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6.30 pm
Mr. Howard Flight (Arundel and South Downs): Surely what is right is what will be the right structure to secure quality of service, value for money and safety, not fatuous debates about who did what.
In the United States, bonds have been a successful way for municipalities, particularly the New York subway, to fund themselves. An interesting irony has not been drawn out. When politicians use bond funding, in essence it makes them and the organisation capitalist because their success rests on the efficiency and success of the operation. If a mayor of a major city faces the prospect of that city financing a collapse and refunding bond lenders, he and his party will not get elected again for a long time, so bond funding puts into politics and civil transport a strong capitalist motive.
I have no doubt about the ability of London, if politically endowed, to raise the money. Do not forget that it is as large as Switzerland. London's credit-worthiness would be undoubted. We are in an age where there is a great shortage of bonds. The problem with pension funds and annuities is that there are not enough bonds to invest in, so there would be ready demand for issued bonds.
The operation must service the interest--that goes without saying--but, stepping back, that option is likely to be cheaper than the public-private partnership investment option because there is no profit element involved. The crucial thing is: if it stayed wholly within the public sector, could the service be run as efficiently and as safely, and better, than under the PPPI structure that is proposed? I share the doubts of many. What has happened is that the Government have funked the full option of privatisation for a halfway house, which may not be the right way to run a major subway system.
I close by saying what others have said. The public want to know what the recommendations are. The United States has one of the best records in turning around past failures and making a success of them. No one can go to New York without feeling that it has a thoroughly efficient subway system, which, unlike many of those in continental Europe, is not a huge drag on the taxpayer, but there is one caveat: such bond issues must not have any central Government guarantee. That would undermine the whole discipline and process. To look at it the other way round, a risk of PPPI is that the Government are potentially more exposed to picking up the tab than they are by a municipal bond issue that is ring-fenced. As has tended to happen in rail and other sectors, it becomes irresistible for the Government to get involved in providing public sector money when things start to go wrong.
We have a new political situation. For better or worse, the new Mayor was elected on a particular mandate. We have staggered to where we are in terms of the proposals. It is so important for the long term that the position should be looked at anew, particularly in the light of the recommendations of Mr. Kiley, perhaps the world expert, on how it will be most practical to run London's subway for the future.
6.34 pm
Mr. Tony Colman (Putney): I declare an interest as a current director and founder chair of Public Private Partnerships Programme, which is the local government private finance initiative company and which began to operate in 1996, under the previous Government. It is all party. We have Conservative Members, including a Member of the other place, Liberal Democrat Members and Labour Members. It has been uncontentious and an avenue for the investment of some £20 billion of funding, which is flowing into local government in a wide range of sectors, including education and social services.
We have public-private partnerships for hospitals. I was pleased that, today, the Secretary of State for Health has announced the PPP for my local hospital, Queen Mary's. I mention those to show that we are talking about something that, other than in respect of the underground, appears to have broad support. My hon. Friend the Member for Croydon, Central (Mr. Davies) has mentioned Tramlink. One end of it was in Croydon. The other end was in Merton, where I had the great honour to serve as the leader of the council. I was pleased to see that PPP go forward.
I was not able to be in the House to listen to the contribution from the hon. Member for Brent, East (Mr. Livingstone), but it surprises me that the number of PPPs that Brent council has had over the past three years has not been commented on by him, as far as I know, in the House at any time, so the problem does not seem to be the concept of PPPs.
Ms Abbott: My hon. Friend will be aware that people who object to the PPP do not object to PPPs in principle. They object to this misbegotten PPP.
Mr. Colman: I am glad that my hon. Friend believes that with all other PPPs, which run into many billions of pounds, there is no problem, but that there is a problem with this one. All of us--well, perhaps all of us; all sane Members--[Interruption.] I withdraw that. All Members who can see the clarity of the situation would oppose the view that has again been expressed by the hon. Member for Arundel and South Downs (Mr. Flight), who I think I am still able to claim as a constituent--but perhaps he has moved on. The Conservatives' view appears to be based on privatising the underground. It is unvarnished--they see it disappearing into the private sector. We all know--it has been mentioned by other Members--what has happened in the past three years and the huge number of additional accidents that have occurred through privatisation of British Rail.
