extension from the 11 banks that are funding Olympia and York. Should not the Government now be able to tell the House what is happening instead of saying that they do not know what the position is?

Lastly, the Secretary of State told the House today that future owners of Canary Wharf would have to carry on the financial commitment to the Jubilee line if there were to be a change of ownership as a result of a sale on or an entry into receivership or administration. Would that be a written agreement and a firm deal? Would it be secured by a contract that was binding in law which gives preference if one is a creditor if something goes wrong? Or would it simply be another informal back-room deal?

To sum up, the significance of this subject is that it appears that the Government entered into a partnership for their priority tube line proposal in London two and a half years ago without ensuring that the contract was legally binding. By failing to do that, they have denied themselves the security that a contractually bound contracting party has if anything goes wrong. What does that mean for the scheme? Is it responsible for the Government to say now that if things go wrong they just will not intervene? What does that mean for the commitment to the regeneration of the docklands?

It is no reflection on the Minister, but I propose to ask the ombudsman—the Parliamentary Commissioner for Administration—to investigate this aspect of the history of these events. What were the Government doing? Were they guilty of maladministration? I must make it abundantly clear that I will refer this question to the ombudsman not because I and others do not want the scheme to go ahead; quite the reverse. However, we cannot leave multi-billion pound schemes to chance. My constituents and I now want the scheme to go ahead. It is committed so far that we must go forward and not back. We look forward to a reply that makes it clear that the scheme will go ahead and that the Jubilee line extension will be built.

10.41 pm
The Minister for Transport in London (Mr. Steve Norris)

I am grateful to the hon. Member for Southwark and Bermondsey (Mr. Hughes) for raising the future of the Jubilee line extension, as he gives me the opportunity to set out the Government's position in full. In so doing, I hope to answer some of the hon. Gentleman's questions. I am also grateful for his kind comments. He described our potential relationship as worth while, positive and encouraging. I am not sure whether I can be entirely encouraging tonight, but I will do my best.

I start by outlining the Government's decision to support the line. The hon. Member for Southwark and Bermondsey has already related most of the history that I am about to relate. However, for the record, an extension of the Jubilee line from Green park to Stratford via Waterloo, London Bridge and Canary Wharf was recommended in the report on the east London rail study that was issued by the Department of Transport's consultants in July 1989. At that time, the then Secretary of State said that in considering its findings, he had paid particular attention to the way in which the line was to be financed. He made it clear that the line would be built only if sufficient contributions were forthcoming from property developers and other landowners who would benefit.

It was in that spirit of partnership, on which a correct degree of emphasis was laid, that the plans for the line were worked up in the months immediately following. In November 1989, the Secretary of State announced that he was authorising London Regional Transport to deposit a Bill for the extension on the basis that substantial contributions from developers would be forthcoming.

In announcing his consent to deposit the Bill, the Secretary of State told Parliament, in a speech to which the hon. Gentleman has already referred: The Jubilee line extension will cost about El billion in today's prices to which developers will over time be making a cash contribution of just over £400 million. I warmly welcome this contribution, which is of an unprecedented scale. This is a further example of public and private sector co-operation to the mutual benefit of both. After setting out the figures, as the hon. Gentleman did, the Secretary of State said: My right hon. Friend the Chief Secretary to the Treasury has agreed that these sums should be made available from the public expenditure reserve which was set with this in mind." —[Official Report, 16 November 1989; Vol. 160, c. 398.]

Since the deposit of the Bill, the hon. Gentleman will know that the Government's commitment to the line has grown. By last year, the expenditure plans for the three years 1992–93, 1993–94 and 1994–95 committed Government funds of £304 million, £521 million and £477 million respectively. Those plans were based on an expectation of developer contributions of over £40 million in 1992–93 and more than £60 million in 1993–94. There was a further expectation that, after the end of the construction period—that is, from 1997 onwards—a further series of contributions would be made by developers, totalling some £300 million in cash.

Those figures graphically illustrate the extent to which, in taking forward the plans for the JLE in partnership with contributing developers, the Government have been prepared to be the senior partner. Over the planned 53-month construction period between 1992 and 1996, we envisage spending some £1.5 billion of Government funds, alongside contributions of over £100 million from developers. In other words, of the £1.6 billion total to be incurred during the construction period, over 90 per cent. is to be met by Government.

Governments do not, of course, agree to undertake expenditure of that order without first considering very carefully the benefits to be gained from doing so. One set of benefits are those to be gained from the regeneration of the inner-city areas through which the line is to pass, in particular by those involved in the development of prime sites along the route. The most notable example of such beneficiaries was Olympia and York. It was, of course, the recognition that it stood to gain such benefits at Canary Wharf that prompted the company to enter into its partnership with Government to fund the line in the first place.

Let us, however, consider some of the wider implications of the benefits of the JLE, recognition of which prompted the Government to accept a major partnership role, and which underpin our commitment to the line. The JLE will have a capacity of around 15,000 passengers per peak hour in each direction. It will run for 10 miles from Green Park, 7.5 miles underground and 2.5 on the surface. As the hon. Gentleman said, the first new station to be built along the route is to be here at Westminster; as hon. Members know, the station at Westminster is incorporated in the sketch plan for the new parliamentary building.

Beyond Westminster, at Waterloo, the line will provide major new interchanges with the Bakerloo and Northern lines, with British Rail's main lines for Southampton and the south coast and with the new channel tunnel international terminal. The new interchanges will significantly relieve rail congestion on British Rail's Waterloo and City line, and improve connections to the west end.

