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13 Feb 2001 : Column 26WH

London Underground

11.30 am

Mr. John Wilkinson (Ruislip-Northwood): It is a privilege to initiate this debate on the proposed public-private partnership for London Underground. I declare at the outset a deep political interest. My constituency of Ruislip-Northwood contains eight tube stations served by three lines--the Metropolitan, the Piccadilly and the Central. The Metropolitan is a sub-surface line; the other two are deep lines and the underground system is vital to my constituents who want to get to work and to visit the capital, as it is for many people up and down the country.

The proposed public-private partnership for London Underground is an essential element in the manifesto pledges made by the Labour party at the last general election. Many of these have been only partially fulfilled. The electorate understand over-optimism from a political party and condone over-optimism so long as they can see that honest efforts are being made by the party in government to deliver on the undertakings given.

The Government have totally failed to fulfil their promises about the modernisation of the London underground system, promises extravagantly proclaimed in the Labour party's manifesto for London, which urged people to vote for new Labour "because London deserves better".

The London manifesto's slogan is true today, but I doubt very much whether Londoners will be compelled to vote Labour. At the last election, the Labour party received a huge majority of seats in the capital on a swing of some 13 per cent. against the national average of some 10 per cent. Of course, as a consequence, the Conservatives hold only 11 out of the 72 seats in the capital. The electorate obviously believed that, in the Prime Minister's words on the London manifesto, which were proclaimed with his signature underneath, echoing very much his boasts about the Millennium dome, that London would be "a showcase for Britain". Central to the renewal of the capital would be "A modern transport system". London's Labour manifesto stated:

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By May last year, it was clear that Labour's failure to deliver on the public-private partnership for the modernisation of London Underground had already cost the Labour party majority support in London, with the Tories leading Labour by 36 to 34 per cent. in votes for the Greater London Assembly. Labour's official candidate, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), who stood loyally by Labour's commitment to the public-private partnership for the underground, trailed lamentably behind the hon. Member for Brent, East (Mr. Livingstone) who, with almost every breath on the hustings, declared the Governments' public-private partnership for the tube to be anathema.

As for the Secretary of State for the Environment, Transport and the Regions, his only visible contribution to London's transport system is the notorious red traffic lane from Heathrow, personally designated by him for ministerial Jaguars and the occasional bus.

What about the long-suffering public, whose interest was to be safeguarded by the public-private partnership, and for whom value for money was to be guaranteed as taxpayers and passengers? For them, it is persistent interminable delays, overcrowding, unreliable services, dirty underground trains and stations, disinterested staff and frequent strikes, for which daily horrors they pay fares which each year increase by well above inflation. Annual breakdowns on the London Underground system have been some 20 per cent. higher since 1997 than under the Conservatives. Does the Labour party ditty "Things can only get better" ring ironically in commuters' ears, as they strap-hang stoically towards a late arrival at work or vital personal appointment, trapped in a seething, malodorous, frustrated mass of impotent humanity? One might imagine that the arrival of the people's mayor to office would have changed all that. After all, did not Labour's London manifesto say that he was needed:

The reality is of course very different. The mayor, instead of providing a voice for London, effectively promotes industrial action by the trade unions, which is in itself a remarkable dereliction of duty to the wider public that he was elected to serve. He seems keener to serve a narrow sectarian interest. I hope that you will allow me to make this observation, Mr. Benton. I understand that it is normal to give notice to other hon. Members of an intention to criticise them, but I am not so much criticising him personally. We all like the hon. Member for Brent, East--it is the office of mayoralty that has not lived up to public expectations.

Transport for London, which was to provide strategic decisions about the future of transport in London, has had to become operational without its principal

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constituent element, London Underground. Its chief executive, Bob Kiley, brought in at great expense from the United States by the mayoralty to institute the modernisation of the tube, found when he arrived that the Department of the Environment, Transport and the Regions would not give him the full facts and figures on which the Government's public-private partnership for the tube is based. He also found that he was in the crossfire of a publicly conducted war of words between his political master, the mayor, who wanted to fund the tube's modernisation by a bond issue, and the DETR in the rumbustious figure of the Secretary of State, backed by the Treasury, which, conscious of the consequences for the public sector borrowing requirement of a Government-backed bond issue, stuck by the PPP, despite the fears of the Select Committee on Environment, Transport and Regional Affairs, the National Audit Office, the rail unions, countless experts and the anxious public that, without unified management and a clear line of command, the underground system would prove inefficient and less than safe. As for the financial figures, even the NAO seemed hardly able to add them up and came to a clear conclusion. Meanwhile, the clock is ticking, not just towards election day.

