FOUR YEARS after the first Tube assets were handed to the private sector, London Underground’s biggest union has called for the disastrous ‘Public-Private Partnership’ to be scrapped if the capital is to have a world-class metro system by 2012.
On the fourth anniversary of the PPP, an RMT study has drawn together the conclusions of a catalogue of damning reports and reviewed the continuing chaos that underline the need to end a scheme that has ‘failure built into its very fabric’.
The study shows how warnings that the PPP would turn out to be an expensive failure have come true, and concludes that the privateer ‘infracos’ will not be able to deliver the world-class system needed for the 2012 Olympics.
‘By last summer Metronet and Tubelines had been handed more than £3.3 billion of public money and made nearly £300 million in profits, but by anyone’s standards they have spectacularly failed to deliver,’ RMT general secretary Bob Crow said yesterday.
‘The performance targets the privateers were set were five per cent lower than those expected when the Tube was maintained by LUL in the public sector, yet report after report has shown that the privateers have not even managed that.
‘The privatisation and fragmentation of Tube maintenance have resulted in deterioration in service, missed targets, infrastructure failure, engineering overruns, an alarming increase in safety problems and a massive increase in costs.
‘By contrast the national rail network has brought maintenance back in-house and is already reaping the benefits in increased efficiency and better safety.
‘Time is rapidly running out, and if we are to have a world-class Tube network in time for the Olympics it is no longer an option for the government to allow the PPP to rumble on towards disaster.
‘Today is the day for New Year’s resolutions, and one of the government’s must be to bring the necessary legislation forward to end the PPP and return the Tube’s infrastructure to London Underground,’ Bob Crow said.
On 31 December 2002 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 4 April 2003. The companies that make up the private consortia are;
• Metronet – Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy, RWE ThamesWater
• Tube Lines – Amey and Bechtel.
Before the Public-Private Partnership was introduced politicians, trade-union leaders, 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 over-generous.
‘If it fails to meet these criteria, then the bidding companies should instead bid for turn-key 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’.
In a series of hard hitting memoranda to the Committee, Transport for London (TfL) maintained that the 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.
Also in February 2002 a press release issued by the Mayor of London explained ‘The PPP will saddle the travelling public and council-tax-payers of London with huge and unquantified liabilities while replicating the key mistakes of rail privatisation on the Underground.’
In March 2002 the House of Commons Transport, Local Government and the Regions Select Committee report, ‘London Underground – The Public Private Partnership: Follow Up’, concluded ‘£100 million has been invested in developing and assessing the PPP contracts.
‘After an exhausting four-year process there are considerable vested interests in seeing the deal completed.
‘However, the evidence we have taken to date shows that the basis on which the decision has been taken is flawed. The shifting sands of the rationale for, and the assessment of, the PPP have lead to a process that has lost all credibility in the eyes of the public and professionals in the field.
‘Parliament must now have the opportunity to have an unfettered debate on the decision to proceed with the PPP. It is essential that the government allows Members a debate and vote in the House of Commons on a substantive motion on the future of the London Underground and the PPP’.
Finally between 2000 and 2003 the London Underground trade unions – RMT, TSSA & ASLEF – organised a concerted campaign against the PPP that involved public meetings, rallies, leafleting passengers, lobbying MPs and borough councillors and industrial action.
Government chose to ignore the warnings 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.
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.
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 the TfL report explained that in 2003/04 it was too early to judge the performance of the PPP. . . The verdict is put bluntly: ‘In short, performance is not good enough and is less than was promised’. The report goes on to say: ‘The Infracos and their shareholders are earning significant sums through the PPP, but the volume of real work out on the railway is not consistent with the payments being made.’
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 March 2005 the House of Commons Transport Select Committee published their Performance of the London Underground report.
The report found that ‘disregarding the costs of the Jubilee Line extension, central government expenditure in constant terms has increased from £44.1m in 1997-98 to £1,048m in the current financial year (2004-05); an increase of 2,276 per cent – over twentyfold’.
It is now four years since the beginning of the PPP. RMT believes that the PPP structure remains so fundamentally flawed that it is incapable of delivering the required improvements to London Underground’s performance in order to provide an economic and efficient service to the travelling public and put in place the world class transport system required for the 2012 Olympics and Paralympics.
We contend that the PPP’s separation of ‘wheel and steel’ and the fragmentation of Tube maintenance has in many instances resulted in deterioration in service and value for money for the tax- and fare-payer.
We believe that performance can only be sufficiently improved through the complete scrapping of the PPP, and that the government should therefore bring forward the necessary legislation that will lead to London Underground assuming direct control of the Tube’s infrastructure.
