Examination of Witnesses (Questions 20900
- 20919)
20900. The issue between us is that the Canary
Wharf Group are concerned about the time that North Quay will
be needed for the Isle of Dogs for our works. Their concern really
turns on the detail of the Bill powers, so I think this is probably
the first time in this Committee I am actually going to take the
Committee to the Bill powers.
20901. Under clause 6 of the Bill, the CPO powers
last for five years from Royal Assent, but there is in clause
6(7) and 6(8) of the Bill a power to extend that time by the Secretary
of State. Such a power is well precedented. It existed in the
CTRL Act and it has existed in other Bills. It is important to
stress, indeed very important to stress, that, in order to use
that power, the Secretary of State has to go through an extremely
rigorous parliamentary procedure, and I will tell you far more
about it in closing, but it involves both a public inquiry and
a special parliamentary procedure which involves a joint committee
of both Houses, so it is a very difficult thing to do. The Secretary
of State cannot just say, "Oh, I'd like to keep the powers
going for longer".
20902. It is also important to stress at the
outset that, under Schedule 6, paragraphs 18 and 19 of the Bill,
it gives any affected landowner or lessee the power to require
the Secretary of State to acquire their land if the Secretary
of State chooses to use the power to extend. In other words, we
cannot extend and continue to sterilise the land. If we choose
to extend, then Canary Wharf Group have the right to say to us,
"Okay, buy North Quay now", so they can get their compensation
at that stage if we go down the extension route.
20903. Sir, I think there are two points I want
to make in opening. First of all, this power to extend, which
Canary Wharf Group will ultimately ask you to excise from the
Bill certainly in respect of their land, is only exercisable after
a very rigorous parliamentary procedure and scrutiny.
20904. The second point I would like to emphasise
very strongly in opening is that I understand that the Canary
Wharf Group and the witness are going to ask you to get into the
details of the funding of Crossrail and the negotiations that
are going on between the Secretary of State and Canary Wharf Group
about how Crossrail is funded, which is partly tied up with issues
around this site, the value of this site and whether or not some
deal could be struck, but the Committee will know, not from anything
that has been said here because funding is nothing to do with
the Committee, but from its general knowledge of this project
that funding is a huge issue and is subject to a great many discussions
and negotiations outside this Committee. I would very, very strongly
urge this Committee not to start trying to get involved at Canary
Wharf Group's behest in one particular aspect of that because
one can see that it would be easy to see one little part of what
is a much bigger and much more complicated jigsaw. Sir, I will
leave it there and obviously say more in closing, if that is appropriate.
Thank you.
20905. Chairman: Before we continue,
Mr Anderson, can we just put on record our gratitude to you for
the time you afforded to us last week on our site visit. We are
most grateful and it was very informative. Mr Lewis?
20906. Mr Lewis: Sir, what I am going
to do is simply introduce Mr Anderson who will give you his evidence.
Mr Peter Anderson, Sworn
Examined by Mr Lewis
20907. Mr Lewis: Mr Anderson?
(Mr Anderson) Good afternoon. My name is Peter
Anderson, the Managing Director of Finance at Canary Wharf Group
plc. I understand that it might have been expected in these proceedings
that counsel represent us, but I would prefer to make my remarks
by myself, if that is acceptable to you. I also have some pictures
to accompany my remarks. Canary Wharf Group is a very strong supporter
of Crossrail and I would not want any of the issues that we raise
today to be misconstrued as a lack of support for Crossrail; quite
the contrary. Crossrail is vital for London, vital for its future
growth and vital to ensure its continued competitiveness globally.
As counsel for the Secretary of State said, the reason I am here
is the impact of the construction of Crossrail, or rather the
potential for its delay, on our North Quay development, and I
want to illustrate the impact of transport improvements on the
Canary Wharf district. This first picture is a picture of Canary
Wharf in 1987 before any such work started, and you can see the
docks, you can see the water on either side of the central spine,
and the building on the central spine is the Limehouse Film Studios.[38]
20908. Chairman: Could we list all these
photographs in a group as A240.
(Mr Anderson) If we look at the second photograph,
this is a photograph in 1991 showing the first phase of Canary
Wharf.[39]
This phase was supported by the Docklands Light Railway and, as
you can see, it is a grouping of seven buildings surrounded by
Cabot Square and, as I said, it was supported by the DLR station.
The next diagram shows Canary Wharf pretty much as it stands today.[40]
What it shows is around 15 million square feet in ten different
ownerships, as Canary Wharf is not the sole owner of Canary Wharf
district, and with a working population of 90,000 people. This
level of development was supported by the Jubilee Line. We can
build another five to seven million square feet with the upgraded
Jubilee Line capacity coming on line which will occur in 2009.
