DOCKLANDS (Hansard, 26 October 1994)

§ Viscount Ullswater

The Government are to privatise the Docklands Light Railway (DLR), in line with their 1992 manifesto commitment. The first step will be taken in 1996, when DLR operations will be franchised to the private sector for a period of about seven years. The second step will be taken at the end of the franchise period, when the aim will be to transfer the railway as a whole into the private sector.

In parallel, as part of the Private Finance Initiative, the private sector will take responsibility for building an extension of the DLR to Lewisham, as announced by my right honourable friend the Chancellor of the Exchequer last year. Detailed planning for the Lewisham Extension is now complete and my right honourable friend the Secretary of State for the Environment has today given DLR Ltd his consent to start the competition to select a private concession company.

DLR PRIVATISATION

Through privatisation, the Government aim to ensure that the DLR will continue to develop as a highly efficient, customer-oriented and market-driven passenger service for Docklands, with reduced dependence on public subsidy.

The DLR's operational performance has improved markedly over the last two years. Moreover, existing programmes to improve DLR's signalling and train control system are well advanced and will be complete in 1995, providing the capacity for more flexible service patterns and operating practices. The railway should return to full seven-day services across the network during the first half of 1995. The franchising of DLR operations in 1996 will therefore allow private sector disciplines to be applied to consolidate the substantial improvements already made in efficiency, reliability and quality of service.

My right honourable friend the Secretary of State for the Environment has asked Sir Anthony Gill, Chairman of the DLR, to put in hand the preparatory work required to enable the franchise to be let in 1996. The 42WA private sector operator will be expected to take responsibility for marketing services, maintaining trains, stations and track, and for all DLR's operations, including train services on the new extension to Lewisham when it opens, for a period of about seven years. The franchisee will have to have a statutorily approved railway safety case in place before starting to operate train services.

DLR will be consulting its workforce on the planned franchise. We expect any franchise to amount to a transfer for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations and, if this is the case, the franchisee will assume responsibility for DLR employees.

Neither the letting of the franchise nor any subsequent sale of DLR will require legislation.

DLR LEWISHAM EXTENSION

In his Budget Statement on 30 November 1993, my right honourable friend the Chancellor of the Exchequer announced that the private sector was to be invited to finance, build and maintain a 4.2 km extension of the DLR to Lewisham. Following the completion of detailed planning, my right honourable friend the Secretary of State for the Environment has today given his consent for DLR to start the competition to select a private concession company to deliver the project. The first phase of market-testing, the prequalification of bidders, will take three months. Full tendering is expected to start in February 1995, and DLR Ltd should be in a position to award the concession contract before the end of the year. Construction should start in 1996, with the extension opening in 1999.

A year ago, the provisional indications were that the project could not be financially viable as a private sector concession if it included stations previously planned for Island Gardens and Cutty Sark. At my request, DLR Ltd and their owners, the London Docklands Development Corporation, consulted local interests on the option of deleting those two stations from the project. They also appointed financial advisers to validate the financial modelling and to develop a commercial structure for the project. Further, in July 1994, the Lord Chairman of Committees in another place ruled that any decision to omit Island Gardens station would breach an undertaking given to Parliament by the promoters of the London Docklands Railway (Lewisham) Act 1993 in relation to that station.

In the light of these developments, DLR Ltd have recommended to us that, on the basis of their latest cost and revenue forecasts, the Lewisham Extension project is potentially viable financially with the new station at Island Gardens included. But they have concluded that the financial case for inclusion of a station at Cutty Sark is poor and that unless the cost of providing the station can be met by third party contributions, Cutty Sark should be omitted from the project.

We are pleased that we are able to proceed with the Lewisham Extension with six stations because of the regeneration benefits this will provide both north and 43WA south of the Thames. In particular, the inclusion of a new station at Island Gardens on the Lewisham Extension, close to the Thames foot tunnel, and one at Greenwich, about 700 metres from the Cutty Sark and the historic waterfront, will provide dramatically improved access to the various important tourist destinations in the area.

Nevertheless, we have received a number of representations arguing for a station next to the Cutty Sark itself. We are willing to allow more time for local interests to finalise a financing package of their own. My right honourable friend the Secretary of State's decision therefore is that, if funding is fully and unconditionally committed by the time DLR has prequalified bidders for the project next January, the project may go ahead to full tendering with Cutty Sark station included. Otherwise it will go out to tender on a six station basis, excluding Cutty Sark. Contributors must agree to meet the actual costs of the station, whatever they are shown to be through market testing, the current estimate being £14 million (at 1994 prices). Funding pledges must be contracted and unconditional, with agreement that the cash will be provided during the construction period. There is no question of the Government's providing grant or subsidy towards a Cutty Sark station.

This arrangement will allow an extended opportunity to those who support a station at Cutty Sark to come forward with funding, whilst eliminating uncertainty and potential delay for the Lewisham Extension project as a whole.