Transport for London Bill [HL]

My Lords, I have an interest to declare in that I am a paid board member of Transport for London, or TfL, which is a public body constituted under the Greater London Authority Act 1999. This is a Private Bill that was promoted by Transport for London, deposited on 26 November 2010 and ordered to commence in the House of Lords. The Bill was read for the first time on 24 January 2011. Its purpose is to provide Transport for London with a broader set of financial and disposal powers to meet its business needs more flexibly and to allow it to deliver better value for money for the farepaying and taxpaying public. Specifically, Clause 4 will remove the requirement for the Secretary of State’s consent to the disposal of surplus land from Section 163 of the GLA Act, as that consent imposes an unnecessary restriction on TfL, given that the Mayor of London is required to provide an opinion in advance of sale that the land to be sold is surplus to the requirements of TfL in conducting its functions. Clause 4 will reduce uncertainty for TfL when selling land, while maintaining the Mayor's opinion’s statutory safeguard that the land to be sold is surplus to requirements. One petition was deposited against the Bill by the West London Line Group. The petition primarily concerns Clause 4. TfL has entered a dialogue, having met the petitioners' representative, and is hopeful of reaching an agreed position with the petitioner, rather than an opposed Bill Committee being required. At present, TfL and TfL subsidiaries are not permitted by law to grant security, such as a mortgage, over their assets and revenue streams. That reduces TfL's capacity to finance projects and functions at the best available interest rate or at the lowest risk. That extra cost or risk is ultimately borne by farepayers and taxpayers through higher costs or greater risks on TfL. Clause 5 will allow TfL subsidiaries to borrow and charge against assets and revenue streams. This will provide TfL with cheaper finance for its projects and more flexibility in how it borrows. Under secured borrowing, TfL subsidiaries can achieve lower interest rates than can be attained through the Public Works Loan Board or issuing bonds—two of the significant debt financing options for TfL now. TfL subsidiaries can also borrow for a discrete purpose, and the security can be structured so that a creditor has recourse only against the subsidiary borrowing, but no recourse against TfL and other TfL subsidiaries. That can better protect the farepaying and taxpaying public from liability for TfL debts. Clause 5 also allows TfL to purchase subsidiary companies with secured debt. TfL would not be required to restructure secured debt once Clause 5 is operating, as was the case with the purchase of Tube Lines Ltd and Tube Lines (Finance) plc. Had this been operating at the time of those acquisitions, it would have spared TfL significant costs at the time of purchase—ultimately borne by farepayers and taxpayers. Importantly, existing TfL creditor rights are reserved in full by the Bill. Also, TfL subsidiary borrowing under Clause 5 will be subject to existing borrowing limits set by the Secretary of State as applied to TfL, operating as an effective limit on the new power. Clause 6 will allow TfL to form or join others in forming limited partnerships. TfL would like to be able to use a partnership structure to seek third-party investors in its property estate and to manage secondary income generated from that investment. Pension funds are identified as likely investors who often prefer limited partnerships to other legal structures in which to invest. A partnership structure can better attract long-term investors to property development, because partnerships are tax-transparent. There is very limited tax benefit to TfL from using a limited partnership vehicle, as Clause 6 provides that a TfL subsidiary company will bear the incidence of the tax liability generated by the partnership, as a subsidiary company is not exempt from income, corporation or capital gains tax. The exemption to that relates to stamp duty, where TfL will be subject only to a proportionate share, should any charges relating to stamp duty arise. At present, TfL is limited to exercising its functions only through a company limited by shares. Clause 7 expands the list of legal structures through which TfL functions can be undertaken to include a company limited by guarantee, a limited liability partnership or a limited partnership. This will allow TfL to conduct its functions more flexibly and better enable TfL to seek third party investors in its property estate. Clause 8 amends TfL’s hedging powers and responds to changes in the way that financial institutions hedge risk away from specific commodity trading to trading by indices. It also expressly permits TfL to hedge risks that impact the rate of contributions that TfL is required to make to the TfL pension fund, including for membership longevity. It also responds to the evolution of the financial markets. In summary, the Bill will assist TfL in seeking the most cost-effective borrowing. It also allows TfL to mitigate the risk that applies to its pension contribution liabilities through improving the hedging power. The Bill will assist TfL to maximise income from and investment in its assets and allow TfL to deliver better value for money for fare payers and taxpayers. I beg to move.