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London Regional Transport Bill

7.24 p.m.

The Parliamentary Under-Secretary of State, Department of Transport (

Viscount Goschen): My Lords, I beg to move that the London Regional Transport Bill be now read a second time.

This Bill is essentially technical in nature. Its purpose is to extend the powers of London Transport in order to allow it to make full use of the opportunities available under the Government's private finance initiative. I believe that the Bill has cross-party support. Private sector investment in London Underground in particular should not be impeded by unnecessary restrictions in LT's statutory powers. I hope that your Lordships will accept that principle and support the Bill.

The Bill originates from the work done by London Underground in developing a number of PFI projects, which I shall describe in a moment. In looking for the most innovative and attractive deals, they came across various potential or actual legal problems arising from their statutory powers. This is not surprising. London Transport's existing powers date back to 1984, well before the PFI. It is worth emphasising, however, that the Bill was drafted following a request from London Transport, and in full consultation with it, and it has its full support.

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Three of the projects which are now at quite an advanced stage brought to light the problems which this Bill is intended to address. The first is known as Communications or Connect. This project would require a contractor to provide an integrated radio system for London Underground based on a fibre optic network. The network would not only provide updated systems for LUL's own communications systems, but it would have sufficient spare capacity to be used by the contractor to provide telecom and IT services to third parties. Sharing costs in this way would greatly reduce the cost to LUL.

Secondly, there is a ticketing project known as Prestige. This would involve the complete modernisation of LT's ticketing systems, based on the progressive introduction of smartcard technology. The contractor would take over responsibility for providing and selling tickets for both Underground and bus services and for the equipment to validate these such as the ticket gates at Underground stations. Giving the private sector responsibility for the whole system would provide scope for the introduction of innovative and efficient systems. But, as with the Communications project, there may be scope to spread costs; for instance, if the smartcard can be used as an electronic purse to buy a range of other services.

The third scheme involves power supply. This would involve a contractor taking over London Underground's existing power generation plant and taking responsibility for the provision of main and emergency power supplies for the Underground network. As with the schemes already mentioned, the contractor would be able to spread costs by supplying power for third parties using the Underground's distribution network. These are major projects that would involve a private sector capital investment of around £650 million.

It may assist the House if I emphasise what the Bill does not do. I can reassure your Lordships that the Bill in no way erodes the powers of London Transport or changes its status. This is not a privatisation Bill. In particular, there is nothing in the Bill which affects the basic duty of London Transport, as set out in Section 2 of the 1984 Act, to provide or secure the provision of public passenger transport services for Greater London. Equally, there is nothing which in any way affects London Transport's functions under Section 8 of that Act in relation to the planning of fares and services. Nor does the Bill change the wide range of other provisions in the 1984 Act which would almost certainly need to be changed if the Underground were to be privatised.

I hope that the House does not take these remarks as a sign that the Government's belief in the benefits of privatisation is waning. Far from it. One has only to look at our commitment to the railway franchising process to see that.

I turn now to the detail of the Bill. The main purpose of Clause 1 is to empower London Transport, subject to obtaining the Secretary of State's consent, to enter into an agreement with a contractor under which the contractor will carry on activities which LT does not itself have the power to carry on. Paragraphs (a) to (c) of the new Section 3(2A) to be inserted in the 1984 Act

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set out the types of agreement which it will be possible for LT to sign. The new Section 3(2A) is intended to maximise LT's flexibility to enter into PFI contracts while ensuring that the agreements relate either to LT's function of providing public passenger transport services in London or the exploitation of LT land or assets by the contractor. This amendment is essential if London Transport is to gain the maximum benefit from the private finance initiative.

I have already mentioned London Underground's proposed Communications PFI project for the installation of a fibre optic network, with some capacity being used by the Underground and the rest being available for sale to third parties. London Underground has no powers to act as the provider of such a cable network to other users, nor, as things stand, can it enter a revenue-sharing agreement with a contractor who installs and manages a network. This provision will enable London Underground to enter into such agreements, so that, through a revenue-sharing or royalty clause in the contract, it can share the contractor's success in selling capacity to third parties. I believe that that sums up the main provisions of the Bill.

