PPP–FOUR YEARS ON

On 31 December 2002 the private consortium Tube Lines assumed responsibility for the engineering functions on the Jubilee, Northern and Piccadilly Lines. Engineering functions on the remaining London Underground lines were passed to the Metronet BCV (Bakerloo, Central, Victoria) and Metronet SSL (all other LU lines) consortia on April 4 2003. The companies that make up the private consortia are; • Metronet - Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy, RWE Thames Water • Tube Lines - Amey and Bechtel OPPOSITION Before the Public-Private Partnership was introduced politicians, trade-unions, transport users and transport specialists were convinced that the scheme would not work. In September 2000 the Industrial Society report, The London Underground Public Private Partnership, An Independent Review, explained that the PPP was offering a guaranteed 15.3 per cent return on equity for 30 years with benchmarks for performance set five per cent below the levels expected of the publicly owned London Underground. The report concluded “that the PPP should not proceed unless it passes the re-specified Public Sector Comparator we have outlined. In other words the PPP should go forward only if it meets much more vigorous safety and value-for-money criteria, and if it is substantially amended to protect against the risk that the contracts are incomplete and overgenerous. If it fails to meet these criteria, then the bidding companies should instead bid for turnkey projects funded and financed by LUL within the public sector. In the interim, this should be undertaken through orthodox Treasury financing, while the preparation begins for London to undertake its own bond issues.” In February 2002 the House of Commons Transport, Local Government and the Regions Select Committee report, London Underground, concluded “that it is inevitable that the PPP will lead to significant and expensive disputes over the contracts and between staff and employers”. The report went on to explain that “The initial forecasts that the PPP would provide a saving of £4.5 billion over public sector management were inadequate and flawed”. Transport for London also maintained that government should not sign the PPP because the scheme was not value for money, it was unsafe and unmanageable and the proposed contract terms did not properly protect the public interest. The government chose to ignore the warnings and concerted campaigning and imposed the PPP against the wishes of the vast majority of Londoners. The results have been in line with the fears and concerns raised pre-transfer by the opponents of the scheme. By July 2006, Metronet and Tube Lines had been paid £3.3 billion in performance-adjusted Infrastructure Service Charge. Given this huge taxpayers’ subsidy it is little surprise that the Infracos have generated huge profits for their shareholders. Between 2003/04 and 2005/06 Metronet BCV, Metronet SSL and Tube Lines made pre-tax profits of £286 million (see Appendix A for complete figures). Regrettably, performance has not matched profit margins. A catalogue of no fewer than eight reports has cast serious doubt on the PPP’s ability to deliver the upgrade of the London Underground in an economic and efficient manner. FAILURE In June 2004, TfL published London Underground and the PPP – the first year. The report identified that during 2003/04 “the Underground’s assets continued to provide dramatic demonstrations of their inadequacy”. The 2005 TfL report explained that in 2003/04 it was too early to judge the performance of the PPP but bluntly stated: “In short, performance is not good enough and is less than was promised”. The report explained that engineering overruns had increased by some 35 per cent on the first year and were averaging more than one a week. The overruns were often caused by poor project planning and execution. The 2005/06 report explained that London Underground had issued a Corrective Action Notice (CAN) to Tube Lines due to “persistent poor performance” on the Northern Line which “was manifest in repeated track, signal and rolling stock failures”. In relation to Metronet the late delivery of only 14 of the 35 station upgrades and the incorrect preparation of District Line tracks for summer temperatures and disruptive incidents on the Victoria and Central Lines “undermine the progress Metronet is making and our confidence in the capability of Metronet’s management.” The report goes on to say that the upgrade of the Waterloo and City Line “is an acid-test of Metronet’s capability to manage major projects”. In the event the Waterloo and City Line re- opened over a week late on 11 September 2006, exposing Metronet to fines for the late completion of works. The line has since been closed twice due to dust and dirt caused by on-going engineering works causing visibility problems for train operators. In June 2004 the National Audit Office published two reports into the PPP. The London Underground PPP: Were they good deals? detailed the PPP’s huge start-up costs including £109 million spent by London Underground (LU) on external advisors and £275 million paid by LU to reimburse private- sector bidder costs. The report went on to say that final PPP costs remained uncertain. Not known for its radical language, the NAO states: “…there is only limited assurance that the price that would be paid to the private sector is reasonable”. June 2005 saw the publication of the GLA Transport Committee’s report The PPP: Two Years In. Whilst recognising strong performance on the Piccadilly and Central Lines the Chair’s foreword found “…poor performance on the Northern Line has led to Tube Lines’ proposals to close sections so that work can be carried out to repair track and signalling. On some lines the programme for track and station renewal is running behind schedule”. In March 2005 the House of Commons Transport Select Committee published their RMTnews :: january 2007 :: www.rmt.org.uk 16 PPP–FOUR YEARS ON RMT News looks back at the chaos PPP has brought to London Underground