Continuing eastwards, we come to four stations in the constituency of the hon. Member for Southwark and Bermondsey, each of which will confer substantial benefits. First, there is to be an entirely new station at Southwark, which will provide an interchange with Waterloo East by means of a new subway, new stairs and new escalators. At London Bridge, there are to be improvements to the Northern line facilities, as well as new deep-level Jubilee line platforms and a substantially expanded ticket hall. At Bermondsey, there is to be another entirely new station, and at Canada Water there is to be a new interchange station with two new deep-level Jubilee line platforms and two new platforms on the East London line between Rotherhithe and Surrey Quays stations.

The hon. Gentleman will know that, when the Government gave the go-ahead for the extension in 1989, we left open the question whether new stations at those places could be justified pending further analysis. That work was completed in 1990, and as the hon. Gentleman said, my hon. Friend the Member for Kettering (Mr. Freeman) announced that, as the work had shown the economic case for the stations to be positive, the Government were prepared to approve the construction of both. We were glad to do that: those stations will be of real benefit to residents of Bermondsey and Southwark.

Beyond Canada Water, the extension is to go back under the Thames to Canary Wharf, where there is to be an interchange with the DLR. The benefits of going to Canary Wharf consist mainly of the regeneration and transport benefits of additional docklands employment. The calculation of the transport benefits that the extension is expected to bring was based on assumptions about the growth of employment in certain areas, particularly the Isle of Dogs. That growth was assumed to derive principally from a transfer of jobs from central London to docklands. Those assumptions about employment growth involved substantially more people working in docklands at an earlier time than now seems likely. Nevertheless, when growth comes, the extension will play an important part in that regeneration.

Beyond Canary Wharf, the extension is to go back under the Thames to north Greenwich, where a new station and interchange with buses and "park and ride" located on the Greenwich peninsula east of the Blackwall tunnel southern approach road is planned. A particular benefit here is that engineering provision will he made for the possible further extension of the Jubilee line to the royal docks if that proves beneficial at some future time.

Finally, beyond north Greenwich, the extension is to cross the Thames for the fourth time, heading north and surfacing just south of the existing north London line station at Canning Town. It will then run alongside the north London line for two and a half miles, through the existing station at West Ham to Stratford. At Canning Town, there will be an interchange with the DLR Beckton extension and at West Ham, there will be an interchange with the Hammersmith and City and the District lines. At Stratford, there will be a new terminus station with interchanges with the Central line, with British Rail main line routes and, perhaps in future, with a channel tunnel rail link terminal and a crossrail station.

All that adds up to at least four substantial benefits. The first is improving connections between the west end and docklands, and between those areas and the major south London termini of Waterloo and London Bridge. The second is improving access to inner-city areas such as Southwark and Bermondsey. The third is the provision of additional river crossings, and the fourth is eliminating derelict wastelands, reinvigorating local communities, and expanding London's commercial centre with new employment opportunities.

Substantial benefits do not, however, come without substantial costs. I have already said that both Government and developers envisage a combined total of £1.6 billion to be spent during the construction period. In accordance with the Government's normal procedures for evaluating the economic case for undertaking major urban rail investment projects, detailed cost-benefit appraisals of the line have been undertaken.

In terms of the measurable costs and benefits normally taken into account in such appraisals, the line does not meet the established criteria for approval. We would not normally be prepared to proceed with projects that failed to meet those criteria. In this case, however, we were prepared to go ahead, and the promised contributions from developers were clearly important in that decision.

Moreover, we have always recognised that the case for the Jubilee line extension depended not just on the measurable benefits but to a significant extent on the regeneration benefits for the docklands area, which are not captured in the conventional cost-benefit procedures.

Let there be no misunderstanding, however, about the basis on which the Government undertook the commitment to regeneration. From the first, it was made clear to all concerned that the line would be built only if sufficient private sector contributions were forthcoming.

By far the largest, indeed the crucial, contribution was pledged by Olympia and York. The company's problems are well known. We understand that Olympia and York's creditors recently agreed to advance the company sufficient funds to enable it to continue trading at Canary wharf until the end of the month. I am given to understand that the creditors are meanwhile considering business plans put forward by Olympia and York, with a view to ensuring the company's long-term viability. No doubt that will include the question of Jubilee line contributions. As my right hon. Friend the Secretary of State for Transport made clear to the hon. Gentleman in Question time in the House today, he can see no prospect of authorising the start of construction until and unless those agreed contributions are forthcoming.

I should make it clear that we are still talking about a cash contribution. The hon. Gentleman referred to press speculation to the effect that some Government Departments have been considering the possibility of moving some staff to docklands, and that some deal may be done that will remove the need for Olympia and York to contribute to the cost of the Jubilee line extension. That is not so. My right hon. and learned Friend the Secretary of State for the Environment has made it clear that the criteria which will govern any decision about whether staff should be relocated will be the suitability of the accommodation offered and, crucially, whether it will provide good value for money.

Any examination of the options will be directed towards docklands as a whole, not to any one developer. Let me make it clear that the question of possible staff moves to docklands is entirely separate from considerations of funding for the Jubilee line extension. It follows that we continue to look to Olympia and York, or its creditors, to come up with the contribution originally pledged.

In the time available to me, I have not been able to answer all the questions that the hon. Member asked me. I shall write to him on the balance of those questions, which I am sure I can agree with him shortly hereafter.

To sum up, we continue to expect developer contributions to be forthcoming so that the line can proceed on the basis originally planned. The basis for proceeding has always been one of partnership between Government and the private sector, and "partnership" is the word that I wish to emphasise in this short debate.

I hope that, in the interests of all concerned, the contribution that has always been anticipated to this important development from the developer—which, in the taxpayers' interest, ought to be forthcoming, given the substantial gains that will accrue to those developers—will be received in the near future.

Mr. Simon Hughes

With the leave of the House, I think that there is one minute left. I thank the Minister for his reply. I must say the obvious to him—for as long as—

The motion having been made after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at seven minutes to Eleven o'clock.