EXTENSION OF GENERAL POWERS (Hansard, 3 April 1996)

§ Mr. Spearing
I beg to move amendment No. 1, in page 1, leave out lines 13 and 14.

Mr. Deputy Speaker
With this, it will be convenient to discuss amendment No. 2, in page 1, line 19, leave out `transferred' and insert 'leased'.

§ Mr. Spearing
Amendment No. 1 follows conveniently on the discussion we have just had. I do not understand the need to include in the Bill the paragraph that provides that, provided a contractor is involved in such activities as are mentioned in section 3(2) of the London Regional Transport Act 1984, he can make use of the PFI and the secondary layer of agreements that we have discussed. Why is that provision in the Bill? If it was excluded—as amendment No. 1 would provide—what effect would that have? I suggest that it would cut out a privatised or contractualised crossrail.
The Minister and I have much in common in applauding the addition of the new sections of the Jubilee line to London's transport. We have seen parts of the work and I visited a station in my constituency only last week. I suspect—I hope that the Minister will reply if he can—that under the proposed section 3(2A)(a) of the 1984 Act it would be possible for London Regional Transport to contract out the Jubilee line. That decision could be made, perfectly legally, by 50, or perhaps 55, people at 55 Broadway.
What a line that would be, because it has been built at considerable public expense. That is halfway to happening on the Northern line already. I think that the Bill would make that possible. Amendment No. 1 is a probing amendment, since it would remove proposed section 3(2A)(a), because I believe the Bill would allow such contracts to be made. Moreover, when such contracts had been made and following the transfer to the contractor by LRT of land or other property, the proposed section 3(2A)(c) would allow the use by the contractor of land or other property".
Again, the Minister and I differ in our view of the operation of privatisation. If a contractor takes on an underground line—the Deputy Prime Minister was not far from suggesting that, according to the press reports—the contractor may have to take on a liability, because the line may not pay its way. We know that there is a degree of public subsidy of London transport. So the Government would have to provide some form of incentive. We know that the incentive for the fast rail track to the channel tunnel is a considerable transfer of land. In other words, 435 use of the PFI in capital projects for London's underground railways, which is clearly in the Government's mind, cannot occur without some sort of incentive. That would involve a procedure under which assets would also be handed over. That is what the Bill will do. The inclusion of the proposed section 3(2A)(a) will mean that the existing railways, or indeed crossrail, could be run by contractors, under the existing powers of LRT.
Amendment No. 2 would change a transfer of property to a lease. Again, it is a probing amendment to ask why land would be transferred to a contractor—presumably as freehold for development. Why could such land not be leased and kept as the property of LRT and the people of London? I await the Minister's reply with interest.

§ Mr. Chidgey
I am puzzled by the intention of amendment No. 1, because it would appear to preclude LRT from undertaking the subcontracting activities that the Bill sets out to permit. If so, we should be debating whether or not the Bill should progress. I take the point of the hon. Member for Newham, South (Mr. Spearing) about the difference in terminology between transferral and leasing. I would feel concern if property assets could be permanently transferred to a contractor, and particularly about the acquisition of profits through the disposal of property assets. I would insist that any profits accruing from surplus land and assets through development should be reinvested in London Regional Transport, rather than go to a third party.

