Examination of Witnesses (Questions 300
- 319)
MONDAY 17 APRIL 2000
RT HON
JOHN PRESCOTT
MP, RT HON
LORD MACDONALD
OF TRADESTON,
MR MIKE
FUHR AND
MR PAUL
DAVIES
Mr Gray
300. I think so, I think the Deputy Prime Minister
has accepted that there could well be conflict with the mayor
if the major has a different view about how the finance should
be raised.
(Mr Prescott) Yes. That is a fair point. If the candidate,
Mr Norris, who now I think is back on privatisation from what
he seemed to be saying in his evidence, if he favours that, yes
there will be direct conflict. If others try to come in and say
"Look, even though it is best value I did disagree with it.
I want something else, I want to try bonds and delay it for another
two or three years" then I would just accept that I am in
conflict with the mayor and get on with doing the job for Londoners.
Mr Stevenson
301. One question, finally, on the public sector
comparator, Deputy Prime Minister, which I touched on earlier
and a second question or two about the alleged funding gap. My
direct question about the public sector comparator is this. As
we understand it, this comparator is applied over the whole 30
year life of the PPP?
(Mr Prescott) I think only 15 years if I am correct.
(Mr Davies) No, the full 30 years.
(Mr Prescott) I am sorry.
302. I saw you nod.
(Mr Davies) Yes.
Chairman
303. Mr Davies is that a yes or a no?
(Mr Davies) That is a yes.
Mr Stevenson
304. As we understand it, the contracts are
reviewable every seven or eight years and once they have been
signed, presumably the successful consortia will be in a pretty
powerful position when that review comes. You are hardly likely
to tell them to go away. What happens if those seven or eight
year reviews blow a fair old hole below the water line of your
public sector comparator that has been taken over the full 30
year life? Is this not a pretty important fall?
(Mr Prescott) The 15 years I am referring to, I think,
is the judgment about how much investment can be done over that
period of time because it is difficult to make investment requirements
over 30 years, so I am sorry for misleading. In regard to renewable,
that is the seven and a half year period we put in to look at
it and the mayor to discuss whatever changes he might want to
make in this kind of thing. Basically I have the contract and,
as I understand it, it is not a renegotiation of the contract.
Perhaps it could be explained better by Paul.
Chairman
305. No renegotiation, Mr Davies, just a calm
acceptance of the fact it can continue?
(Mr Davies) It is not a renegotiation. At that time
there is an opportunity for London Underground to respecify the
levels of service it wants because it does not know today what
exact levels of service it wants in 22 years' time, let us say.
There are periodic times when you can say to the private sector
"I thought I wanted 30 trains an hour, we want 35 trains
an hour" or whatever they may say. Clearly if they respecify
what they want, the private sector has to reprice what they are
delivering and that is, if you like, the contentious point. The
two have to agree the economic and efficient price to deliver
those services and that is what will happen at the periodic review.
In the situation you described, because you were saying they are
quite strong at that stage, and in the situation they could not
agree, under the Act there is a statutory arbiter who is brought
in to determine the true, economic and efficient price for delivering
those services.
Mr Stevenson
306. This review—just to get this clear—is
nothing more than an opportunity to respecify?
(Mr Davies) Primarily, yes.
(Mr Prescott) Also, I think, would it not be possible,
if the mayor took the view that they wanted to extend some lines,
it might be the same contractor on their route, to say "We
want to extend that" or "We want to modernise this particular
section". They can do that but at the end of the day what
they would be doing is they would be negotiating with that contract
and saying "What would it cost to do it?"
307. I think we understand that. I was just
trying to clarify what effect, if any, a review of the contract,
which is a public sector comparator over 30 years, when you have
this review every seven and a half years, it is merely a respecifying
exercise?
(Mr Davies) It is not reviewing the contract at all.
