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Chris Grayling (Epsom and Ewell): Will the hon. Lady make it clear that on this issue, as on so many issues that the Committee discusses, and following on from the intervention from the hon. Member for Sheffield, Hillsborough (Helen Jackson), those views were strongly held right across the Committee, regardless of members' party political persuasion and perspective on the Government?

Mrs. Dunwoody: That was not a party political view. The Select Committee was so worried by the evidence that it took that it wanted to have a series of questions answered, and it felt that it had the right to ask the Executive to demonstrate exactly where it was going.

Why do a Government choose to move outside Government funding for major infrastructure schemes, if they are a Government committed to improving the transport system? They do so because they have reviewed their finances and concluded that they have so many demands in any given period of time that they must prioritise, which may mean that the money that is needed for infrastructure systems is not to be found within existing Government funding. Fine.

The Government must then consider how they intend to involve the private sector and develop the partnership and what benefits there will be. Experience teaches us that if Government enter into a deal that may raise money from the private sector, but which does not move the risk from the taxpayer to the private company, they are not providing the benefits or the long-term undertaking guarantees that they should provide.

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So we asked whether the Government could convince us that there was a transfer of risk from the Government to the private company. That was not at all clear. What was clear was that because of the complicated nature of the scheme and the very involved system that was proposed, not only would we almost inevitably get into complicated disputes with the individual companies and with contracts, but there would be enormous problems for the staff involved. That would mean constant references to an arbiter, and the need to extend the powers of the arbiter to look at all the implications and come to a just and sensible conclusion.

We considered the fact that already the shortage of funds available to London Underground was constraining capacity. The sheer length of time that the creation of the particular form of financing was taking was immediately impacting on the work of London Underground. We began to argue, as we had in an earlier report, that there should be an independent assessment, and the Government agreed, sensibly, that that was a good idea. The response that we got from the people concerned was that, unfortunately, many of the elements in the public-private partnership deal are subjective.

Four years, and we are told at the end of that time that many of the judgments needed to work out whether the scheme represents value for money are subjective! I find that very worrying indeed. We can all bring to the table our prejudices in terms of negotiations and objectives, but if a Government are entering into massive commitments, it is essential that they should do so on the basis of clear facts, clear responsibilities, a clear transfer of risk and a clear indication of the cost to the taxpayer over a number of years. After all, the bid will have implications for public transport for over 30 years. That is an extremely long time.

The previous Secretary of State accepted that it would not be possible to provide definitive answers on value for money; well, why not? How are we to proceed, if we are not convinced that we are committing the taxpayers' money to a deal that is in their interest? We were sure that we wanted the National Audit Office to give its view of the particular and subjective aspects of the deal. The NAO's response was sensible; it said that it could not make a political judgment.

The public, however, do make political judgments. They look at a scheme and say, "Is this going to be what we want? Are we going to get a modern, comfortable railway and are we going to continue to pay for it not just through fares, but through the considerable subsidies that the scheme will receive?"

Those are the considerations that should concern us. The kind of financing that was being discussed was decided, it seemed to us, not on the basis of what was essential to modernise the railway, but on the basis of what we could afford. In a sense, the matter was decided the wrong way round. The decision was taken on the method of funding, then the Government looked at what they would get under that particular arrangement.

Geraint Davies (Croydon, Central): Does my hon. Friend accept that, contrary to a normal private finance initiative, in which money is lent to be spent up front, the nature of the scheme was that £1 billion would be spent every year and the Treasury would supply that on a yearly basis? The picture that my hon. Friend has painted in that

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respect is not a reflection of the deal. With reference to risk transfer, does she accept that the penalties in the contracts, which would mean the elimination of suppliers or penalties out of their profit, under pressure from the bank, which is the third player in the relationship, would ensure risk transfer and ensure project management such as we see in large projects in the private sector, which we have not seen from London Underground in the public sector?

Mrs. Dunwoody: The answer is no, I do not take that view. If I did so, I would not have been a party to the report that sets out in considerable detail why I think that it is wrong. I am sorry if I am not making myself clear; perhaps I should speak in simpler Anglo-Saxon terms.

We were promised an initial saving of £4.5 million in the deal, but the Committee found that the present arrangements were flawed. Let me explain to my hon. Friend the Member for Croydon, Central (Geraint Davies) one of the reasons why. A large amount of London Underground's work is funded from the fare box. The amount that it takes from its fare box moneys towards its operating costs is higher than that which is taken in similar systems elsewhere. In 1998, London received 129 per cent. of its operating costs from the fare box, but New York received only 77 per cent. and Paris 63 per cent. When we consider the scheme, we must work out whether it will be heavily dependent on the amount that is receives from the fare box. If it will be, we should be aware that the amount that is available from the fare box is declining. Have the Government considered the implications? Who will find the difference? Will London ratepayers be faced with a considerable commitment of which they are not currently aware? If not, will the Government have to give much more substantial subsidies than we thought?

