Clause 47

Crossrail Bill – in a Public Bill Committee am 12:00 pm ar 27 Tachwedd 2007.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Holder of functions of nominated undertaker

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport)

I beg to move amendment No. 56, in clause 47, page 30, line 10, at end add

‘, relevant London borough council leaders and chief executives, and those officials with the same standing in relevant borough councils and unitary authorities outside of London.’.

Clause 47 is important. It relates to the appointment of the nominated undertaker, the body that is to assume the task of building Crossrail. Subsection (4) requires the Secretary of State to consult the Mayor of London. Does the Minister think that it would be prudent to consult not only the Mayor of London, whoever that might be, but leaders of local authorities? The Secretary of State should look beyond consultation just with the Mayor of London, and should be required to consult representatives of local government when making the decision. After all, Crossrail is certain to have ramifications in several London boroughs in areas both east and west of the City.

Local councils will have to deal with several issues arising as a direct result of Crossrail, and I sense that they may be better minded to co-operate if they feel that they have been included in decision-making processes relating to the project from the outset. I have no doubt that some of the boroughs in question have already made representations to the Select Committees, and I am sure that those representations were taken very seriously. None the less, the amendment is non-controversial. Local government has a role to play in the success of the project. It would be a mistake to exclude it from the Bill.

My amendment is designed to ensure that the appropriate local government representatives—the amendment specifies them as the borough council leaders and chief executives, and officials of the same standing in borough councils outside Greater London—would be consulted on the appointment of the nominated undertaker, who will, after all, become such a presence in their area. I hope that the Minister will feel minded to accept the amendment.

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

Clause 47 empowers the Secretary of State to specify by order one or more nominated undertakers, for the purposes of the Bill. The clause requires the Secretary of State, before making such a nomination order, to consult the Mayor of London—who will, I am sure, be Ken Livingstone. It also allows the Secretary of State, by agreement with the Mayor of London and whoever it is proposed to name in the nomination order, to fetter his discretion as to the exercise of the power granted in subsection (1). That power is necessary to enable the Secretary of State to make contractual arrangements prior to the nomination of a person or body as the nominated undertaker.

The amendment would require the Secretary of State to consult leaders and chief executives of local authorities along the route before making a nomination order and before entering into agreements with the proposed nominated undertaker. The crucial part of my opposition to the amendment is that clause 47 requires the Secretary of State to consult the Mayor before taking either of the actions specified. As the hon. Member for Wimbledon knows, the Mayor is co-sponsor of Crossrail; that is why he is given the relevant power. It is intended that the Mayor will be responsible for delivering the project through Cross London Rail Links Ltd. I expect to say more about how it is intended to manage the project when the relevant amendments are considered.

For the purpose of the current debate the simple point is that it is right that the Mayor, as co-sponsor of  Crossrail, should be consulted when the Secretary of State contemplates making a nomination order or entering into an agreement with any nominated undertaker. The chief executives to whom the amendment refers are not co-sponsors of Crossrail, and it would not be appropriate for there to be an obligation to consult local authorities along the route about the matters before us. There will be a good deal of discussion and consultation with key stakeholders, such as local authorities, because they will have a key role to play in the detailed delivery of the project, but it does not seem appropriate at this stage to consult them about the identity of a nominated undertaker or the terms under which a nominated undertaker will be commissioned to carry out the work. Such matters are properly for the project’s sponsors, so I trust that the hon. Gentleman will withdraw the amendment.

Photo of Stephen Hammond Stephen Hammond Shadow Minister (Transport) 12:15, 27 Tachwedd 2007

I have listened to the Minister’s explanation, although I certainly do not share his certainty about who will be Mayor of London at any given time—indeed, he and I are completely at variance on that point.

I recognise the fact that the Mayor is the co-sponsor, but local government needs to be a key stakeholder, and the Minister has said that it will be involved in the consultation process. I therefore fail to understand the Government’s reluctance to refer in the Bill to the fact that they will consult key stakeholders. Although I am happy to take the Minister’s reassurance on that, we do not know whether we will have a different Minister, a different Mayor and a different view at some stage, so it is odd that the Government will not include any reassurance in the Bill.

