Examination of Witness (Questions 60 -
77)
WEDNESDAY 5 APRIL 2000
MR STEVE
NORRIS MP
60. Can you give us some idea of what they are.
(Mr Norris) First of all, trains renewals
and refurbishment. There is absolutely no reason why the stock
which is coming up—and I am thinking about District this
year, Victoria next, and Piccadilly the year after, a regular
programme of 20-year renewals that we undertake—should not
be conducted on the PFI/PPP model. Other areas of contracting
could equally well apply, particularly in terms of infrastructure
maintenance. There is nothing wrong with the principle of infrastructure
maintenance being contracted. There may be difficulties with the
contracts that are currently on offer. I have made no secret for
the last two years that I thought the bird would probably not
fly. The public sector comparator would be likely to be rather
too difficult for the present contracts. But I think there is,
within the germ of infrastructure management contracts, every
possibility of doing something that is very much in the public
interest.
61. Have you any new ideas under contract system
that could apply?
(Mr Norris) To the extent that it is a new idea, I
am not personally sure that I would want to tie up the regime
to the length of time that the current contracts envisage. Those
who criticise them for potential flexibility are probably right.
After all, the term that you classically use is the term over
which the contractor can have more ties, the important assets
the contractor has to dedicate to the project. Provided that has
been dealt with—my own view is that 20 years would certainly
be sufficient in that respect—as I see it, there is no commercial
value in necessarily elongating that contract.
62. Would it put prices up over that shorter
period of time?
(Mr Norris) I do not see any reason why it should.
There are two things you do which act in favour of better economy.
One is that you price limit the contracts themselves. It really
is important to look at the history of public sector contracting
and look at the average cost of overruns in public sector contracts.
You are looking on average, in the Department of Transport when
I was there, at cost overruns in excess of 40 per cent. So, first
of all, you have a cap there on the actual amount of expenditure.
Secondly, the issue of relative financing cost is something of
a delusion. That has never been the issue. It is really the ability
to use capital efficiently that determines its ultimate worth
rather than simply the cost of borrowing. So for a lot of reasons
there is no reason to see the PFI or the PPP as increasing the
cost to the passenger. There is a very good reason to see each
of these schemes delivering much better value to the system as
a whole.
Miss McIntosh
63. Could I ask Mr Morris, does he envisage
a situation where there might have to be a massive increase in
fares—for example, if there was a downturn in the economy—because
of a decrease in the use of the tube?
(Mr Norris) I do not believe myself that we ought
to be looking at the requirement for massive increases in fares,
largely because I think, at the moment, that the constraints on
the system are not simply those of attracting more passengers.
At the moment, we are at crush capacity on peak on pretty much
every line for five hours a day. There really is not much potential
for additional ridership there. Incidentally, one of the concerns
I have about the original PPPs for the infra. cos. is precisely
because they make rather ambitious assumptions about increased
ridership. I think more is about getting more off-peak revenue.
Early bird revenue. The return of the workmen's ticket, that many
people in London will remember, to try to spread the peak and
offer overall extra capacity. If you do that, I think it is possible
to envisage a situation in which any downturn in the economy,
which led to a reduction in ridership at peak, could be offset
by gains elsewhere in the working day.
64. Do you have a view on workplace charging
and road user charging? Whether they should be introduced. And,
if they were introduced, would you be in favour of their being
used to subsidise the cost of the tube?
(Mr Norris) I am very much against the idea of using
charging in the method that is permitted under the terms of the
Greater London Authority Act. I thoroughly understand and indeed
approve of the logic of pricing as a mechanism, which not only
can reduce traffic in certain conditions but can also raise revenues
for public transport improvements; but the key is to raise revenue
for public transport improvements and not simply to do the Chancellor's
bidding and replace a fat zero in the Red Book, which is on offer.
For that reason I have turned my back completely on the notion
of either workplace parking charging or urban congestion charging.
I think the added disadvantage of workplace charging is: think
of the level of around £1,500 per space, not the 3,000 I
have since seen talked of, but at £1,500 it was deemed to
have an impact of 1.5 per cent reduction in traffic. There would
be a very general agreement that this is hardly a justification
in terms of traffic policy. It may be a convenient way of raising
revenue but it certainly is not what it ought to be, which is
a tool to reduce congestion in London.
