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Handing over the keys

Dave Wetzel explains why the government's refusal to permit public control could jeopardise the future of London Underground.

If Gordon Brown invites you to his house, I suggest for your own safety and peace of mind you stay away. Imagine the scenario - if Gordon treats his house repairs in the same way he suggests PPP is used for repairing and renewing the Underground.

He will give his front door key to a jobbing tradesperson with instructions that his house requires rewiring, new plumbing, central heating installed, dry rot treated, replastering, decorating and a new roof installed.

The tradesman will be given:

  • thirty years to complete the job;
  • a lease for that period of time;
  • freedom to charge more than other local suppliers;
  • encouraged to subcontract as much of the work as s/he wishes (handing over the front door key to all that need it);
  • the authority to decide in what order that the works are carried out;
  • the right to borrow money for materials at a higher rate of interest than Gordon with his reputation for "prudence" could reasonably expect to pay;
  • no overall responsibility for ensuring safety as the electrician and the plumber compete to finish their tasks in the shortest time at the lowest cost to themselves;

And Gordon and his family will need access to the house from 4am to 1am each day.

Big issue

Despite the attitude of the Treasury who have starved London's transport system of adequate funds to provide a modern mass transit system, public services do matter. The controversy surrounding fox hunting or Europe may excite argument at Westminster and in the media, but the battleground of recent elections has been jobs, health, education, law & order and increasingly transport.

The Mayoral elections last May showed just how important transport is to Londoners. Hardly surprising, since so many rely on road or rail to get to work, school or hospital. There were many areas of agreement between the candidates, but it was Ken Livingstone's uncompromising stance on traffic congestion and tube privatisation that ultimately persuaded the voters.

For many of the three million workers a day who use it, sorting out the tube is the number one priority. Fed up with the daily rush-hour crush, exacerbated by staff shortages, signal failures and faulty escalators, tube passengers are becoming increasingly vociferous in their demands for action and more and more angry at the stubborn refusal of central government to scrap its discredited PPP (Public Private Partnership) policy. In recent weeks, political commentators have argued that it is not just the future of the tube that is at stake in the looming confrontation between Transport for London (TfL) and central government, but the future of devolved government in this country. Even though we are still hoping to reach a negotiated settlement, TfL is taking the government to court to stop it imposing its Public Private Partnership on Londoners in its current unacceptable form. How did we get to this point?

Ken's manifesto

As Ken's manifesto said, the tube should be the showcase of public transport in London, but it is getting worse and we are paying more and more for it. When we were last in power, at the GLC, we slashed fares and introduced bus passes and Travelcards. Since then, fares have risen in real terms by 46%, as central governments have refused to release the resources needed to expand and modernise the system. Ken promised to freeze bus fares and only put up tube fares in line with inflation. He has been true to his word, and saved fare-payers 30m this year.

Ken also rejected the Central Government plan to split up and partially privatise the tube which, he pointed out, provided huge scope for buck-passing, red tape and error, while costing Londoners an extra 1 billion, which would inevitably result in higher fares for passengers. He promised to stand up for Londoners. He has done so.

In August a leaked letter from the principal railway inspector of the Health & Safety Executive, revealed he did not have full confidence in the way the system was being run following the split between operations and infrastructure brought about in preparation for the PPP sale. He expressed concern about who was ultimately going to be responsible for safety decisions in the new structure.

Industrial Society report

In September, the Industrial Society published The London Underground Public Private Partnership, An Independent Review. It concluded that the PPP was unsafe and poor value for money, binding London for 30 years to over-generous contracts giving private sector monopolies intolerable power over London's democratically elected authorities. The Mayor agreed that if PPP is not radically altered, it should be abandoned in favour of allowing TfL to raise finance by issuing bonds.

Then, the following month, the Hatfield rail crash appeared to put the final nail in the coffin of the fragmented, partially-privatised solution for the tube favoured by the government. Balfour Beatty, part of a consortium bidding for two of the three PPP contracts was responsible for maintaining the section of track on which the accident happened. The Mayor called for their removal from the bidding process.

Enter Bob Kiley

In the meantime, the Mayor pulled off a major coup by persuading Bob Kiley, the man credited with turning round ailing metro systems in New York and Boston, to join Transport for London as Commissioner.