It is disappointing that the Minister will not accept a number of our points about consultation, but given that the amendment deals with the co-sponsors and the nominated undertaker, I am prepared to ask the Committee’s leave to withdraw it. However, I will table several other amendments about consultation to test the will of the Committee. However, with your permission, Lady Winterton, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Transport, Transport, Shadow Secretary of State, Liberal Democrat Spokesperson (Transport)

I beg to move amendment No. 2, in clause 47, page 30, line 20, at end insert—

‘( ) An order made under subsection (1) shall set out all information that the Secretary of State considers necessary relating to—

(a) the sources of funding for the relevant provisions of this Act, and

(b) the uses to which it is proposed that funding should be put.’.

Photo of Ann Winterton Ann Winterton Ceidwadwyr, Congleton

With this it will be convenient to discuss amendment No. 3, in clause 47, page 30, line 22, at end insert—

‘( ) An order under subsection (1) shall not be made unless a draft has been laid before and approved by a resolution of each House of Parliament.’.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Transport, Transport, Shadow Secretary of State, Liberal Democrat Spokesperson (Transport)

Amendments Nos. 2 and 3 obviously go together and are designed to ensure that Parliament would not have to sign a blank cheque. The issue has been tackled to an extent, given the Government’s willingness yesterday to put the heads of terms in the House of Commons Library in both summary and slightly more expanded form. There is some editing, which is always frustrating, to protect commercial confidentiality, but we are assured that it has been kept to a minimum.

There is also a letter from the Mayor outlining how he intends to proceed with the element of finance that is the responsibility of London. That is a significant improvement on the situation that we faced when the Bill was first presented and we first tabled our amendments. However, I am still left with a number of questions for the Minister.

First, as the Minister will be aware from looking at the heads of terms, they in no way represent a legally binding obligation, and no such obligations will be entered into until after the legislation receives Royal Assent. Will he therefore let us know how he intends to keep the House informed of the final bill, so that we are not constantly having to sign a blank cheque? Will he also let us know whether there is any mechanism he would accept that allowed the House to express its verdict once the final structure for financing Crossrail and its related obligations was agreed?

As the Minister will be aware, it is often in the final months of negotiation that a deal, and particularly its financing, loses any relationship to the structure that was previously discussed. As the various financial institutions become involved, suddenly the fundamental nature of risk allocation and of who is to pay what and where essentially changes. Therefore, what mechanism does he think would allow the House some appropriate understanding, which would not be possible prior to Royal Assent, according to the timetable before us?

Secondly, will the Minister help us on some understanding of a key element that seems barely to be discussed within the heads of terms? The heads of terms lay out various sources of financing, coming up to the total of £15.9 billion. The uses of funds is a one-line item only, and I understand why the Minister has presented only a one-line item for that. He presumably wishes to protect from general public knowledge the size of the contingency that is built into the uses of funds. That is sometimes a rational thing to do, because the various bidders on the contract, if they were to know the size of the contingency, would be likely to raise their prices to absorb it. He will be aware that the rumour mill, which is very active within this particular industry, has suggested that that contingency is an exceedingly large figure.

We always talk about projects coming in on budget and suggest that that is a good thing, but when there is a large contingency, one would expect a project to come in under budget. Having looked at the heads of terms, I am not clear who is the beneficiary of any such savings and underspend. There is only a one-line reference in those documents.

I looked at the heads of terms that are presented as part of the sources and uses statement that I requested in relation to the amendment. With regard to the timing within which funds are applied from the various sources, it shows that the funds for the two last years,  2016 and 2017, are underwritten by TfL and the Greater London authority, which makes one suppose—correctly, I hope—that at least the first element of the contingency will be clawed back to TfL and the GLA, although I do not think that that is made clear anywhere in the document.

If the contingency were to be, for example, almost the same size as the Department’s contribution, it would be important to know whether the Department anticipated reclaiming all its contribution, leaving the project to be funded solely by Londoners, through either the fare box and TfL or the supplementary business rate. We need clarification on who is to be the beneficiary of those savings and who, in a sense, is carrying that element of the risk.

I make a strong plea that London fare payers should be the first to benefit from any underspend and the London business community should be the second, rather than the taxpayer being first out. That clarification and an expansion on the outline sources and uses that have been provided would be extremely helpful.

On overspend, which is obviously an ongoing worry and a reason for having an accurate sources and uses statement, I am somewhat confused by the details that have been laid out under the heads of terms. That might be in part because I have not had long to work my way through the document. However, there seem to be two intervention prices. Will the Minister at least provide us with clarity as to whether those fall under the total £15.9 billion? In other words, when a hard line is more appropriate and is non-contingency related, what uses number is developed? Do those cover the ground between that and the £15.9 billion, or are they in excess of it?