Mr Gray
65. Do you not think that there might be some
merit in just going for straightforward privatisation of the network
as a whole?
(Mr Norris) There might indeed. I have made it clear
that, at least for the first year or 18 months, the Mayor is likely
to be cohabiting with a Government that has not offered that alternative.
It is important that we deal with the status quo. For that
reason I have constructed proposals to deal with Public/Private
Partnerships. This is because that overcomes any ideological difficulty
that the present Government might have with the concept of private
ownership. I am also relaxed about the proposition that if Londoners
feel, for whatever reason, more comfortable with the ultimate
ownership of the system remaining in public hands, then so be
it. I am concerned that what we do not do is to allow the ideological
commitment to the alleged virtues of nationalised status to somehow
cloud our ability to make sure we get enough finance in the system
and enough management focus on delivering real quality services
to customers. I set aside, for this moment, the prospect of dealing
with outright privatisation as an option because it is frankly
not one which is on the agenda.
66. So crack on with PPP in the meanwhile to
put right what is wrong with the Underground.
(Mr Norris) There is a huge amount that you can do.
I have always felt that, ultimately, ownership was hardly the
issue. It is not a question of ultimately who owns the system
but how well the system works, which is overwhelmingly what the
majority of Londoners care about. Londoners simply will not forgive
a Mayor who puts ideology, in terms of the ownership of the system,
in front of the ability to lever in the resources that are necessary.
I would not turn back the Chancellor's cheque. Indeed, part of
my strategy is to insist to the Chancellor that he delivers the
kind of investment levels, which I think is generally agreed are
necessary to continue to support LT.
67. Lastly, you talk about cohabiting with the
Government. Would it not be awkward being a Conservative Mayor
in a Labour Government? Would that be better or worse than if
it was offered to Mr Livingstone?
(Mr Norris) You must ask Mr Livingstone on how well
he thinks he will cohabit. I suspect that he would have some difficulty.
I rather suspect it would be a question of: the answer is no,
now what is the question? But that is probably the price you pay
for being a constant critic of the Chancellor. My view is that
my job is to look after London. It is to make London's buses work;
make London's rail service work; to try to do something about
crime; job creation and so on. The constructive approach to this
Government is, in my experience, that it is a rather more delicate
one, having to be awkward with one's own colleagues, than it is
with the opposition. I suspect it is a much more open and workmanlike
relationship when you do not have any difficulties on a personal
level.
Mr Bennett
68. You want the tube to be used rather more.
It is going to be used at peak periods for a longer spread. Is
that not going to present some safety problems?
(Mr Norris) None of this is incompatible with a thorough
safety regime. One of the credits that you have to give to LT,
post King's Cross, is their absolute commitment to safety. I witnessed
that when I was Minister for Transport in London for nearly five
years. I was greatly impressed by it. I know they would not permit,
and I would not authorise them to permit, any operation of the
system which was not consistent with high levels of safety. What
I am talking about is something that the heavy railway has already
encountered. That what we should be looking at is off-peak capacity,
weekend capacity. I do not think LT has thoroughly woken up to
the fact that London is a seven-day city. It has not yet woken
up to the advantages of spreading the peak. It ought to wake up
to the idea that the rest of London is a-24-hour city. There is
no point in inviting people to use public transport to the theatre
if they cannot get home after they have witnessed the curtain
falling. This is the absurd position that we are in right now
and it is not acceptable. Now all of that does not imply any diminution
of safety.
69. Does it not make it much harder to take
out a piece of broken or damaged line, if you have far less time
when the system is not operating?
(Mr Norris) No, the worst possible value you get at
the moment is the value you currently get on possessions, where
you get an average two hours' work out of every six and a half
hours of closure. I cannot think of any arrangement, in civil
engineering terms, which gives such poor value for money. I am
very clear—because I have had to do it and I know some of
my successors in my job have done it—if you tell Londoners
in advance that you need to close a line in order to do essential
works, that it will be closed for X period of time, that this
is the work which is going to be done, and this is what it is
going to look like when it is finished, Londoners are enormously
appreciative of that and perfectly sensible. We all understand
that concept and most people do not resent it. What they resent
is the arbitrary closure which seems to have no rationale, for
which no notice is given, and which seems to reflect simply on
inadequate maintenance.
