Tom Brake (Carshalton and Wallington):
It is a pleasure to follow the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), who is very experienced in these matters. We are happy to add our names to her amendment; I hope that that will not do heror rather ourcause too much harm.
It would be churlish of me not to welcome the opportunity for the debate. I presume that this two or three-hour debate is the second and final phase of the wide consultation on the Government's part-privatisation plans for London Underground that was promised by the former Secretary of State for Transport, Local Government and the Regions. I hope that the debate will focus on the public-private partnership rather than on the personalities involved, including the Mayor of London, Bob Kiley,
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former Secretaries of State and the present Secretary of State. I deplore the way in which yesterday's debate, which was supposed to be about transport in London, was hijacked by the hon. Member for Ilford, South (Mike Gapes). He made some very serious allegations during that debate, which he has declined to repeat outside the House. Yesterday's debate was all about getting Kiley and nothing to do with getting London moving.
Mr. Barry Gardiner (Brent, North):
Can the hon. Gentleman explain how it is possible to hijack one's own debate?
Many hon. Members thought that a debate entitled "Transport in London" would be about transport in London, but that was not the case.
The Government have always stated that their approach to the modernisation of the underground would be based on three principles. I quote:
"First, there must be no privatisation; secondly, safety must not be compromised; and thirdly, the contracts must offer value for money."[Official Report, 7 February 2002; Vol. 379, c. 1126.]
In our view, PPP falls foul of at least two of those three principles. First, does PPP constitute privatisation? I do not want to spend valuable time debating semantics. Chambers dictionary defines "privatisation" as to
"transfer from ownership by the state into private ownership".
The Government say that PPP does not represent privatisation, but Liberal Democrat Members and many others consider that handing over responsibility for the maintenance of the underground to two private consortia, Tube Lines and Metronet, for 30 years represents at least part-privatisation. However, the debate about whether it is privatisation or part-privatisation is not nearly as important as the debate about whether PPP compromises safety or represents value for money. I shall focus on those two points.
Is PPP compromising safety? There is no doubt that PPP will make managing safety issues more complex owing to the fragmentation that it introduces to the industrythe very sort of fragmentation that has caused so many problems on the rail network. A network broken up into two parts will have more interfaces and there will be more opportunities for safety standards to diverge. Of course, more complex does not necessarily mean less safe, but it does mean that a greater effort will have to be put into safety standards to achieve the same level of safety than would be the case if there was not that fragmentation.
Of still greater concern is Transport for London's assessment that PPP hands over to the infracos' financiersnot to the infracosdecision-making powers over safety matters. On 19 June, Bob Kiley wrote about that to Mr. Stephen Williams of the Health and Safety Executive. So far, he has not received a substantive response. In his letter, he said that
that is, Tube Line
"finance documents we reviewed include unusual terms which will materially affect LUL's actual ability to control and/or work in partnership with the privately owned infracos."
He goes on to say that
"the JNP finance documents detail mechanisms that convey to infraco lenders a panoply of powers to control or direct infraco activities. A sixty-two page 'Control Matrix'"
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"well over a hundred decisions Tube Lines and infraco JNP must take if the lenders so direct. These rights potentially include how works are performed, the scheduling of works, the choice of subcontractors and the settlement of disputes."
He also observes that
"the Metronet finance documents, which may contain similar lender rights, have not been disclosed"
or had not been disclosed at that point. He went to say that there had been very little in the way of a substantive reply from the HSE to the many issues that had been raised in previous correspondence, and that he wanted a full response to each of those issues. He expressed surprise that the HSE had
"concluded that it was neither 'necessary or appropriate' for a face-to-face meeting to take place between its and TfL's counsel."
He and I find it difficult to understand why that is the case, given the level of experience that TfL's counsel will have built up in considering and reviewing the contracts. If TfL's reading of those documents is correct, this is a very serious matter.
Will the Minister confirm whether TfL is correct in its assessment of the documents and, if it is, what guarantees he can give the House that the financiers of the infracos will always make safety their priority? If he can provide none, PPP should be put out of its misery now.