The second alternative, which seems to be espoused by Liberal Democrat Members, is bonds. What we opt for must provide best value, but the key point about bonds is that the risk is retained within the public sector; the risk is retained by the council tax payer and taxpayer. I am not keen that the risk be held by those taxpayers. That is not the way forward, especially given that such experience and expertise has built up over the past three years of the Labour Government.
Incidentally, I was pleased that the first legislation that we passed in the House in the current Parliament was the Local Government (Contracts) Act 1997, which sorted out the mess that the Tories had made of PPP. It sorted out who was going to do what and on what basis we could
go forward to ensure that subsequent decisions were not deemed ultra vires. Our proposal went forward based on the utmost clarity.My involvement with PPP came when I was elected as leader of Merton council. I had to travel from Morden to the City on the Northern line, which at that time was in a deplorable state. I am therefore pleased that, with colleagues, I have been able to persuade my right hon. Friend the Secretary of State for the Environment, Transport and the Regions to go forward with a PFI PPP for the Northern line trains. That took some eight years to get through but the trains started to run under that arrangement last year. That success shows the incompetence of the Tories in trying to sort that out. I hope that, after the three to four years that we have had in government, the PPP that will emerge shortly for the underground will be something with which we are all happy on the basis of best value for taxpayers and the safety of London.
Mr. Brake: Perhaps the hon. Gentleman can explain why Londoners voted overwhelmingly against PPP in the Greater London Assembly elections.
Mr. Colman: There were a number of issues in those elections: PPP, privatisation or bonds. We are now studying that range of options.
Other hon. Members have mentioned their constituencies. I give two vignettes about the District line, Wimbledon branch. East Putney station had to be restored after decades of dereliction under the previous Government. The work overran by nearly a year. I tried to obtain compensation for my constituents who live next to the station, but was informed by London Underground that, as it was itself performing the contract, it was unable to offer compensation.
In the other case, about two weeks ago, there were great delays, which were attributed to flooding, on the track between Wimbledon Park and Southfields. Although the reason given for the delays would seem to make sense, the track is on a 30 ft high embankment.
Clearly, in both cases, the contractor organised by London Underground failed to deliver that which it should have delivered. I want a public-private partnership that keeps accountability in the public sector, but enables private finance and management to be used on the infrastructure. I believe that such an arrangement would be the right one for the people of London.
6.40 pm
Mr. Robert Syms (Poole): This has been an important debate, and we have had some good speeches from hon. Members on both sides of the House. As my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) said, not only is this the fourth time that we have debated the tube, but all those debates have been held in Opposition time. It is a pity that the Government, who control so much of the House's timetable, have not initiated a debate on this topic and allowed hon. Members to have their say. One half-day Opposition debate is probably not sufficient to allow all hon. Members who wish to speak on the subject to do so.
We are all disappointed that the Deputy Prime Minister has not attended the debate, to speak and to listen. However, perhaps his absence is understandable, as the Government seem to have some "good news" Ministers
and some "bad news" ones. The Deputy Prime Minister, when he is not in Tokyo or Delhi, seems to be one of those who attends when he has good news or there is money to give out, whereas the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Streatham (Mr. Hill), and his sidekick the other Under-Secretary the hon. Member for Sunderland, South (Mr. Mullin), are wheeled out when there is a difficult debate or an Opposition day to deal with. Those two Ministers do their best, but perhaps their best is not good enough.Today, the more the hon. Member for Streatham tried to describe the PPP, the glummer Labour Members became. They all seemed to realise that, at the next general election, they will have to explain the proposals on the doorstep, and that there is no way the proposals can be explained simply. Recently, while electing a new Blairite leader, even the modernised London Labour party could not stomach this PPP. I therefore tell Ministers to look not at those who are in front of them, but at those who are behind them. It is from behind them that their difficulties will come.
The London underground caters for 3 million trips per weekday, including journey-to-work trips made by 35 per cent. of people in central London. Additionally, about 90 per cent. of tourists use the tube during their stay. The tube annually generates more than £1.1 billion in fare revenue. It is a very important part of our capital's transport infrastructure, and it truly is the only real method of rapidly transporting large numbers of people around London.
We all want London to have good public transport. London is a world-class city and it deserves world-class transport. However, what is the Government's record? Although Ministers have been slow in dealing with the tube, that should not surprise us, as the hallmark of the Government's transport policy has been to think about things rather a lot, but to do very little. We are now three and a half years into this Government, but we are still discussing what Ministers will do to try to improve the situation.
