TIME TO BURY THE PPP

RMTnews :: august/september 2007 :: www.rmt.org.uk 24 F ollowing the demise of Metronet, bringing London Underground infrastructure work back into the public sector is the only option if Tube upgrades are to be put back on track. The government was warned about the dangers of fragmenting Tube infrastructure along the same fault-line as the national rail network. They were warned that forecasts of £4.5 billion in savings over public-sector management were fanciful, and that the PPP would become an expensive drain on public money. They were warned that there was no evidence to suggest that the private sector could deliver more efficiently than LU. And they were warned that the public would be left to pick up the tab when it all went wrong. Transport for London itself warned that the PPP was not value for money, was unsafe and unmanageable and would not properly protect the public interest. Despite those warnings we were told that the PPP would deliver massive improvements funded by huge private- sector investment and, best of all, it would transfer financial risk to the private sector. There is no pleasure in saying we told you so, not least because the fall-out threatens to undermine essential upgrades, but the reality has been in line with the warnings. Massive improvements dissolved into a huge and growing backlog of work, with frequent engineering overruns disrupting Tube traffic, and an unprecedented string of potentially disastrous derailments. PPP MYTHS DEBUNKED The huge private investment was a myth, with expensive private borrowing ultimately costing the taxpayer twice as much as other options. But the biggest myth of all was the transfer of risk. Metronet’s shareholders – Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy, RWE Thames Water – abandoned Metronet because they couldn’t get the public purse to underwrite their massive cost overruns – leaving the public with a £2 billion debt, racking up interest at commercial rates. Metronet’s shareholders staked a modest £350 million, dwarfed by the more than £3.3 billion in public money pumped into the PPP over its first three years. Even so, the two Metronet contracts still managed to siphon off some £127.3 million in profit in those first three years – more than £800,000 a week. Recall that it cost half a billion of taxpayers’ pounds just to draw up the contracts, and LUL even re-imbursed the privateers’ £275 million start-up costs. Now we have the cost of administration, estimated at as much as £30 million a week. Some have suggested that Metronet is the problem, not the PPP. Alongside Metronet’s breathtaking failure, Tube Lines’ performance certainly looks better, but even if the PPP was delivering according to the script, it would still be delivering less than was demanded of LUL, at massive extra cost. Seven years ago the Industrial Society noted that the PPP offered the prospect of a guaranteed 15.3 per cent return on equity for 30 years, with performance benchmarks five per cent below those expected of publicly owned London Underground. MORE EXPENSIVE The 2005 the Commons’ Transport Select Committee reported that, even without the costs of the Jubilee Line extension, government expenditure on the Tube had increased more than twentyfold, from £44.1m in 1997-98 to £1,048 million 2004- 05. What limited successes have been achieved “could hardly be otherwise”, according to TfL’s 2005 report, given the huge sums thrown at the PPP, but overall performance was still “not good enough” and “less than was promised”, and “the volume of real work out on the railway is not consistent with the payments being made.” The same report noted that engineering overruns had increased by some 35 per cent on the first year, averaging more than one a week. The 2005/06 TfL report noted that LUL had issued a Corrective Action Notice to Tube Lines due to its “persistent poor performance” on the Northern Line which “was manifest in repeated track, signal and rolling stock failures”. Nonetheless, Tube Lines managed to extract profits of £158.7 million in the first three years of the PPP – more than a £1 million a week. POOR PERFORMANCE The astonishing thing is not that the PPP has failed to deliver – because it was never going to – but that Metronet, despite some of the most generous contracts ever designed by bean-counter man, failed to bag its full quota of guaranteed, risk-free profits. The solution to this mess is obvious to most, and even city voices are calling for infrastructure work to be taken back in- house under direct LUL control. Network Rail has already shown what can be achieved by bringing maintenance back in-house, a move that brought immediate benefits in reducing delays, and which made a welcome start towards recreating a single command structure. It is unthinkable that Metronet’s death throes should be allowed to result in even more fragmentation, and we have warned the administrator that any attempt to cut jobs or conditions or forcibly transfer our members will be resisted, with strike action if necessary. It is our members who are out there every day trying to deliver the improvements the Tube network desperately needs, and that skilled workforce will still be needed long after Metronet is forgotten. Mayor Livingstone opposed the PPP and now has four years’ experience of it to show that he was right to. LUL has warned that failure to deliver its minimum improvements programme means a future of delays, overcrowding, catastrophic failures, line closures, declining safety and massive knock-on costs. No-one will lament the end of Metronet, the PPP has failed and must be buried. TIME TO BURY THE PPP