Examination of Witness (Questions 20 -
39)
WEDNESDAY 5 APRIL 2000
MR KEN
LIVINGSTONE MP
Chairman: Good afternoon. I will stop you exactly
on 20 minutes, irrespective. Mr Bennett.
Mr Bennett
20. Would transferring control of the Underground
to the Mayor before the PPP is completed not further delay the
whole process?
(Mr Livingstone) I do not think it is a problem. Clearly
the Government is going to come to the House of Commons with the
details of the bids, with the public sector comparator. I have
heard the Deputy Prime Minister and successive Transport Ministers
giving an assurance to the House that they will not proceed with
the PPP unless it is in the best interests and financial interests
of Londoners. I confidently expect that the PPP is not going to
go ahead, and the Government would be sitting down with the Mayor
and the Assembly to work out a proper way forward for funding
the Underground.
21. That sounds like a recipe for delay.
(Mr Livingstone) On the PPP timetable, at the moment,
I think Denis Tunnicliffe told the Committee that he expected
the bids to be finalised and agreed in 2001. The Mayor will formally
take legal responsibility for everything else, except the Underground,
in the first week of July. There is endless amounts of time to
sit down and sort out with the Deputy Prime Minister, who is very
committed to public transport, a better way forward.
Mr Gray
22. What would happen if the elected Mayor was
very much against the PPP and the Government obviously is very
much in favour of it?
(Mr Livingstone) There is a four-to-one chance that
the elected Mayor will be very much against the PPP, as only one
candidate seems to have some enthusiasm for it and that is quite
muted. We need to bear in mind that overwhelmingly Londoners have
no enthusiasm for it. Effectively, this election is becoming a
referendum on whether or not PPP should go ahead. I assume a sensible
Government, facing a General Election within a year, will want
to listen, once it has heard the views of Londoners, and sit down
and discuss with those who have been elected, having debated these
issues, about the way forward.
23. Surely the reality, spelled out by the Labour
Party, is that you ain't going to be able to enter into any kind
of partnership with the Secretary of State at all, on the PPP
or anything else, particularly on the PPP here. Is this not a
recipe for disaster?
(Mr Livingstone) The Prime Minister's Private Office
is filled with PPP defected to the SDP and they have been welcomed
back into the Labour Party, so I assume the same tolerance will
be shown to my good self.
24. If there is no PPP, surely the Londoners
will have to pay in higher train tickets for cost overruns or
inefficiencies of contractors?
(Mr Livingstone) The big mistake people assume is
that somehow the PPP is going to transfer risk to the banks at
the end of the day. This seldom happens in this world. The banks
manage to get their money whatever goes wrong. If you look at
the likely outcome of these contracts, I am certain that written
into them will be a commitment that if any of these companies
or consortia go down, the cost of repaying the bank loans will
pass to the Mayor and Assembly of London. Therefore, it is outrageous
that this deal should be done over the heads of the elected Mayor
and Assembly, when they are going to bear the responsibility for
picking up the tab.
Mr Donohoe
25. Do you think the Piccadilly Line is adequate
to serve the capital's principal hub airport?
(Mr Livingstone) No, it is not. In retrospect—and
I have to say that this was constructed before I was Leader to
the GLC, the plans were all there—it was a mistake because
the line stops all the way out. You want a line, much as we have
got now, the overland rail between Heathrow and Paddington, which
is quick and efficient. My assumption is that the Government will
proceed with Terminal 5. What we want to ensure is that passengers
going to and from T5 are using public transport. My choice as
Mayor, if I had the money to do one thing or t'other, would be
to extend the overland Paddington link to Terminal 5 rather than
extend the Underground.
26. Do you think it is right that when you take
office, (if you do take office and are successful), that we should
introduce the euro into the automatic ticket machines?
(Mr Livingstone) I have to say we would be mad to
buy any new ticketing machines which were not euro compatible.
Whether the Mayor will want to make a top priority, with their
very limited resources, of taking existing machines and making
them euro compatible, is another matter. I would take that under
advice. It is not at the forefront of my mind over the next four
weeks.
Mr O'Brien
27. Under the PPP proposals, if that came about,
there are concerns of whether there has been sufficient action
taken on the safety standards and whether these would be compromised.
What is your view on the question of safety standards and the
consequence of restructuring the Underground on PPP?
(Mr Livingstone) Inevitably, if you break up the Underground
into different units, there are bound to be problems which do
not exist if you have a clear line of managerial and political
responsibility. I suspect there will be. One cannot guarantee
it. We could be very lucky and there will be no deterioration
in safety standards but it is taking a risk. I do not think, given
the horrors that we have seen at Southall and Paddington, that
people in this country want to take a risk with safety. It is
the top priority.
28. What action should you, the Mayor, take
to ensure that safety is a priority?
29. I think the only way the Mayor will be able
to do that is to try and retain the Underground as one service
in the public sector, stopping PPP. I think inevitably there is
the risk to safety if PPP proceeds. We have seen that in terms
of the problems with the privatisation of British Rail. As soon
as firms have to start to factor in the needs of their shareholders,
as opposed to public sector, there is a problem.
30. That is what you think the Government should
do. What should the Mayor do?