We must understand that the original Government estimates, which said in October 2001 that 45 per cent. of the deal would be financed from Government subsidy, 30 per cent. from the fare box and 25 per cent. from private finance, may no longer be valid. The figures may have changed so radically that the House should know about it. I am worried by the current proportions in relation to the various groups involved, as I am not at all sure whether the bidders are already laying down conditions that might mean that the figures that the House has been discussing are no longer accurate. Is it true that the people who are already involved in the deal are laying down a number of specifications and saying that they will require a certain number of millions of pounds in a single input of finance immediately when the terms are signed? If that is the case, why have we not been told?

Richard Ottaway (Croydon, South): The hon. Lady will be aware of the Mayor of London's letter to a number of hon. Members, dated 12 June, in which he notified us that he had identified a large funding gap and was starting legal action against the Government and insisting that the PPP did not go ahead until an explanation was forthcoming. Would she consider it appropriate for her Committee to call in the Mayor of London and the Minister and try to resolve the matter?

Mrs. Dunwoody: My Committee may no longer be there. We have already taken evidence from Transport for London, but it may have been overtaken by changes in

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the existing arrangements. That is what concerns me, and I hope that the Minister will give some clear indications about that.

There are other difficulties. London Underground will have to monitor the arrangements, and the Committee asked whether it had sufficient staff and money to do so. It will need to employ more people, not fewer. We have seen on overground rail that, unless maintenance and operation are very closely monitored and there is very skilled supervision of engineering, we will run into serious problems in operating railways. If that is so in relation to Railtrack, may not also it be true in relation to London Underground? If so, will London Underground have enough money and staff to carry out the very high level of monitoring that is required?

The Committee was also very concerned about the sort of deal that says that companies will be able to press for better terms after seven and a half years. We took evidence and asked questions about that. We asked what would happen if the companies said at the end of seven and a half years that they did not think that they could continue and wanted substantially to increase the amounts paid by tax and ratepayers. I am afraid that we did not get a very detailed answer, so I ask the Minister again to address that point. In effect, London Underground can be held to ransom by the companies, which will be in an extremely powerful position. Who will decide what is a fair deal when we get to that point? Why is there no public interest exclusion? Why will it not be possible for the Government of the day to demand that change should come about because of the public interest? That seems something that should be automatically written into the contract, and yet, somehow or other, it is not there.

Surely, we have learned by now in dealing with private companies that the overriding interest of the tax and rate payer on matters such as safety must mean that the Government should have the right to intervene and say that they cannot continue with the contracts in their present form because of the implications for the travelling public. If not, there will be considerable difficulties. Major upgrades and enhancements that are not properly spelt out will be another source of difficulty. Why will they not be the responsibility of Transport for London? Why will it not be possible for them to be planned and take a direct form?

There is no 15-year public sector comparator and I am afraid that some of the figures that have been quoted have no basis in any of the published reports. The dominance of the highly constrained financial analysis as the basis for the decision-making process is ill-founded and mistaken. The Committee said:

we have also been discussing this issue in relation to Railtrack—

Again, I emphasise that risk transfer was one of the key reasons given to us for undertaking the deals, but we think that it is seriously undermined and could mitigate the desire to go ahead with this particular public-private interest.

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We pointed out that, even at this juncture, the Government should have an alternative. I feel great sympathy for a new Secretary of State who enters a Department and is faced with a number of deals that appear half done, but we have spent more than four years arguing about how we can best come up with such a partnership deal, it is still not completed, and yet the Government are still saying "Unfortunately, there is no alternative, and even if we think that it is flawed and cannot provide the House with accurate financial information, we must nevertheless go ahead because there is no alternative."

Governments always have alternatives. They have a number of them, as we have seen in relation to something as basic as Railtrack. They have a responsibility to exercise their political judgment. Who in the 21st century would imagine that a capital city of the size and importance of that of the United Kingdom should be reliant on an underground system that is more than 100 years old, but unable to conclude a deal to improve, change and modernise it even after four and a half years' discussion? Who would believe that a Government who are so strongly committed to transport and who care about people's quality of life could still be suggesting that we should wander forward with a deal—I say this without wishing to be unkind—that is unproven, has vast numbers of holes in its responsibilities and does not indicate that it will deliver the goods? After all, all that Governments should have the right to determine is the need to deliver the goods. We come here to decide how our public money should be spent—that is why we are elected. The link between elected Members and the prioritising of Government schemes is the fact that it is our taxpayers' money that we are spending, and we have a special responsibility to ensure that it is spent responsibly, sensibly and, above all, with a clear end in mind that will produce a good transport system.

The Committee was not convinced. We asked to see Ministers who should have answered our questions. We published reports that we thought spelled out to the House: "Beware—this is a bad scheme, which can still be dropped and should be abandoned." Frankly, we did not get the answers that we wanted, and we have had to use a particular device to ensure that the matter is debated on the Floor of the House today. They are a grown-up Government—they should demonstrate that they understand that it is better to tell people, "We have a made mistake, and on the whole we think we ought to start again."

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