There are serious issues at stake. Moneys from the sale of infrastructure leases from the PPP to the infrastructure companies--to the bidders--should have been coming on-stream from April 2001. The Treasury has made no provision from the end of this financial year for grants from the Exchequer to fund the tube system. Instead, because of the delays in instituting the PPP, the underground system will have to remain on drip-feed from the Treasury, while the backlog of improvements to the system grows. Perhaps most important of all, the bidding consortiums for the two groups of deep lines become more financially exposed. The consortiums bidding for the sub-surface lines, which are running behind in the bidding process, are of course also exposed.

Small wonder that the main headline on page 1 of Construction News, 8 February 2001, screams "Tube bid teams at end of tether". The article states:

It is worth putting on record what Construction News calls "a countdown to confusion", and the chronology of events as evidence of the horrendous delays and incompetence over the bringing about of the PPP, if indeed it is to come to fruition. On 20 March 1998, the Secretary of State announced the tube's PPP plans. On 5 July 2000, bidders were short-listed for the deep tube lines contracts. On 13 December 2000, the newly appointed Transport for London chief Bob Kiley attacked the Government's PPP and put forward his plans for a bond-funded alternative. On 18 December 2000, bidders for the two deep-line contracts were told to re-price the job, and selection of a preferred bidder was put back until the end of January 2001. On 2 February 2001, the Government and Bob Kiley announced plans to work together to find mutually agreeable changes. Bidders were told that they were likely to have to re-submit revised proposals. On 5 February 2001, best and final offers were handed in by LINC, Metronet and Surface Lines Group for the £4 billion sub-surface lines upgrade.

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Bidders need certainty, so that they can cost-effectively deploy their resources up to the end of the contract, which they hope, of course, will be at an early date. When will those contracts be let? I ask the Minister, who has responsibility for London, to state unequivocally what the dates will be. The companies, those who work for them, their investors, shareholders and not least the travelling public deserve to know.

As I made clear in that chronology, the Secretary of State made the first announcement to the House in March 1998. The manifesto was issued in May 1997. The Government must have known, or should have known, what a public-private partnership entailed before putting it in a manifesto. If they did not, it was, in essence, a fraudulent prospectus. There have been estimates that, if the PPP were to fall apart--there is no certainty that the PPP will be carried into effect following the latest concordat that seems to have been struck by the Transport Commission and the Secretary of State--a new system for tube modernisation might take up to two years to put in place.

What are the financial implications of all that? I spoke about the drip-feed from the Treasury, but the Treasury is hardly going to be delighted about further recourse to public funds by London Underground, particularly when its spending plans are under criticism from the European Union and many commentators, not least the Conservative party. The fact is that the Secretary of State was forced to climb down from his insistence on the public-private partnership by the fear that the Transport Commissioner might walk away and return to the United States amid much public acrimony.

Bob Kiley has, in protracted negotiations with the Department of Environment, Transport and the Regions, forced on the Government a total rethink of the PPP. There is speculation that the preferred bidders for the two deep-level sets of lines will not be known until after the general election. If so, the Government would have utterly and completely failed to fulfil their manifesto commitment.

What would happen if the delays forced the bidders--I ask the Minister to reply to the point--to make a claim on the Government for the costs of their bids? Presumably, if Bob Kiley has indeed forced a rethink on the Government, the original bids in answer to the original tenders will have to be modified. It will cost them money, as will further delays while those bids are scrutinised and decisions made.

Bob Kylie may want a unified management structure. Surely, it should have been insisted upon at the outset of the bidding process, so that the bidding companies knew how the overall system would be managed before they responded to the tenders. In the words of a bidder quoted in Construction News on 8 February:

Bob Kiley has the good wishes of the House--any professional should have them--as do the consortiums that have deployed their resources, financial, material

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and intellectual, to answer the tenders of the Department of Environment, Transport and the Regions. The modernisation of the tube system is the earnest desire of our constituents, not least in London constituencies such as mine, but the bidding contractors for the PPP, in current circumstances, also have our sympathy. As for Her Majesty's Government, for indecision, procrastination and sheer incompetence, they win all the booby prizes.

11.49 am

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill) : I congratulate the hon. Member for Ruislip-Northwood (Mr. Wilkinson) on securing the debate. I am always delighted to respond to any debate that he secures, even though at our last encounter he described me as a poor imitation of Frankie Howerd.

I am intrigued by the hon. Gentleman's continuing ability to be taken by surprise at the progress of the public-private partnership. On the occasion of the debate when the hon. Gentleman made those kind remarks about me, he and other Conservative Members excelled themselves by demanding that we enter into discussions with Bob Kiley that were already under way, and by insisting that we provide information--I am tempted to say "titter ye not"--that we had actually supplied some time before. Now they are treating the agreement reached between my right hon. Friend the Deputy Prime Minister and Mr. Kiley as some kind of unexpected and dramatic development. It shows that the Opposition still have not caught up.

