Network Rail arches sale ‘not a good deal for taxpayer or tenants’

Arches traders outside Parliament after the meeting in June 2018.

Arches traders outside Parliament after the meeting in June 2018. - Credit: Archant

The mass sale of Network Rail’s 4,500 railway arches was not a good deal for the taxpayer or the tenants, MPs have found.

Meg Hillier. Picture: Gary Manhine (c)

Meg Hillier. Picture: Gary Manhine (c) - Credit: Archant

Members of the Parliamentary Public Accounts Committee, led by Hackney South and Shoreditch MP Meg Hillier, grilled bosses of Network Rail and the Department for Transport earlier this year over the £1.46billion deal.

That followed a National Audit Office report that found the traders occupying the arches were only offered support in the "final stages" of the sale to Telereal Trillium and Blackstone Property Partners in September last year.

At the hearing, DfT chief Nick Joyce and Jeremy Westlake, chief financial officer of Network Rail, both admitted not engaging properly with tenants.

Now the committee has published its report, which also finds that although the sale was conducted well, members aren't convinced it represents value to the taxpayer - Network Rail's repeated reason for going through with it in the first place.

The committee said Network Rail had given up £80m a year in rents to plug a funding gap.

Ms Hillier said: "We remain unconvinced that the sale represents the best value for the public and the public sector finances in the long term.

"The Department for Transport failed to consider the interests of tenants until far too late in the sale process, despite them being those most affected by the sale."

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The report also found future tenants will have less protection than existing ones, because an agreement of the sale was that new leases must be contracted outside of the Landlord and Tenant Act, which rail bosses say hinders their ability to carry out urgent repairs on the railways. That applies to existing tenants trying to renew their lease as well.

"This is another case of government failing to see the big picture," added Ms Hillier. "It did not recognise the potential of the arches to further its industrial strategy and support small and medium-sized enterprises."

The Guardians of the Arches traders' group formed in London Fields early in 2017 to fight rent hikes and grew into a national campaign group. It went on to win 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.

Ms Hillier chaired a Parliamentary meeting during the campaign, and also backed Hackney mayor Phil Glanville's offer for the council to buy the arches in Hackney.

A tenant's charter was eventually announced by the new owners, but the committee pointed out it was not legally binding. It has recommended that Network Rail writes to MPs in a year outlining how it has been implemented.

The Arch Company, formed by the new owners, said it had been speaking to tenants in an open and responsive way and would be publishing the charter in the coming weeks.

"Tenants are and will remain at the heart of everything we do," a spokesperson said. "We are investing millions of pounds across the estate, addressing long-standing maintenance issues, recruiting more staff to resolve tenants' queries and bringing over 360 unoccupied arches back into use for small and medium-sized businesses across the country.

"We are also working constructively with long-standing small businesses to address any affordability concerns they may have."

The Gazette has been covering the Guardians of the Arches campaign since attending the meeting where the group was launched. For all our coverage on the campaign, click here.