Bob Kiley quickly assembled a team of experts. In December, he reported to the Mayor that the PPP was fatally flawed, since the public would own the system but not control it. The implementation of the PPP would be unsafe, inefficient and prohibitively expensive. At the same time, and with the Mayor's backing, he put forward an alternative plan for the reconstruction and renewal of the tube.

Bob Kiley's report on the Feasibility of the PPP structure as currently proposed concluded that the overriding obligation to keep the trains running means that the entire risk can never be transferred. And without adequate arrangements for supervising or enforcing the contracts, the transfer of risk is largely illusory.

Remarkably, the consortia bidding for the contracts had made no comprehensive assessment of the work required to restore the tube to a state of good repair. Neither had London Underground Ltd. How, in these circumstances, could they consider making a binding agreement to carry out the job at a specified price?

The proposed contracts do not achieve the stated purposes of the PPP. They fail to do so because of the lack of day-to-day supervision or regulation, ineffective penalties for poor performance and the stifling of competition. This means they are most unlikely to produce the performance necessary to restore the system to a good state of repair. They are not effective in transferring the risk of performance failure to the private sector and they will not provide the claimed efficiency savings. They in fact will result in higher costs.

An Outline for the Rehabilitation and Management of the London Underground was published alongside it. The report contained a costed plan for financing and funding the tube, bringing it up to a state of good repair and maintaining it in that condition. TfL requested a long-term commitment of 250 million each year from the Government.

NAO report

A few days later The National Audit Office published its long-awaited Financial Analysis for the London Underground Public Private Partnership. It cast doubt on the ability of the London Underground's Financial Analysis and the Public Sector Comparator to evaluate value for money. The case for the PPP had not been proven.

The same month the Health and Safety Executive found serious deficiencies in London Underground's Safety Case for the PPP. The health and safety management systems of LUL and the infracos were not being fully implemented; the risk control systems for major hazards and top event risks were not easily defined; and some of the commitments made in the safety cases were not being achieved.

The February 'deal'

At the beginning of February, and with the trade unions already planning strike action over safety, the Deputy Prime Minister John Prescott, and Bob Kiley, announced they would work together on modifications to the PPP, with Bob Kiley taking the lead. If they could agree mutually acceptable changes then the PPP bidders would be asked to submit revised proposals. The Evening Standard heralded it as a 'Victory for Kiley'. The strike on 5 February went ahead; two subsequent strikes were called off.

Legal action

For a while, it all looked optimistic. Civil servants and advisers worked co-operatively with Bob Kiley and his team, making available papers which they had previously withheld. However, within a few days it became clear that the Government had not changed its position on the fundamental issue of control. TfL still lacks the basic tools afforded to public owners to influence and direct the performance of contractors.

At the end of February, Bob Kiley presented a further report to the Mayor on the London Underground PPP, rejecting any Government concessions made up until that point, and calling for a system combining a clear structure, public disclosure and stable long-term financing.

On 1 March, exasperated by the lack of progress, TfL resolved unanimously to give the Commissioner authority to commence legal proceedings to test whether London Underground Limited and/or London Regional Transport can lawfully enter into contracts that are inconsistent with TfL's statutory duty to develop and implement policies "for the promotion and encouragement of safe, integrated, efficient and economic transport facilities and services to, from and within Greater London".

A few days later, it emerged that the Health and Safety Executive had identified 69 significant issues that still needed to be addressed. The PPP could not go ahead unless progress was made. By the end of the week, RMT members voted for a series of 24-hour strikes starting on 29 March; Aslef said initially it would back the stoppages, but subsequently reached an agreement with London Underground.

Where next?

Train cancellations are now running at record levels. The problem of how to finance and manage the tube is not going to go away. The bottom line for Transport for London is unified management control of the operation of the trains and the renewal and maintenance of track, tunnels and stations. The Mayor insists that, unless the PPP is changed, the fragmentation of responsibility and accountability for decisions will cause lives to be lost. After Hatfield, who can disagree?

In the run-up to a general election, it will be interesting - both for the future of transport and for the future of devolved power - to see whether an acceptable compromise on the tube is offered by the Government. Londoners are holding their breath, and preparing to cast their votes.

Dave Wetzel is Vice-Chair, Transport for London and a former GLC councillor.

May/June 2001