If we can put up the next diagram, this picture shows the potential
for the future post-2014 which dramatically expands the Isle of
Dogs business district in and around Canary Wharf, including the
build-out of Wood Wharf, which is majority owned by the British
Waterways Board, the Billingsgate Fish Market, which would be
the area here, Wood Wharf is over here, Billingsgate Fish Market
there, and the Millennium Quarter to the south of Canary Wharf,
which is that area there, all in different ownerships, including
such developers as Ballymore, Hammerson and Fidelity.[41]
Without Canary Wharf London would not have been as successful
a financial centre as it is today. I say that for two reasons.
First, Canary Wharf provided large floor plate buildings required
to house large financial services firms. We provided a large quantity
of the type of space these firms needed to operate efficiently.
Secondly, the supply we created and the price at which we created
it was a moderating influence on rents across London, making London
an affordable place in which to do business. Without Canary Wharf
it would have been very difficult for London to provide the quantum
space demanded and rents that would have very likely become uncompetitive
globally. Crossrail is vital because it will enable a continued
supply of space to be created and enable a workforce from a very
wide catchment area to work in the three financial centres in
the City, the West End and Canary Wharf. In fact, it will increase
the catchment area for these districts by one million people.
Canary Wharf has strong credentials in supporting transport improvements.
To date Canary Wharf has contributed £369 million to the
construction and subsequent improvements to the Jubilee Line and
Docklands Light Railway.
20909. Chairman: Mr Anderson, could I
ask one question. You said it employs 90,000. If this futuristic
plan occurs how many people will it then employ?
(Mr Anderson) Two hundred thousand and that
statistic, or that number, comes from the Mayor's Transport Plan
and has also been reiterated recently by Ruth Kelly and the Thames
Gateway plan. What I would like to show is the area of North Quay.[42]
This is a similar diagram to which you were shown earlier and
the site is right here. This is a picture of the site itself and
the intention here is to use this as a worksite for Crossrail,
as counsel mentioned earlier. I would like to move on to the next
picture. This is a picture on the left and we put in in red where
the Crossrail station will be and the buildings we are talking
about are this development here on the diagram.[43]
If you could go to the next photograph, this shows in schematic
what the development is.[44]
We have planning permission for this development and the market
is currently very strong for these types of buildings. We want
to be in a position to develop these buildings as soon as possible
and were it not for the Bill we could start tomorrow. Our issue,
and the reason we wanted to address this Committee, is that because
of the Bill we may not be able to develop this site for ten years
or even longer. The time limit on compulsory acquisition under
the Bill is five years from Royal Assent but that is extendable
theoretically to an unlimited degree. Similarly, the planning
consent enjoyed by Crossrail under the Bill is subject to a time
line of ten years, again extendable by statutory instrument. If
Crossrail is delayed and extensions to these time limits are secured
we could be excluded from the site for many years, and even then
there is no assurance that Crossrail will be built. The only way
that is provided in the Bill for Crossrail to acquire the site
is through compulsory purchase. Given the planning permission
and value of the site, this would be a costly and unnecessary
expense to the taxpayer for the project. Because of our strong
support for Crossrail and our desire that it should be built,
and built expeditiously, we have made an offer to the Department
for Transport that we will give Crossrail a licence to use the
North Quay's site for free with no compensation, provided the
work begins within five years of Royal Assent and that the site
is returned to us within five years after commencement of the
works subject to force majeure. We think this is a very
fair offer. It would mean that potentially we would be agreeing
to the sterilisation of our site for ten years with no compensation.
It will also save the public purse in excess of £300 million
of compensation for the compulsory purchase of the site or for
lease payments. Our principal concern is to get the site back
to develop it and we believe that ten years is a sufficiently
long period for a site of this magnitude and value to be blighted.
Given that the Secretary of State is unwilling to agree our proposal
for a compensation-free licence, we would like to see the Bill
amended to provide that the compulsory powers of acquisition over
North Quay will expire five years from the date of Royal Assent
and that there will be no possibility that the period be extended
under the Bill. I confirm to you now that our side of the bargain
is that we would enter into a licence arrangement of the type
just described, saving the project, we say, hundreds of millions
of pounds. If, once the Bill has attained Royal Assent, the Department
considers that to be an unreasonable offer, then they could still
acquire the site compulsorily under the Act, but only in the first
five years. Obviously we do not want that to happen, and I am
sure the Secretary of State does not either, given the vast expense
in doing so, but at least it would give us some certainty. Our
lawyers have prepared amendments for your consideration, which
is document six. Chairman, when you and the Committee visited
Canary Wharf last week I made some comments on how Crossrail might
be funded. I would be happy to repeat those comments and let others
on the Committee hear what I said and put it on the record.