As we learned on the previous Opposition day, this year the tube will receive £753 million--which is a substantial reduction on the £1,035 million that the previous, Conservative Government were investing in 1996-97. The tube needs more investment, but successive Governments have not invested enough in it. The fact, however, is that state-owned enterprises have to compete with hospitals, schools, social services, pensions and many other priorities. Therefore, as we have heard in previous debates, it is no wonder that the tube has occasionally been starved of investment.
- the number of regular users who see the Tube as poor value for money has doubled in a year, from 32 per cent. in 1999 to 65 per cent.
In a very thoughtful speech, my right hon. Friend the Member for Cities of London and Westminster likened being caught in the tube to being in the black hole of Calcutta. I think that we can all appreciate the difficulties that tube travel sometimes entails.
There have been criticisms that the PPP is over-complicated, and I think that hon. Members, after hearing the Minister try to explain the PPP, will agree with those criticisms. There is a question mark over whether the PPP structure will generate sufficient cost savings, and whether the proposals will provide value for money. The Library brief points out that fees for consultants working on the proposals already amount to £60.3 million. Originally, and optimistically, London Transport estimated that the total cost to establish the PPP would be £65 million.
There will also be significant costs involved in monitoring the PPP and negotiating and administering contracts. The hon. Member for Brent, East estimates that the PPP will entail more than 150 various contracts, all of which will provide very substantial work for the lawyers. Additionally, an endemic problem in such proposals is the difficulty of dividing risk between the private sector and the public sector. We also do not know how the proposed penalties and incentives will work.
The length of the contracts--30 years--has also come in for substantial criticism. As it is unrealistic to specify service levels for the next 30 years, there will have to be formal reviews. As Professor Stephen Glaister has argued, there are fundamental difficulties with 30-year contracts.
The hon. Member for Brent, East also made the very good point that some contracts will allow only 95 per cent. of performance targets to be met. There could, therefore, be reductions, in addition to the hoped-for improvements, in performance levels. It is a potential difficulty.
What assumptions have been made about the PPP? London Transport expects that, in the next 20 years, peak-time traffic will grow at 1 per cent. per annum, and that off-peak travel will grow quite significantly. It also assumes that fare income will increase by 40 per cent., mainly because of a greater volume of passengers. The assumptions are key ones. If the increase in passenger numbers occurs at peak time, there will be gridlock. Moreover, I am not quite sure how anyone can argue that there will be a very small increase at peak time and a substantial one at off-peak times.
As my hon. Friend the Member for North Essex (Mr. Jenkin) said, the Jubilee line, which the previous, Conservative Government promoted, is an excellent line which has air conditioning and which demonstrates the tube's potential. The PPP does not seem to provide for new lines--new link lines such as the Croxley link line which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) mentioned. We all have a shopping list for how best to increase the tube's capacity. I think, however, that the Government's PPP proposals will not deliver the substantial tube improvements that we all want.
Mr. Bob Kiley has been central to today's debate. On the PPP, he said:
- I have been trying to figure it out for about five weeks now and still haven't managed it. I have a rule that anything that takes that long to understand is not going to work.
-
The Minister said earlier that the Government had given information to Mr. Kiley. However, the hon. Member for Brent, East questioned that and said that Mr. Kiley had not been given the most up-to-date contract information. I hope that the Minister will be able to clarify what information has been given to Mr. Kiley. As my right hon. Friend the Member for Cities of London and Westminster said, it is interesting that the person who knows how to run such networks is being shut out by the Deputy Prime Minister, who has not had any experience of running such networks.
- half baked and either naive or dishonest,
There is a genuine lack of accountability. The Government do not seem to have obeyed the logic of their own arguments on devolution and the restructuring of government. We have a Mayor and an Assembly, and the responsibility for running most services will rest with them. It makes sense that the professional individual employed to run the services should have some input into the setting up of the organisation. I understand Ministers' worries that information may have to be provided. It is strange that we have a former employee of the CIA to whom the Government do not wish to give information.
This ill thought out proposal does not find favour with many people and I would be surprised if it became a reality. The electors of London will have ample opportunity to give their views on it at the next general election.
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