Indeed, within the document there is a description of a put option that is to be debt free. That is the ability of TfL ultimately to put the project back to the Department. Does that mean that, under these proposals, Londoners will be left carrying a substantial debt? They will lose control of the asset and any revenues generated by it if it is passed back to the Government. If that is a risk that Londoners are taking, it ought to be explicit.

The sources of fund statement indicates that section 106 money will be applied back into the project. Surely London’s many boroughs have the right to expect that section 106 money will be available to them to deal with the offsetting of the many problems that the construction of Crossrail will cause them. Will the Minister take us through the logic of allowing that money to be funded back into the project itself, rather than dealing with the mitigation of the impact on the affected communities?

The supplementary business rates are to be set, according to the Mayor’s letter, on any property that is in excess of £50,000 of rateable value. Will the Minister give his estimate of how many businesses will be affected? The media speculation that it will be between 100 and 150 businesses sounds rather peculiar, but considering something of that size certainly changes the character of the deal, compared to something that extends to many more companies across London.

There seems to be real confusion over what will happen with the retail industry. It is unclear how various retail branches will be treated—whether collectively or separately.

TfL is expected to produce some of its early contributions under a sources and uses statement from prudential borrowing. I am unclear whether that is expected to absorb all TfL’s prudential borrowing capacity. While TfL has used prudential borrowing on only a limited basis, it has been an essential part of a wide range of new projects that have been brought on stream. The East London line, Thameslink and a series of other projects will come into play in roughly the same period, so I am concerned to understand what the implications are if all the prudential borrowing is absorbed within the Crossrail project.

Lastly, within the heads of terms, despite the fact that they have been mentioned over and over again, there is not one single word dealing with the issue of freight and freight access. It seems extraordinary that those matters are not even included in the contractual regime proposed by these various documents. Is the Minister willing to address that issue?

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I should first salute the hon. Lady for her great optimism that somehow this project will not have a great cost overrun. All experience suggests that a budget of £16 billion is likely to be exceeded, not least because we were discussing only £10 billion to £13 billion three or four years ago when debate on Crossrail became more common in the House.

I fundamentally disagree with the hon. Lady’s view that it should be the fare box that gets first advantage of any underspend. The London council tax payer should get first advantage. Some people who are likely to use Crossrail will come from outside London and from abroad, but a significant number of Londoners will also do so. A large number of infrastructure projects are in part being funded by London council tax. In my own city of Westminster, this year, for the first time, more than half the council tax that any resident pays is now down to the mayoral precept. One can only imagine that, having underwritten the Olympic games and elements of this project, that statistic will become worse still.

A Mayor who does not empty a single refuse bin, sweep a single street or run a single school or social services department will none the less take an enormous proportion of the council tax spend from Westminster residents. I appreciate that the same will increasingly apply to other parts of London.

There is a difficulty with what the hon. Lady said about section 106 agreements. I agree with her that much of the money should be used to mitigate the localised loss of amenity because of disruption, but the reality is that the parcel was lost during previous debates on Crossrail and on the Greater London Authority Bill. It is clear that the Mayor is keen to have a central pot of section 106 moneys to utilise for purposes other than local mitigation, so I have some concerns along the line that the hon. Lady put forward. I would be interested to hear what the Minister has to say, but I make a strong plea for the London council tax payer. If the project comes in within budget and money is to be given back, he or she should be first and foremost, rather than giving it back through the fare box.

Indeed, the business community is also involved in a fairly unprecedented way—Canary Wharf with £400 million, and the City of London with £250 million and rising because of other connections—but I suspect that that will become much more common for large-scale infrastructure projects in the decades ahead. The business community will be rather concerned, and it may become much more difficult to include it in future projects, if there is to be a massive underspend when there has been a reliance on its money.

I suspect that this is probably wishful thinking, given the likely situation in respect of expenditure on this project, but I hope that I am wrong on that. It is important that the London council tax payer, who is much beleaguered by contributions to a range of national projects, should be the first beneficiary of any underspend.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South 12:30, 27 Tachwedd 2007

I am beginning to get the impression that there is a general view that the project is purely about London, but of course it is not. It impacts sizeably on the rest of our community in many ways, but I fear that that is not taken into account in the amendment. The people of Northampton and Northamptonshire generally are concerned about Crossrail because it does not help their transport problems one iota, yet it will cost them, through the Exchequer, a considerable amount of money. The whole question of transparency in respect of Crossrail is vital not only to London but to the rest of the country, which will be affected by it but which will not get quite the benefits that many Londoners hope it will bring.