(Mr Livingstone) The Mayor has got to persuade the
Government not to proceed down this road. If the Mayor is presented
with a fair accompli with the PPP in place, I give notice
now that if I am Mayor I will employ the best lawyers you can
get to go over every comma and clause in the contracts. I shall
hold the firms to them, to the letter. They will not make a patsy
out of me if I am Mayor. They will deliver the service and the
safety standards. I very much suspect many of these firms bidding
are working on the assumption that they may get away with the
sort of nonsense that happened with British Rail after privatisation,
where we were told that privatisation would bring a massive increase
in investment and, in fact, what we saw was the rate of track
replacement declining.
Miss McIntosh
31. Could I ask Mr Livingstone why he disputes
the cost savings of the supporters of the PPP scheme and what
savings his own funding plans, in his view, would have. Would
he envisage any role at all for private sector involvement in
the Underground in future?
(Mr Livingstone) Clearly there has always been private
sector involvement in major tube construction programmes. My view
is not that it is a great ideological thing. My position to PPP
is that I have seen what happened with the break-up of British
Rail. I have seen what happened with the Passport Office. I do
not assume the public sector is always more efficient than the
private sector but I do not assume the reverse either. I seem
to recall that we had to step in and rescue the Channel Tunnel
from the fiasco of effectively going broke. It is a question of
what works. It seems to me that if you have to raise £7 billion
over the best part of a decade and a half, it is common sense
to raise it as cheaply as possible. Having raised the money as
cheaply as possible, I would undoubtedly say that you have got
to bring in competent civil engineering firms capable of doing
the work, because there is now a huge backlog of it. That is a
partnership with the private sector but you have to make certain
that you tie them to fixed terms, fixed time, and they do not
keep coming back with extra demands for money.
32. Mr Livingstone answered the question as
far as concerned construction, but how would you overhaul the
Underground's management and operation?
(Mr Livingstone) Clearly something has gone terribly
wrong. I was aware, when I was the Leader of the GLC, that there
was always the underlying assumption among senior management that
the vast majority of Londoners had no choice but to use the system.
Therefore, however bad it was and however much the fares went
up, they had a captive audience. As soon as you took away democratic
accountability that sort of view has bubbled up. Everywhere else
you go on underground systems around the world, trains come in
on a fairly regular basis. I go down the tube line here and I
can see 11 minutes to the first train, 12 minutes to the next,
and 13 minutes to the one after. It is a nightmare. I want to
know what is wrong with the London Underground management that
they cannot maintain the sort of system and sort of efficiency
of other systems. If that involves sacking people I am prepared
to sack people. You have got to bring in someone capable of running
the system. I do not think anyone there now fits that bill.
Dr Ladyman
33. In answering Miss McIntosh, you made a plea
for learning the lessons of history. What lessons do you learn
from the Jubilee Line being late and over budget?
34. Management changed its specifications far
too often. They did not stick to the original idea. They went
backwards and forwards with different signalling systems. You
have to bear in mind that the comparison with the Jubilee Line
is really with the Channel Tunnel, which was a huge engineering
project. Crossing under the river—major problems—there
were always going to be potential problems there. Certainly you
have to make certain that you try and avoid those mistakes of
the past. That is why you have to bring in new management. You
have also got to specify quite clearly that you work to a fixed
time and fixed price.
35. Where does risk go under your plans?
(Mr Livingstone) Risk is always going to be shared,
that is the reality of it. No Government or Mayor could stand
back and watch the collapse of the Underground system any more
than he could stand back and watch the collapse of the Passport
Office. When things go wrong the state steps in and sorts the
mess out, as we did with the Passport Office, and as we would
have to do here if one of the PPP firms dropped out.
36. But under your system there is no risk from
the private sector at all. The risk is going to be entirely on
the shoulders of the Government. There is not going to be any
shared risk.
(Mr Livingstone) Let us make the assumption that one
of the consortia actually failed. What you will find is the risk
under the existing contracts being worked out. When Lord Macdonald
came to a private meeting of London MPs some months ago, he admitted
that the risk cannot be transferred. It would revert to the Mayor.
That is the simple reality. No bank is going to say, "We
are going to put X billion into this. Sorry, if it all goes down
the Swanee we do not get our money back." If an asteroid
strikes the earth tomorrow and wipes out all life, you will still
find there is a clause that we have to repay the debt to the banks
before we go to heaven. That is the reality.
37. Under a slightly less traumatic situation,
where maybe the project was just late under the PPP, the private
companies themselves who were late would pick up the bill for
the lateness, whereas under your system the bill for the lateness,
the loss of revenue, the cost of overruns, would all fall on the
shoulders of the Mayor.
(Mr Livingstone) Not if you set a contract with a
fixed time and penalties for overrunning. The reason is that under
the PPP, raising funds that we need, we are seeing figures generally
in the area of 10 to 12 per cent rate of interest. If you have
Treasury backed bonds—and I checked the papers, the Financial
Times this morning—ten-year, Government backed bonds
yesterday were trading at 5.23 per cent and 30-year bonds at 4.46
per cent. The private sector takes on a bit more of the risk but
he is charging you over twice the original cost than if you raised
this money by bonds.
38. So what estimate have you made of the cost
of risk so that we know whether the extra cost of interest will
match it or not?
(Mr Livingstone) That is what the public sector comparator
is going to do. I am not in a position with my campaign team to
do that sort of detailed financial work.
39. You have backed a particular horse without
knowing whether the sums are going to work out or not?
(Mr Livingstone) No. I am working on the assumption
that if the Government honours its commitment it will be a fair
comparison—and will come to the House and explain that in
detail, and no doubt be questioned by this Committee - but we
will have those detailed figures and at that point I assume the
Government is not even going to proceed with it.
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