20910. Chairman: We would be happy to
hear that.
(Mr Anderson) On Crossrail we began our thinking
on how private sources of funding might be raised in 2002 when
we produced this document with CBRE and it is entitled "Funding
Crossrail: Could Property Help?" In this study we advocated
two ideas. First was an increase of two to three per cent in the
business rates hypothecated and specifically directed to funding
Crossrail. This idea has developed support in the business community
in the form of a three per cent increase and we believe that the
concept has also gained traction in the Treasury and the DfT.
We are also waiting imminent publication of the Lyons Review that
will hopefully offer some ideas and support along these lines.
The second idea we advocated is that office developers should
contribute as well. Put simply, for every new building started,
once the decision is made to proceed to build Crossrail, we have
suggested that office developers should contribute £30 per
square foot of net lettable space via a hypothecated section 106-type
payment directly to Crossrail. Our thinking on this is as follows.
The entire existing public transport system is at or beyond capacity.
At some point, and we believe we are very close to that point,
the lack of growth in the public transport infrastructure is going
to limit the growth of London. Once that occurs, incremental development
cannot be supported by the current infrastructure. London needs
to grow and London needs to continue to be competitive globally.
To do that, we will need to constantly upgrade and expand its
office stock and transport infrastructure to accommodate that
growth. All development in central London will benefit from Crossrail.
Based on office development economics developers in the Isle of
Dogs and Canary Wharf districts could afford a £30 per square
foot payment. Rents and building values per square foot are higher
in the City and even higher in the West End and so developers
in those areas could even more easily afford such a levy. Developers
are used to section 106 negotiations and they occur at the point
in time when the developer has a strong incentive to successfully
obtain planning permission. Under this scheme they would pay once
the project is started and at the time the funding is being put
in place for their project. We believe that such a funding mechanism
has the virtue of simplicity and a very high likelihood of raising
substantial sums for Crossrail. I would like to illustrate why
we would want to create a system that requires contributions from
all developers. Put up the next slide. [45]
Even in an area as concentrated as the Isle of Dogs and surrounding
business district you have multiple ownerships. This is a diagram
I showed you earlier, but this time it is colour-coded to show
the Canary Wharf Group ownership in grey and other owners in colour.
Go to the next diagram. Here is another diagram I showed you earlier,
the post-2014 scenario, again with Canary Wharf Group ownership
in grey and other owners in colour.[46]
As you can see, the vast majority of new development will be done
by others and all developers will benefit from the provision of
Crossrail. Of the total potential developments on the Isle of
Dogs, Canary Wharf represents approximately a third of that development.
The Mayor's plan, Transport 2025, projects employment growth across
London will increase by 360,000 jobs in central London and 565,000
jobs outside the central area for a total of 925,000 jobs by 2026.
Based on an average of 172 square feet for every person, this
could generate a demand for new office space across London in
the order of 159 million square feet. At £30 per square foot
this could generate a contribution of up to £4.7 billion.
We believe this type of mechanism could be extended to residential
developers as well because they benefit significantly from additions
to public transport. The Jubilee Line and the residential development
that has occurred along that corridor is a clear example of public
transport benefit. We are mindful that residential developers
must also make significant contributions for affordable housing.
The Mayor's plan projects a population increase of some 800,000
people by 2026. This could generate 550,000 to 720,000 households.
Conservatively, assuming an average unit size of 400 square feet,
this generates between 220 and 288 million square feet of new
residential development. For example, taking the conservative
end of the range, a £5 per square foot of contribution would
generate up to £1.1 billion of developer contributions over
time, and at £10 per square foot it could generate contributions
of £2.2 billion. We provide this background because we want
to make clear that we want Crossrail to happen, we are trying
to contribute to the debate as to how it can happen and mechanisms
to capture significant private sector contributions that are fair
and equitable for all stakeholders. Thank you very much.
20911. Chairman: For the record, could
we list the two documents described here as A241 and A240. Ms
Lieven?
20912. Ms Lieven: No, sir, I do not want
to ask any questions. I said a number of the points in opening,
but if I could encapsulate them in different words in closing.
It is very interesting to hear Mr Anderson's thoughts on funding
and those of Canary Wharf Group. I am sure that those behind me
will have listened with great interest but, sir, what Canary Wharf
Group is seeking to do here is to get the Committee involved in
funding negotiations which are going on with the Secretary of
State at the present time and, in my submission, that would be
quite inappropriate for the Committee.