§ Mr. Norris
I am glad that the hon. Member for Eastleigh (Mr. Chidgey) is confused by amendment No. 1, because so am I, and I was glad to hear that it was a probing amendment—which I treat as one that we are not expected to take overly seriously as to its effect.
If I have a vestigial grasp of the point that the hon. Member for Newham, South (Mr. Spearing) was attempting to make, amendment No. 1 is undesirable because it would make parts of an agreement under new section 3(2A) subject to the Secretary of State's consent while those made under existing section 3(2) could be made without his consent.
It is almost certain that in practice the contractor would seek the Secretary of State's consent if there were any doubt about the contractor's vires in the matter. Amendment No. 1 would achieve nothing, but it would create confusion which is wholly avoidable by not accepting the amendment. The hon. Member for Eastleigh was entirely right to make that point.
Amendment No. 2 is much more serious. I share the concern of the hon. Member for Newham, South that assets transferred to a PFI contractor should revert to LRT at the end of the contract, as the hon. Member for Eastleigh said. The purpose of clause 2(1) and (3) is precisely to ensure that LRT's claim on essential assets at the end of a PFI contract can be safeguarded and continuity of service protected. On Second Reading, I emphasised that those provisions exist precisely because LRT needs to safeguard continuity of service and to keep property at the end of such contracts.
436 The proposal to confine LRT to a lease is extraordinarily naive. It would be perfectly possible for LRT, if it were so minded, to sell instead of a freehold a long leasehold for a peppercorn for the equivalent capital sum. We should not follow the suggested path in respect of leases. Nor should we be diverted from the fact that the essential protection that the hon. Gentleman seeks is already in the Bill.
Where assets are surplus to LRT's needs, it already has a power to dispose of them. If the assets were in the control of the PFI contractor, it might be perfectly sensible to allow the contractor to remain in possession for an appropriate consideration.
Amendment No. 1 would not achieve the hon. Gentleman's purpose and would cause confusion. I therefore hope that he will seek leave to withdraw it. As for amendment No. 2, I confirm that the hon. Gentleman's concerns are already covered by the Bill.

§ Mr. Spearing
I disagree with the Minister in respect of leasing, but I will concentrate on amendment No. 1, which has been derided as unnecessary and curious. The Bill's purpose is to allow a PFI to be used not just for additions to LRT's existing role as a peripheral or ancillary but to permit a contractor to move into core activity—perhaps including running an entire railway. The Minister's refusal—he can call me confused if he likes—reinforces my suspicion that the Bill could be used for that purpose.

§ Mr. Norris
If the hon. Gentleman invites me to call him confused, I will do so. He is confused. LRT already has the power, under the 1984 Act, to deal with circumstances of the kind that the hon. Gentleman described. Central to the speeches of the hon. Members for Cunninghame, North (Mr. Wilson) and for Newham, South and of other Opposition Members on Second Reading was that the Bill was not to be seen as a back-door facility for privatisation.
I told the hon. Member for Newham, South that the uncomfortable truth was that to the extent that such powers might be necessary, they are contained in the 1984 Act. I do not seem to be able to get it through to the hon. Gentleman, which is probably more my fault, that his arguments are not relevant to the Bill. The scenario that he described might have been debated in 1983 in preparation for the 1984 Act, but it is not relevant now.

§ Mr. Spearing
The problem with the Government is that time after time legislation is produced which appears to be sensible, in pursuit of and of assistance to public service but ultimately—particularly when legislation is extremely confined and dense in its wording—other things happen. In Committee, the Minister referred to the rather misleading story told by the hon. Member for Newham, South, whose encyclopaedic knowledge of the system may not quite have caught up with the existing make-or-buy policy operated by London Transport specifically within London Underground. Under that policy, we decide in relation to each measured area of activity whether it is better in terms of value for the user and the taxpayer for the facility to be procured from outside or provided in-house."— [Official Report, Standing Committee F, 27 March 1996; c. 21.] The Minister said that LRT's existing powers could be used for a crossrail plc, but we know that there would not be such a thing—or improvements to any other line—unless facilities exist under the PFI. We know what 437 happened when contractorisation occurred in relation to signalling and track: there were escalating signal delays and point failures. I believe that the Bill would make it possible for PFI to enter core activity, which is not possible under the existing legislation. That could occur under the 1984 Act if crossrail were a public project, but the Bill concerns the PFI and the incursion of private capital—including, as we have seen in other parts of the country, Wisconsin Central or a water company—and the private operation of part of London Transport.
The amendment was not intended as a serious amendment to the Bill; it was designed to find out the Minister's intentions. I hear what he says—that he does not intend to use the Bill in the way I have explored. The Bill may not be a huge animal—my hon. Friend the Member for Cunninghame, North (Mr. Wilson) may be right to call it a mouse—but the people of London are so used to bad legislation on health, traffic or anything else that we have learnt to scrutinise Bills rather carefully. The language of this Bill is obscure and legalistic, so we must beware.
All I can hope is that the debate will at least have laid to rest some of the suspicions entertained by the Minister's supporters, if not those of Opposition Members.