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Mr. Geraint Davies: Does my hon. Friend believe that there should be any limit in principle on borrowing to invest in public sector infrastructure in a given year, or does he believe that there should be no ceiling on it in spite of the need for macro-economic prudence and stability?
Mr. Livingstone: That is the most remarkably stupid question that I have ever been asked, and people have to go some to get that record. Of course, I accept that someone has to set a limit somewhere. We are arguing about where to set it. The Treasury has been unduly restrictive and largely responsible for the parlous state of much of the public sector in Britain. We were originally told that too much public sector investment would squeeze out private sector investment. There is no evidence to sustain that. However, we have been under-investing disgracefully in the public sector for more than 20 years. A huge backlog now exists, and we have to set priorities.
I have a copy of London First's advice, which, I assume, was sent to all Members of Parliament. It mentions a £25 billion programme of investment in transport in London. It points out that that figure would constitute 2.5 per cent. of London's contribution to gross domestic product over a decade. That is achievable, if we decide that it is important. There have been complaints from the business sector, whose members encounter appalling delays week after week when they try to move from a meeting in the City to a meeting in the west end. The business community knows that the state of transport in London is a major disincentive to people to stay in London and to new work and wealth creation in London. Getting transport infrastructure in London right must be a top priority for the mayor.
The last real claim in "Working for London"--although it is made four or five times--is that, if we go for PPP, the private sector will accept the risk. My right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) also made that point. It is argued that, under a bond system, the risk would remain in the public sector. That is true, but it is why the sums of money vary so much. The document points out that the cost overrun on the Jubilee line is almost 100 per cent.
When we consider the different costs of raising the money, we must bear in mind the fact that Treasury bonds would be issued at 4.5 per cent., whereas, under the private finance initiative--the PPP is effectively that--the charge would be 10 per cent. or 15 per cent. Even if we could persuade firms to do the work at 10 per cent., we would double the cost of raising the money through issuing bonds. The private sector is not stupid; it does not take on the risk for nothing. It doubles the initial cost of the project, and that is at only 10 per cent. Many of the private finance initiative schemes that the Department of Health conducted when building hospitals came in at more than 15 per cent.--200 per cent. more than the initial cost. The private sector takes on the risk, but it charges more than if one had taken the risk oneself.
Mr. Wilkinson:
Is it not the case that almost anything is better than the PPP? Bonds have an advantage in terms
Mr. Livingstone:
I take on board the complaints of my right hon. Friend the Member for Holborn and St. Pancras that the current leadership of London Underground has handled the Jubilee line unsatisfactorily. Nobody suggests that the money raised should simply be given to the current management of London Transport to repeat the errors that it made on the Jubilee line. The method is clear: we raise the money as cheaply as possible, bring in a contractor to do the work on a contract for a fixed price and at a fixed time. That is the norm in such operations all over the world. Part of the risk is transferred to the private sector, but we would have to pay for that in the initial cost.
Ms Diane Abbott (Hackney, North and Stoke Newington):
Does my hon. Friend agree that the public are grateful that he has opened the debate on financing the improvements to the infrastructure of the London underground? Everyone agrees that we have to make those improvements. It is unfortunate if the dictates of internal party discipline mean that we cannot have that debate. Does he also agree that the balance of opinion--professional, informed and academic--is in favour of some sort of bond issue and against the proposal for a public-private partnership that we have been presented with?
Mr. Livingstone:
The row about the public-private partnership and the bonds issue is interesting--it is a sign of how good the mayoral system might turn out to be. The candidates have provoked the debate, there has been some adjustment of Government policy--they have been forced into a serious debate, which we have not been having--and there has been a brouhaha about the candidates and personalities, or lack of them. Behind all that, there has been a serious debate in the media about bonds versus PPP. I think that the bonds side has won it, although I almost dropped dead when I saw thatThe Economist had said "Ken Livingstone is right" on the bonds issue.
I do not want to be cruel to anyone in the Department of the Environment, Transport and the Regions, but there was a wonderful moment last Monday when the Evening Standard rang DETR and asked whether it could name a single independent expert who supported its case on the PPP. The only one it could come up with was Deutsche Bank, which of course is not independent--it is advising the Government on the whole affair. There is no independent support for its position, so I think that the PPP will be adjusted to reflect the political realities.
Mr. Cohen:
Will my hon. Friend give way?
Mr. Livingstone:
I shall take a last intervention.
Mr. Cohen:
I thank my hon. Friend for giving way so that I can make one print before we leave the issue of
Mr. Livingstone:
I am happy to confirm what my hon. Friend says. I understand that Lord Macdonald, the Minister for Transport, spent an entertaining couple of hours with members of the London Labour group of MPs and made it absolutely clear that major elements of risk such as flooding and disaster would still be dealt with by the Government. No firm would sign a completely open-ended contract without such a commitment.
Let me conclude by dealing with congestion charges. Although there are debates in the Labour party over PPP versus bonds they will be resolved by the selection of a Labour, candidate; but coming into focus is the issue that divides the parties--the congestion tax. Unless the Conservative party moves back to the much more sensible position of supporting congestion charging, which it used to hold, it will have no policy to tackle the problems being experienced on our roads. Today's rush hour lasts all day, and extends to Saturdays and Sundays, and London's streets are clogged seven days a week, virtually from dawn until dusk--they are becoming a nightmare.
Let us not forget that congestion charging is not some wicked Marxist scheme; it comes from the Chicago school of economics and is one of Milton Friedman's little ideas. Many Labour Members have been reluctant to accept it because we would rather have had a congestion charge under which great big expensive cars paid more--that would have put a progressive element into the charge--but we have not been allowed that.
All the studies show, however, that a reasonable congestion charge could reduce the number of cars driving into central London by 15 per cent., thus freeing up the roads, allowing traffic to move and increasing traffic speed. Resources would also be freed for investment in public transport. A charge of £5 a day to travel into a small congestion zone has been suggested by London First, the business organisation. A small central zone--running between Park lane and the City and between south of Euston road and north of the River Thames--with each car being charged £5 to enter it, Monday to Friday, would produce £250 million. That is where we should look for the money to buy new buses, to hire conductors to speed them up and to get the buses properly cleaned again.
I know that some of my hon. Friends are unhappy about my commitment to freeze fares for four years, but I must point out that transport policies and patterns change dramatically and quickly. When the Labour GLC cut fares the second time--by 24 per cent., with the permission of the Law Lords in 1983--there was a 70 per cent. increase in ridership on public transport. We got 110 per cent. of our original fare levels in; we cut fares, but still made more income. Although many Members have forgotten this, the following year we were able to cut the rates in London by 7.5 per cent. because that extra money was flowing in.
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