308. Can I go on, finally, to this alleged funding
because we have heard evidence from witnesses that are pretty
certain in their own minds, based on the information they have,
that there will be funding gap. We have heard from some that the
bond option would mean something like a £16 million per year
funding gap. The PPP option would mean something like £95
million a year funding gap. Yes, you can frown, Mr Davies, the
evidence is all there, I am sure you have looked at it.
(Mr Davies) Yes.
309. There is evidence we have received, also,
that after two years there will be £175 million funding gap
and that is likely to continue. Would you care to comment on those
figures?
(Mr Prescott) There seems a 100 per cent difference
even in some of the figures you have got. I think that shows availability
that makes it difficult to give us proper judgment. I think we
have given the honest one to say there may well be but until you
get the cost—and since this is a variable affected by what
happens on the interest rate that you are borrowing, which is
the point being made here, the risk and how far you transfer it,
the cost it is going to be, and the level of efficiencies—it
is very difficult to make that judgment. I do not run away from
the point, as I think I said earlier, that it is not a zero grant
that we are saying we can bring about, it may well be some contribution
but we cannot tell that, and nobody can, and even those who are
giving out the estimates have a difference of 100 per cent.
310. My last question is about the possibility
of a public comment. On 13 March I think it was reported in The
Times that the Government was prepared to consider something
like £2½ billion of public support, if I can use that
term, to address any funding gap. Has that got any validity at
all, that report?
(Mr Prescott) Whatever the press says I have extreme
doubts. Since it was a quote of my colleague and he is well aware
of it, I will ask my colleague to answer it.
Chairman
311. Lord Macdonald?
(Lord Macdonald of Tradeston) Chairman, if I was quoted
in that way, I was certainly misquoted. What I said to journalists
when we were announcing the commitment to the extension of the
Docklands Light Railway when this question was put, I said I would
refer them back to Glenda Jackson's statement whilst she was Minister
of Transport for London when she told the GLA Bill Standing Committee
in February 1999—and I quote her—"Our aim is
to avoid paying further grants if possible but that is not a prerequisite
of concluding the PPP". What we have said, building on what
Ms Jackson said some 14 months ago, we have never ruled out subsidy
but we believe it is pointless to speculate about the level of
it at the moment until the bids have been scrutinised.
Mr Stevenson
312. My Lord, the £2½ billion that
was quoted was false?
(Lord Macdonald of Tradeston) Certainly it never crossed
my lips.
313. The £2½ billion that was quoted
did not come from the Department of Transport?
(Lord Macdonald of Tradeston) Certainly it did not
come from the Department or from the press briefing which was
an open press briefing. I think it was based on assumptions that
the journalist had made, certainly nothing we said.
(Mr Prescott) Or, as far as we are aware, any informed
comment. That does not worry journalists.
Mr Bennett
314. Can I take you on to the East London extension
and the Croxley Link projects. Are they going to be paid for out
of this PPP or part of this PPP?
(Mr Prescott) I am sorry, is that the extension in
London?
315. The East London line.
(Mr Prescott) I see. No, I do not think they are at
the moment. What we are dealing with is the Underground lines.
The only reason it probably came into play was when we attempted
to see if we could get the connection between the main rail line
system and the Underground and the possibility of an exclusive
contract with Railtrack. We gave them the opportunity to see if
they could make the east-west connection. That did not work out,
as you know, and what we did ask for the other extension, which
was the East London connection, was to ask the Strategic Rail
Authority to report back to us on it. That is where we are at
the moment.
316. So it is not going to be part of the sub
service?
(Mr Prescott) It is not a part of this, no.
317. Right. How are you going to get the funds
for those and for bigger things like CrossRail and the Chelsea-Hackney
link? Are not all of those essential or are they not going to
have to be funded in a different way?
(Mr Prescott) They are essential and I suggest you
ask the London Mayor because it will be their decision.
Chairman
318. Forgive me. That is a little bit—
(Mr Prescott) Disingenuous.
319. The word was your choice, Deputy Prime
Minister, I would not bandy comments on the English language with
you.
(Mr Prescott) The word was on my lips.
|