70. The closures on the Circle Line last summer
were not actually met with ecstasy, were they?
(Mr Norris) No, and I wished my successor at the time
well to wear it. That is the penalty of office. But the fact is
that if we had in place proper infrastructure management arrangements,
you would see the likelihood of that kind of failure, which was
related to some of the old cast-iron work in a 19th century structure,
perhaps avoided. All of that, after all, is all about a sensible
plan for maintenance rather than the ad hoc fire fighting
exercises that unfortunately LT has been obliged to indulge in
for the last decades.
Dr Ladyman
71. Given what you have just said to Mr Gray,
I take it that your preferred option on the table would be complete
privatisation?
(Mr Norris) It is certainly an option which I think
is valuable. I have looked at the history of privatisation in
this country, going back to the earliest days of Amersham. I am
hard pushed to think of examples where it has made the service
worse. What is interesting is that in relation to the railway,
it is pretty clear that what you have there is unparalleled investment.
Five passengers for every four. A huge forward commitment to greater
efficiency. A mechanism for delivering it that never existed under
nationalisation. What is sauce for the goose seems to me to be
properly sauce for every other gander in the yard. I cannot think
of any logically coherent reason why London Transport is unique
among all the nationalised industries in not being susceptible
to the same advantages. I am prepared to deal with the reality
of the status quo.
72. Given that you will be hoping that in the
next General Election there will be a Conservative Government,
which would put that on the table, that would be the option you
would want to take: complete privatisation.
(Mr Norris) I would expect to work with my Government
of the day. If they were willing to go down that path, I have
said for as long as I have been in this race, that this is an
option I would very gladly look at.
73. Given that you have this privatised system
in the future, do you see that privatised system subsidised by
Government or not?
(Mr Norris) The important point about the level of
on-going subsidy is that it really does not depend on ownership
of the system. Again, please do not get fixated about ownership.
Ownership in this context is irrelevant. The important thing is
that if you look at the way LT has to invest over the next decade,
it is pretty clear that with the most optimistic view of fare
revenues there will be a funding gap. I estimate that at around
250 million a year, only because I am looking at the profit and
loss account that LT publishes for this year in projecting forward,
but it is not going to be significantly less.
74. So given what you have said about if a PPP
were to go forward, you would see more extensive use of the private
sector in that; and given what you have said about subsidies for
a privatised system being your preferred choice; what you are
basically saying is that you see the role of Government in the
Underground, in the future, as handing money to the private sector?
(Mr Norris) We ought to look at what happens in the
railway. Perfectly straightforwardly, the level of subsidy offered
by Government is there on day one—otherwise, the system
would not operate—but it is a reducing subsidy and it will
eventually disappear. Exactly the same is true in LT. The level
of subsidy on day one would not be the same level of subsidy five
years on or ten years on. There are advantages in doing that but
what it does not do is to affect the actual proposition as to
whether the system, as a whole, is formally in public hands or
not.
75. There would be ownership for the Government.
There would be effectively no control for the Government. The
Government's role would be to hand over money, which you hope
the private sector would need less of as time went on, but since
you have ruled out road user charging as a way of cross-subsidising
the Underground, effectively what you are saying is that you would
see the extra revenue coming from the Underground, from increased
use and increased fares.
(Mr Norris) Yes, because the first part of your description
was a gross caricature of what actually happens. If you look at
the railway, the subsidy level is not just divvied up round the
table every year. It is subject to a long-term agreement, which
applies in pretty clear ratchets to the train operating companies,
as indeed the regulator does to Railtrack. Nobody is suggesting
that London Underground would operate without proper regulatory
supervision or without the existence of a very firm contractual
arrangement which would drive down the cost to the public sector
and require the operator to find the revenues to supplant that
reducing subsidy from increased ridership. Of course, the great
gain to Londoners—
76. And from increased fares?
(Mr Norris) No, not at all. There is not an open fare
regime on the railways. I do not know which world you live in—
Chairman
77. The world we live in, Mr Norris, is that
that is it. Thank you very much indeed.
(Mr Norris) Chairman, thank you.
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