20913. Chairman: We well understand the
boundaries. What members who attended the site visit thought was
that it was important to place on the record, because it was an
interesting scenario and that is what we have made sure of today
and we are very grateful for that.
20914. Ms Lieven: We are very grateful
for Canary Wharf Group having attended, made their support for
Crossrail very clear and shown so clearly how important Crossrail
is both to the Isle of Dogs but also to London more generally;
all sentiments that we wholly agree with, of course, but so far
as the issue about funding is concerned, as I have said, those
sitting behind me will have listened carefully—I suspect
much of it they will have heard before in other forums—but
in terms of asking the Committee to get involved, which is ultimately
what Canary Wharf Group is doing, I would very strongly urge you
not to do so because the issues around North Quay and how that
fits into a deal with Canary Wharf as to funding and how that
fits into a much, much bigger funding package as a whole, are
ones not for this Committee but also have some very sensitive
negotiations which are going on at the present time.
20915. So far as the specific issue about the
extension of time for Crossrail in Clause 6, and whether that
should be excluded in respect of North Quay, first of all, as
I said, such an extension is clearly precedented; it existed on
the CTRL Bill and it existed on other Bills. In my submission,
it is wholly appropriate for Crossrail, which is an exceedingly
complicated project for a whole variety of reasons, and having
such a power is quite right and proper.
20916. Then, sir, in terms of how that power
will be exercised, there are a number of safeguards. The first
one is that of general public law. The Secretary of State has
to act reasonably and he has to take into account material considerations
in deciding whether or not to seek such an order under Clause
6 in any event. Then, if he does seek the order, as I said, there
is a two-stage process by which, first of all, if there are objections,
the Secretary of State has to appoint an Inspector to hear a public
inquiry and objectors can attend and make representations and
call evidence before that Inspector. The Inspector then reports
and if the Secretary of State decides to proceed to seek an order
he then has to go to Parliament and there is then a process, not
wholly dissimilar from this Committee, by which if there are petitions
to the extension of powers then a joint committee is set up of
three Members of Parliament and three peers and they hear petitions,
rather like this Committee, and then they produce a report.
20917. So, sir, in terms of protecting Canary
Wharf Group's interest that the Secretary of State will not simply
sit around, do nothing for five years and then seek an extension
of power, this Parliament has every power and control to ensure
that the Secretary of State acts properly and with proper justification
in those circumstances.
20918. Can I say, finally, sir, that so far
as the arguments about deleting Clauses 6(7) and (8) are concerned,
it is difficult to see why, if the Committee went down that line,
a very large number of other landowners along the route would
not pose similar arguments. They may not have developments quite
as big as North Quay but they are likely to have developments
which are just as close to their heart as North Quay and which
may be just as important to their finances. So it is important
to see that this is not specifically just about North Quay. In
my submission, sir, this is territory which it would be a major
mistake for the Committee to get involved in, because of the links
then to other issues which, really, nobody in this room is fully
appraised of and are better left with the Secretary of State.
20919. Mr Lewis: Sir, if I could just
clarify one issue, going slightly off my prepared script, in relation
to the finance, I just want to make it quite clear that I think
you summed up the position correctly in terms of why we mention
finance today. It is not because we want the Committee to get
involved, it is because Mr Anderson made some points to you when
you made a visit and here we are to explain them and put them
on the record.
38 Committee Ref: A240, Canary Wharf-1987 (TOWHLB-94-AP3-35-05-001). Back
39
Committee Ref: A240, Canary Wharf-1991 (Phase 1) (TOWHLB-94-AP3-35-05-002). Back
40
Committee Ref: A240, Canary Wharf-2004 (TOWHLB-94-AP3-35-05-003). Back
41
Committee Ref: A240, Canary Wharf-Post 2014 (TOWHLB-94-AP3-35-05-004). Back
42
Committee Ref: A240, Canary Wharf-North Quay (TOWHLB-94-AP3-35-05-007). Back
43
Committee Ref: A240, Canary Wharf-Crossrail Station Location
(TOWHLB-94-AP3-35-05-008). Back
44
Committee Ref: A240, Canary Wharf-schematic diagram of future
development (TOWHLB-94-AP3-35-05-009). Back
45
Committee Ref: A240, Canary Wharf (Multiple Ownership)-2004 (TOWHLB-94-AP3-35-05-005). Back
46
Committee Ref: A240, Canary Wharf (Multiple Ownership)-Post 2014
(TOWHLB-94-AP3-35-05-006). Back
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