Network Rail didn’t consider tenants in railway arch sale, watchdog finds

A railway arch in Bermondsey, south-east London previously owned by Network Rail. Image credit: Stephen Craven

Network Rail’s recent sale of railway arches across England and Wales may not be worth it in the long-term if tenants are negatively affected, the National Audit Office (NAO) has found.

Network Rail sold £1.46bn of property in February in a bid to help reduce the government’s budget deficit.

In a report released today about the sale, the spending watchdog expressed concerns that the interests of tenants were not considered enough as support for them was negotiated late and is not legally binding.

Amyas Morse, the head of the NAO, said: ‘Network Rail achieved value for money in terms of the price paid and the achievement of its main objective of obtaining access rights to ensure the continued operations and safety of the railway.

‘However, it is concerning that tenants as stakeholders did not form part of the aims of the sale and that they were only fully considered late in the process.’

During the sale Network Rail sold a total of 5,261 rental spaces sold across England and Wales, concentrated in the London area and most of them converted railway arches. The portfolio generated £83m of rental income in 2017-18.

The NAO praised Network Rail for selling its portfolio on a 150-year leasehold basis rather than a freehold sale, saying this will allow railway infrastructure to be safely and sustainably managed in future.

However, it found that the government or Network Rail did not explicitly seek to deliver government objectives such as business support, tenant protection or community regeneration in making the sales.

The NAO also criticised the delay in making the delay in the sale, which took two years longer than expected due to decision-making process made by Network Rail, the department and the Treasury.

While Network Rail did consider government housing policy, excluding land with known residential development potential, support for existing tenants was only negotiated at the final stages of the process.

The new owners of the arches have now taken over the existing contracts with tenants and have committed to adopting a “Tenants’ Charter”, the NAO reported.

However, it warned that the intentions of the new owners of the property are not legally binding and their stated investments are not bound by contract.

The true impact of the sale will depend on how the buyers of the properties decide to act in future, the parliamentary body concluded.

Meg Hillier MP, chair of the Committee of Public Accounts, commented: ‘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.’

Earlier today the NAO also reported on the government’s aim to release land in order to ease the country’s housing crisis.

The government previously stated it aimed to sell enough publicly-owned land to build 160,000 homes by 2020.

However, the NAO said it is ‘unlikely’ to hit this target, with the government now expecting to reach this figure after 2025.