Still with Clause 1, the new Section 3(2B) we are inserting in the 1984 Act is a technical amendment to enable London Transport to sign contracts with banks or other financial backers of the PFI contractor. For large value projects, both London Transport and the PFI contractor's financiers are likely to want the reassurance of direct agreements with one another, so that their respective rights are protected should the contractor default.

The main purpose of Clause 2 is to provide for the continuity of services. Subsection (1) enables London Transport to acquire land for the purposes of agreements under Section 3(2) or 3(2A). This would, for example, enable land to be acquired in LT's name for an electricity sub-station not directly required for LT's own purposes but for use by the contractor in supplying electricity to LUL. I would emphasise that this is not a compulsory purchase power; it is intended to safeguard LT's claim to essential assets at the end of a PFI contract.

Subsection (2) provides that LT may take over services where they are no longer being provided by the contractor under a Section 3(2) or 3(2A) agreement. Again, that is a pragmatic provision designed to ensure continuity of service where a PFI contract ends and another contract cannot be let immediately. Subject to obtaining the Secretary of State's consent, LT could take over the activity concerned so as to ensure the continued provision of passenger transport services and, if applicable, so that it can continue to provide services to any customers of the contractor.

We expect that when PFI contracts expire the commercial activities associated with them would generally pass to a new private sector contractor, following a further competition. But we do need to provide for what we trust will be the very rare circumstances in which a contract comes to an end prematurely; for instance, through default of the contractor. In that situation, LT would clearly want, and

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would have the powers, to take over immediately those functions connected with the running of its own services. But it would be perverse if services being provided to third parties then had to be terminated.

Finally, subsection (3) has the effect of empowering LT to do all other things in its power which in its opinion are necessary or expedient to secure the performance of agreements under Section 3(2) or 3(2A). That power sounds very wide-ranging in its scope. But in fact it is a residual power which needs to be read in the context of LT's express powers elsewhere in the 1984 Act and in this Bill. This provision will, however, widen LT's powers so that it can take a number of practical steps to help ensure that PFI agreements work in practice; for example, by enabling LT to take charges on moveable property so as to safeguard its claim to important assets at the end of a PFI contract.

Clause 3 adds a new section (Section 31B) to the 1984 Act. In order to ensure continuity of service, the new Section 31B empowers the Secretary of State to make an order enabling certain statutory powers--for example, powers acquired by LT under old private Acts--to be transferred between LT and a contractor or to be exercised concurrently by the two.

Clause 4 makes minor and consequential amendments which can fairly be called technical ones. Clause 5 is a standard financial provision. Clause 6 is the standard provision giving the Bill's Short Title, commencement date and extent.

I hope that the House will forgive me for a somewhat dry and detailed explanation of the circumstances of the Bill, but that is justified by the fact that this is a fairly dry and detailed Bill. It is, in essence, a technical one. It is a small Bill. But it is an important one for public transport users in London. I beg to move.

Moved, That the Bill be now read a second time.--(Viscount Goschen.)

7.34 p.m.

Lord Clinton-Davis: My Lords, not only do I thank the Minister for explaining the purpose of the Bill so cogently, I forgive him for committing the offence of being dry. I did not think he was all that dry. I have always thought of him as something of a wet, but there it is.

We support any reasonable means of promoting more investment in the publicly operated, integrated transport systems that apply in this country. The Bill could be helpful. I have one concern--a concern which the Minister did not wholly address; that is, the wide spread of Clause 3, to which I shall come in a moment. Our concern in this House, as it was in another place, is whether that clause contains any hidden agenda--the hidden agenda being privatisation--which the Minister was at pains to say it did not have. The Government, he said, have not lost their faith in privatisation--mania for privatisation might be a better description--of the railways, they have just lost their way.

We are going to debate railway--

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