Ms Diane Abbott (Hackney, North and Stoke Newington):
One of the issues that Bob Kiley has raised is the use of subcontractors. Does the hon. Gentleman agree that one of the most problematic aspects of Railtrack was the increased use of subcontractors, because much of the labour they used was not permanent or skilled? We do not want that to be replicated on London's underground.
I agree. The management of subcontractors is a key priority. One of the concerns about the fragmentation of the network is that it will be possible for Tube Lines and Metronet to operate to different standards, thereby making it even more difficult to control the work that is done.
The hon. Gentleman seems to be saying that the banks play no role in this, and that they are just leeches taking the money without providing added value. Does he agree that the banks' role is to provide a discipline to the private supplier who offers the service to the public? Does he agree that, without the banks, we are less likely to meet our targets, and with them, if the targets are not met, those private suppliers will be removed and replaced or their profits will be penalised, which will ensure that projects are delivered on time?
I agree with part of the hon. Gentleman's point. Clearly, the banks have a role in relation to infracos. However, they should not have a role in making decisions that could have an impact on safety.
The final key question is whether PPP represents value for money. We will know the definitive answer when the National Audit Office conducts its investigation. Unfortunately, that will happen only after the financial close, when it is too late to do anything about it for the next 30 years. The NAO's remit must be changed. What is the point of finding in the next couple of months that
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the Government have squandered billions of taxpayers' money on the scheme when it is too late to make any changes?
I wrote to the Comptroller and Auditor General on 9 May to ask him to consider several specific points. They were:
"whether the rates of return the private consortia have been granted are reasonable . . . whether there are sufficient controls over the charges that the private consortia are able to levy . . . whether genuine risk transfer has been achieved at reasonable cost, and . . . whether the NAO's recommendations in their December 2000 report have been followed."
In his response on 17 June, he confirmed that the NAO was
"continuing to monitor the PPP",
and that it would
"produce a report as soon as is reasonably practical in the months following financial close."
Clearly, that is welcome.
The NAO will have much to consider and investigatefor example, the obscene sums of money that will be dished out to Tube Lines for its PPP set-up costs, which include £36 million of so-called success fees to be given to Tube Lines' parent companies, Amey, Jarvis and Bechtel, and the more than £100 million that the Government have spent on their consultants.
Metronet has refused to comment on the precise indecency of its golden hello, and stated that
"it would not be appropriate to comment".
That is bad news for Londoners. Will that be Metronet's response to any query for the next 30 years? So much for accountability.
It is not surprising that Metronet refuses to answer legitimate questions about the amount of taxpayers' money it will receive for its efforts. However, I did not expect the same response from the Secretary of State. I wrote to him on 20 June and asked, among other questions:
"Can you provide a detailed breakdown of the payments to be made to the two consortia?"
I also asked:
"Has the Government made an assessment of the validity of the consortia's claims for consultancy fees?"
I commend the Secretary of State on the promptness of his response. He replied to me on 24 June, four days later, and I welcome that.
I do not however welcome the content of the Secretary of State's reply, which confirmed that
"London Underground will be verifying all development costs before any such costs can be recovered from bidders."
That is commendable, but he has not been able or willing to state the size of Metronet's bounty. We are left to speculate about the Government's generosity and Metronet's greed.
When the NAO makes its value-for-money assessment, as well as the nine-figure sums, it will have to take into account the fact that the start-up costs for a bond issue would be approximately £40 million, compared with between £440 million, according to The Guardian, and £570 million, according to the Evening Standard, for the Government's plan. It will also have to take account of TfL's estimate that a bond issue would have cost
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£1.7 billion less over seven and a half years. That can easily be verified, because its borrowing arrangements would be cheaper than the PPP arrangements that the Government chose. For those reasons and many others, it is highly unlikely that PPP can or will represent value for money.
Five years ago, Labour promised miracles for the tube. The Deputy Prime Minister stated:
"When the Greater London authority is established, the underground will, with the rest of London Transport, transfer to it."
Several years after the establishment of the Greater London Authority, we still await the transfer of London Underground to it. He also said that
"we will return it to the people of London."[Official Report, 20 March 1998; Vol. 308, c. 1541.]