Let us talk about transparency, particularly in respect of money. It seems that the scheme has gone from £6 billion to £16 billion in two short years. The costs need to be totally transparent but have not been in the past. We do not understand why that massive leap has taken place. I have seen some of the ways that Crossrail has been costed, and, frankly, as a business man, I have been horrified. The question of Woolwich station itself was enough to frighten the taxpayer to death. It went from £350 million down to about £120 million. I know that that is not for the whole station, but the methods applied to costing were most disturbing.

Let us talk about another aspect that will affect the rest of the country: why we need transparency and why I do not think that the amendment covers that need. I am concerned, as are many of my constituents, about the amount of money that London is taking for infrastructure projects. The Olympics will take a great deal of money, Crossrail is £16 billion and Heathrow will take a lot of money, too. Such projects draw resources from other parts of the country. They will certainly affect the ability to provide massive civil engineering infrastructure projects. I need to know how they will impact on other areas, particularly those that have sustainable community projects. They, too, have an immensely sizeable claim for infrastructure. Transparency is vital.

We talk about underspend. Quite frankly, I think that the rest of the country has a right to question the probability of overspend on Government projects. Indeed, it has been suggested to me that we could—I emphasise “could”—end up with a £25 billion or £30 billion project on our hands. We have seen many Government projects increase threefold in cost, so the  record is not very good, and we need reassurance. Transparency is the only way to achieve that, and it is needed not only in relation to existing figures—we need ongoing reports too. The amendment does not address that need.

I am immensely concerned about the impact on the rest of the country, so I want the Minister to tell us how we can be fair and transparent for the nation in terms of costing, focus and the drawing of resources by Crossrail from other projects that are worthy, that are needed elsewhere in the country, and that might be affected by Crossrail or other projects in and around London. How will the Minister reassure us in that respect?

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

I appreciate the opportunity to take part in a wide-ranging debate on financing, and I congratulate the hon. Member for Richmond Park, who in the carry-over debate was clearly disappointed when I mentioned that Crossrail finance would not be included in the Bill. She has contrived a fairly ingenious method of ensuring that the Committee has an opportunity to discuss financing arrangements.

I shall preface my remarks by pointing out that, given some of the problems that the hon. Lady has identified, there are certain areas of the financing agreement that will not be debated in detail in Committee. However, I can assure her that the Government are committed to complete transparency on funding arrangements. An example of that was the lodging of the heads of terms in the Library yesterday.

In the carry-over debate on 23 October, I made an offer to the hon. Member for Wimbledon, and to the hon. Lady’s hon. Friend, the hon. Member for Carshalton and Wallington, to give them an off-the-record Chatham House rule briefing. They took up that offer, which has been helpful to the Committee’s deliberations. If I cannot give detailed answers to certain of her questions, I hope that she will nevertheless accept that the Government are committed to transparency. I understand and accept the concerns that exist, particularly in the wider financial community.

The work that has been done on assessing the final true cost of Crossrail has resulted in a more robust position than in almost any other major civil engineering project of this type. I take issue with the suggestion by the hon. Member for Northampton, South that the estimated cost of Crossrail had risen from £6 billion to £16 billion in two years—I think the record will show that that is what he said. On the Bill’s Second Reading in 2005, the then Secretary of State for Transport, my right hon. Friend the Member for Edinburgh, South-West (Mr. Darling) pointed out that, at 2002 prices, the cost of Crossrail would be £10 billion, which equates almost exactly, I believe, with a cash amount of £15 billion to £16 billion in today’s terms by the end of the project.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South

The Minister will understand that many figures have been bandied about in the past three or four years in relation to Crossrail, including in the Select Committee on which we worked. I do not doubt his word, but it is good at last to have some clearer idea of what will happen. Does he accept that there has been confusion in the past and that that is why transparency is needed in future?

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

I do not accept that there has been confusion in Government or with Cross London Rail Links. I accept that confusion has many avenues and many sources, but I do not think that the Government are responsible for all of it. On Second Reading, the estimated cost was £10.2 billion. Out-turn cost by the end of Crossrail construction is estimated to be between £15 billion and £16 billion.