That agreement was, in fact, the result of weeks of discussion with Transport for London, including four meetings between the Deputy Prime Minister and Bob Kiley. We made it clear in the House and elsewhere that the Government welcomed Mr. Kiley's appointment, and that we looked forward to working with him to find the best solution for London Underground. That is exactly what we are doing now.

A further area where the hon. Gentleman and his colleagues are having difficulty in keeping up with the argument is their attitude to the future of the underground. We are, of course, determined to avoid the mistakes of past privatisations, mistakes that the hon. Gentleman seems determined to repeat. In January 1999, he said:

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However, far be it from me to reject the sinner who repenteth. Evidently, the Opposition have finally recognised the benefits, on which we and Mr. Kiley have been agreed all along, of a publicly owned, publicly controlled tube, and I welcome them on board--better late than never. But after taking so long to come to such an obvious conclusion, I have to admire their cheek in saying that the PPP is taking too long to implement.

We have heard plenty of speculation about the agreement between the Deputy Prime Minister and Mr. Bob Kiley, so I shall make it clear. The Deputy Prime Minister and Bob Kiley announced on Friday 2 February that they would work together to develop modifications to the PPP. Contrary to press speculation, those talks are about modifications designed to strengthen the PPP framework, not to replace it. Contrary to the hon. Gentleman's assertion, there is no question of the PPP having been abandoned.

We have agreed that Mr. Kiley will now take the lead in working with the Government in developing mutually acceptable modifications to the PPP. That will involve retaining the key feature of transferring risk through private sector equity in the three Infracos.

The existing tender process will continue with the current bidders; we will, of course, be discussing any possible modifications to the PPP with them. We expect, if there is agreement, that there is likely to be another round of bidding with the existing bidding consortiums being asked to provide last and final PPP bids.

Mr. Wilkinson : Will the Minister explain more fully what he means by modifications to the PPP? Are not those bound to lead to revisions of the tenders submitted by the bidding companies, and who will pay the extra costs of that additional bidding process? Will they be reimbursed, and when will the contracts be let?

Mr. Hill : The hon. Gentleman has left me with relatively little time, but I hope to deal with precisely those questions in the short time remaining. The Government and Transport for London will jointly evaluate any revised bids to decide whether they are acceptable to both parties. London Underground remains responsible for the PPP and will award the contracts.

Mr. George Stevenson (in the Chair) : Order. I apologise for interrupting the Minister, but I was struck by his comment regarding the short time left. The debate has until 12.30 am.

Mr. Hill : I am very grateful to you, Mr. Stevenson. Knowing of your inveterate involvement in Adjournment debates, when you entered the Chamber I assumed that you had come for an Adjournment debate, not to chair our proceedings. I am delighted to discover you in the Chair, and to learn that we have more time to deal with the hon. Gentleman's questions. I hope to deal with them as fully as possible in due course.

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The key tests that the Government established for the PPP remain the same: is it best value for money, tested against a public sector comparator; and will it maintain and improve safety? In other words, is it the best deal for London?

We have also heard speculation about the safety implications of the proposals. That was ostensibly the reason for the recent industrial action. I reiterate that our approach to safety and the PPP is unchanged. The Government will not contemplate any solution that does not contribute significantly to improved safety. The legal position is that the PPP cannot go ahead otherwise.

Two major revisions to the London Underground's railway safety case have already been accepted by the Health and Safety Executive, and a third is subject to on-going assessment by Her Majesty's railway inspectorate, and further improvements by London Underground. The point of those revisions to the safety case is to ensure that the PPP brings continuing improvement to safety on the tube.

London Underground's safety record is good, but it can always get better. Increasing numbers on the tube have put more pressure on the system, and that led to increases in passenger injuries during the 1990s. Recently, lapses have been noted by HMRI, but that is very much what we would expect. The shadow running of the PPP is designed to test and expose the system with the utmost rigour, so that any problems that emerge can be put right. Safety authorities have consistently made it clear that they will not allow the PPP to proceed until they are sure that that has been done.

In the light of that, claims that the recent industrial action was somehow in response to the compromising of safety are just wrong. I greatly regret any inconvenience to passengers caused by the industrial action, and am glad that the action has been suspended. I hope that London Transport and the unions come to agreement without any more unnecessary disruption.

I come back to the point that the effect of the PPP will be to improve safety. The tube is already running on a safety case that the safety authorities regarded as an advance on previous safety cases. In the longer term, the best way to improve the safety of the system is to ensure that it gets the high and stable levels of investment needed. That is exactly what the PPP will bring.

