Guardians of the Arches: Report into Network Rail sale finds tenants only received support 'late on' after campaign pressure
PUBLISHED: 15:00 02 May 2019
Tenants in the railway arches sold by Network Rail last year were only offered support in the "final stages" of the sale process after pressure from a national campaign, an investigation has found.
The Naional Audit Office (NAO) has published its report into the £1.46billion sale of some 4,500 arches to Telereal Trillium and Blackstone Property Partners, which went through in September after two years of discussions.
The Guardians of the Arches, which formed in London Fields in early 2017 to fight rent hikes and grew into a national campaign group, won the support of the Labour party in its bid to first block the sale and then guarantee tenants' rights such as favourable leases and security of tenure.
But the NAO found the new owners' pledges to support the tenants were not legally binding and that support for the thousands of businesses – car garages, breweries, cafes, carpentry warehouses, printers – only came late on, after the Guardians held meetings with transport minister Jo Johnson.
The NAO report states: “Network Rail obtained non-binding commitments from the new owner, including that it will adhere to good practice and standards in a tenants' charter. These commitments were given late in the process and at the Department for Transport's request.
“Network Rail felt that stronger tenant protections were unnecessary as the sale agreement ensures that existing leases remain in place, and that stronger protections would contravene its requirement to act commercially and could raise the risk of a judicial review or State Aid challenge. We understand from the new owners that they intend to publish a charter before summer 2019.”
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The report also found Network Rail had marketed the portfolio to prospective buyers by revealing the “upside” of the rents, adding: “Network Rail has forecast that the portfolio's total rental income, which it will now forego, will increase from £83 million in 2017-18 to £160 million in 2027-28, mainly through a major investment programme and expected rent increases.”
Network Rail struck a deal with the government to sell the portfolio in one job lot to balance the books. Investigators found the deal did raise more than expected, but added the long-term value “will depend how Network Rail manages its ongoing relationship with the leaseholder and the impact of the sale on tenants and local economies.”
Leni Jones, director of Guardians of the Arches, said: “This report confirms that tenants' interests were only considered during the sale process because we forced Network Rail and the government to listen. We were ignored until we made that impossible through our campaign. That was a major dereliction of duty by both Network Rail and the government.
“It also confirms that the arches were sold on the basis of big rent increases in the coming years. This is exactly what arches tenants fear the most. We are the backbone of our communities, driving local economic development and bringing variety and vitality to urban neighbourhoods all over the country. Big rent increases will kill that vitality stone dead.
“The new owners are yet to prove that they will really put tenants first by delivering on these priorities. If they try to impose further crippling rent increases at the scale suggested by Network Rail, they can expect organised opposition.”
Meg Hillier, Hackney South MP and chair of the Public Accounts Committee, said: “The sale was designed to plug a gap in Network Rail's budget but means that the control of this important public asset is now out of the hands of the public sector so will receive less scrutiny.
“Value includes the wider impact on communities, places and tenants. Government should not, in trying to achieve the best price, lose sight of the wider societal impact when selling a government asset.”