That leads me on to another point made by the hon. Member for Northampton, South. He started off, quite rightly, by pointing out that Crossrail is a project of national significance; it is not just a London project, but one that will have significant value for the rest of the United Kingdom, and I agreed with him. He then went on to complain about the cost of Crossrail having an impact on infrastructure projects in the rest of the country. Frankly, you cannot have it both ways. It is a national project that is being paid for, in part, by taxpayers throughout the United Kingdom, which is correct because it is a project of UK significance.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South

I did not complain. I said that there was a fear that it could draw from other national projects and that that created a need for transparency. Does the Minister accept that that is the case?

Photo of Tom Harris Tom Harris Parliamentary Under-Secretary (Department for Transport)

I accept that the hon. Gentleman is frightened, but I assure him that there is no need to be. The very fact of Crossrail’s construction and operation will, it is estimated, add £20 billion to the GDP of the whole country. So, as well as being an important infrastructure project for London—the benefits to London will be obvious—it will have a knock-on benefit for the rest of the United Kingdom economy.

The hon. Member for Cities of London and Westminster expressed some concern about the effect on council-tax payers in London and hoped that any underspend would directly benefit them. I am more than happy to stand corrected, but I understand that council tax is not intended as a source of funding for Crossrail; domestic council tax will not be top-sliced in order to pay for any part of the project. So, he can reassure his constituents, unless, of course, they own a business with a rateable value of over £50,000, which many of them will, I am sure. But council tax is not intended to be a source of funding.

The purpose of the first amendment tabled by the hon. Member for Richmond Park is to require the provision of information about how the project will be funded. Of course, as I have said, I am happy to support the case for transparency, but not through the means suggested. The Government’s approach to transparency was demonstrated yesterday when we published the heads of terms that have been agreed by the Secretary of State for Transport and Transport for London. Some details, as the hon. Lady has already said, have had to be redacted to protect commercial confidentiality, but the key terms of the deal between the co-sponsors of the project are now in the public domain.

We and Transport for London now need to progress the detailed arrangements that would support the heads of terms. That will include a large number of documents which we expect will take several months to finalise. Our presumption is that those documents will  be made public, again, subject suitably to protecting commercial interests. On that basis, it would seem nugatory to require in the Bill for a nomination order to contain information that will be set out elsewhere and in more detail. Although, as I have said, I pay tribute to the ingenuity that the hon. Lady has exercised in securing a debate on finance in the Committee.

A nomination order is not, in any case, an appropriate place to provide the sort of detailed contractual information that the hon. Lady wishes to see. Furthermore, a practical point is that there may be more than one nomination order and, if that were the case, the supporting financial information relating to any one nomination order would tell us only part of the whole story. That would confuse and, even, frighten, rather than enlighten.

The other feature of the hon. Lady’s amendment is that any nomination order, by implication, the additional financial information that she is arguing should be included, should be subject to a positive decision of Parliament. The degree of parliamentary scrutiny afforded to secondary legislation is, quite rightly, of great interest to hon. Members. I would simply point out that our predecessors saw fit to accept that nomination orders made under the Channel Tunnel Rail Link Act 1996 should be subject to the negative resolution procedure, and that is what we have provided for in the Bill. I believe that that is a reasonable approach.

Committee members understandably wish to know how the project is to be funded and managed. I would emphasise that we have started to provide that information already by publishing the heads of terms; we intend to make more information available in due course. Indeed, the heads of terms explicitly state that information about the project should be provided in order to provide a higher level of transparency about the project. That is key to securing widespread support for the project.

The hon. Lady’s amendments are designed to produce the same answer but, as I have sought to explain, her suggested approach would not deliver the transparency that she wants. I therefore ask her, and ask her nicely, to withdraw her amendments.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Transport, Transport, Shadow Secretary of State, Liberal Democrat Spokesperson (Transport) 12:45, 27 Tachwedd 2007

The Minister is exactly right to say that my objective is to secure transparency. I believe that, because of the size and significance of the project, transparency is absolutely necessary if it is to have support and respect, both of which are critical. I take the Minister’s decision to release the heads of terms yesterday as a very important—I was going to use the word “gesture”, but it is probably a little stronger than that—evidence of willingness to provide information in a detailed and relevant way. I am grateful for that. The other assurance that he provided, which is that such information will be available on an ongoing basis—I hope that that will be with the clarity established in the first document—gives me a great deal of comfort. I am glad that we managed to find a mechanism to ensure that this discussion was part of the ongoing process of the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.