Mr. Wilkinson : Will the Minister give way?

Mr. Hill : The hon. Gentleman asked me many questions and I was about to deal with some of those, but with the new flexibility that we discover in our proceedings I will be happy to deal with further interventions.

The hon. Gentleman asked about the competition process. With regard to whether we will have to scrap the old competition and start again, the answer is no. Mr. Kiley will develop modifications to the existing PPP competition. What will happen to the existing bidders, and will we invite new bidders? Let me emphasise again that the existing tender process will continue with the current bidders. We will, of course, be discussing any possible modifications to the PPP with the bidders.

It has been suggested that the bidders are becoming impatient, and that they might be tempted to walk away due to delays and changes. The hon. Gentleman

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certainly alluded to some rather dramatic headlines. However, I do not believe that they will. The bidders recognise the benefits in Mr. Kiley and the Government working together to get the best out of the PPP. The hon. Gentleman raised the issue of more guarantees to cover costs. London Underground has already revised the arrangements for bid cost support to take account of the likelihood of a further bidding round. There is nothing unusual there. Arrangements for bid cost support have been revised before as the PPP competition has developed.

The hon. Gentleman also asked about the time scale. The process that we have announced is to take forward the three existing competitions. The Government, London Underground, the mayor and Transport for London are all working together to get the deal done without unnecessary delay. Our aim is to agree any modifications to the PPP by the end of February. With regard to the completion date for the competition, we do not intend to allow an artificial timetable to get in the way of ensuring that we get the best deal. There is no change in Government policy on that matter.

Mr. Wilkinson : I am grateful to the Minister for his explanation about the time scale. Will he amplify his remark that the intention of the modifications to the PPP was to strengthen the public-private partnership, not to replace it? He went on to say that the PPP would be examined against the public sector comparator. Is it, therefore, the case that Mr. Kiley has forced on the Government a fundamental re-examination of the principles of the PPP? If the PPP is in the frame against the public sector comparator, and if it will be implemented only if it produces better value for money than the public sector comparator, surely there are still elements in doubt that could lead to an extended time scale.

Mr. Hill : I fear that the hon. Gentleman may be labouring under a misapprehension about the public sector comparator. We have always said that we would submit the final proposals and bids to a public sector comparator. Indeed, the hon. Gentleman referred to the work of the National Audit Office, which we asked to come in precisely to test the robustness of the public sector comparator. The public sector comparator will go forward and test the bids against conventional funding. Only if the bids stand up to that test with the public sector comparator will we go ahead. That has always been unequivocally a central element in the Government's approach to the matter. We have always said that the essential criterion will be that the PPP contributes to enhanced safety.

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I repeat that there is no question of an abandonment of the PPP. Mr. Kiley is now engaged in examining, with the Government and London Underground, modifications within the structure of the PPP. It is too early to say what exactly those modifications may be. Mr. Kiley will focus on what changes will be necessary to give Transport for London the degree of control that it needs to ensure that the PPP delivers the best deal for London.

I must conclude my remarks. However, it is worth going back to the beginning and reminding ourselves why the London Underground PPP was necessary in the first place. It arises, of course, from the miserable legacy left to us by the previous Government, whose years of under-funding of the tube had left a massive backlog of investment, and whose planned cuts at the time they were kicked out of office would have accelerated the decline of the system still further.

It is a cliche to say that a problem cannot be solved by throwing money at it. It would be more accurate to say that money alone will not solve a problem. In the short term, money was what the tube needed, and we, the Labour Government, provided it. We have provided an additional £365 million for London Transport in 1998 over and above existing plans; £517 million of additional resources announced in 1999; and last year a further £65 million for London Underground on top of all that, plus an additional £40 million to deal with claims on the Jubilee line extension--almost £1 billion extra Government support already.

We always said that in the long term what was needed was a stable form of funding, insulated as far as possible from the stop-go annual funding round and the need to compete with claims from other good causes, such as the NHS and schools. That is what the PPP is designed to do, and that is what it will still do, in any improved form that we agree with Mr. Kiley. As I said earlier, the key feature of transferring risk through private sector equity in the three Infracos remains in place.

We are working hard with London Underground, Bob Kiley and Transport for London to settle on the optimum version of the PPP acceptable to all parties. There is still a lot to do, but we share the overriding objective of providing the best possible underground service for London. Once we have settled the matter, we will finally have the publicly owned, publicly accountable and, most important, properly funded tube system for which Londoners have had to wait for so long.

Mr. George Stevenson (in the Chair) : Because the hon. Member for Hornchurch (Mr. Cryer) is present, and I understand that the Minister will reply, we may begin the next debate, which must finish by 1 o'clock, so we have a bonus.

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