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Angela Watkinson (Upminster): The hon. Lady is right that the Government claim that safety is the first and overriding priority and that it will never be compromised. Indeed, they have claimed that there will be a double lock on safety. However, the actual PPP contracts say very little about how safety will be improved by the London underground PPP. Instead, they provide for time- consuming, convoluted, paper-driven exercises, so it is unclear how safety will be improved.
Ms Buck: I have absolute confidence in the Government's commitment, but the HSE and the scrutiny and step-in powers of TfL will guarantee safety. I hope that they do, but the complexity and fragmentation raise questions. My concern is political as much as anything. As I said when the statement was made in February, the proof will not be today, tomorrow and next month, but every day for the next 30 years. That is a long time to be sure that there will be no problems. If there is a problem—be it a cost overrun or an accident—it will unfortunately be irrelevant whether the fault for it can be traced to the structure of the PPP, because it will get the blame anyway.
In the past few years—and we can argue about who is responsible—the PPP, as currently constituted, has not gained the confidence of Londoners. If we are fortunate and the lock works properly, the problem will not arise. If it does arise, we will have a major political problem.
Mr. Gardiner: I compliment my hon. Friend on her thoughtful and well-informed remarks. She acknowledged earlier—
Mr. Deputy Speaker: Order. Could the hon. Gentleman address the Chair rather than his hon. Friend?
Mr. Gardiner: Of course, Mr. Deputy Speaker. Could my hon. Friend clarify her remarks about private sector contractors needing to be involved with London Underground in any event to achieve the improvements over the period of the contract? How would the safety concerns that she has identified—she mentioned the word "fudging" in relation to the PPP—be better delivered under the public sector model? That is critical to understanding why she favours that over the PPP.
Ms Buck: The answer is simply that if the whole of the maintenance and upgrading of the trains and track are bundled together into a 30-year package, it is much more difficult for the public sector manager to scrutinise those projects. Under the contracts as currently set up, a subcontractor will report any problem to the private sector company, which will decide where responsibility for it lies and if it is in the contract with the subcontractor, it might be passed back to them to deal with. Bob Kiley was
worried about a step-in power for TfL, but he also asked why it was stepping out of some responsibilities. If a contract is bundled up and then subcontracted, it is much more difficult for the public company to scrutinise what is happening. The letting of contracts between TfL—or London Underground, as it currently is—and companies to perform specific and discreet tasks, with a direct line of accountability, would have made such scrutiny much simpler and more manageable.In response to my hon. Friend the Member for Coventry, North-West, I must say that the case made by the Government—which made great sense in 1998, and I was very sympathetic to it—was mostly based on value for money. Therefore, it is no good dismissing the various analyses of value for money—whether for or against—as almost irrelevant. I apologise for paraphrasing my hon. Friend's argument, but one cannot dismiss those analyses as biased because of how and why they were commissioned when the whole core of the argument for the PPP was based on value for money. The referee report by Ernst & Young does not offer us any great confidence in the value for money of the PPP. It says that the seven and a half year comparisons, which are the only ones that the public sector will have any contractual and legal power to control, are less likely to provide support for a value-for-money argument. Over 30 years, Ernst & Young are more sympathetic to that argument, but between seven and half years and 30 years there is no legal framework for enforcing value-for-money requirements.
The value-for-money case on which the Government rest their argument is fragile. Ernst & Young itself admitted:
- "The value for money assessment is . . . part art and part science and involves a blend of subjective judgments and fact-based analysis."
Geraint Davies: Does my hon. Friend accept that on some large projects, such as the channel tunnel rail link and the Jubilee line, the private sector has delivered on budget and to time? In the case of the Jubilee line, the private sector did so after London Underground had completely failed to do so. The issue is whether we should hand the management and maintenance to organisations that can deliver better than has been achieved in the past, in a way that is controlled through contracts with clearly specified outputs.
Ms Buck: I do not want to get into a dispute about examples of other projects, but I am not convinced that either of the ones mentioned by my hon. Friend came in on time and on budget. I have no problem with giving the private sector a major role under contract and financial disciplines.
Mr. Geoffrey Robinson: I do not want to dismiss the value-for-money argument, as of course it is important and one has to do one's best with it. I hope that my hon. Friend accepts that what I have said is at least substantially correct.
There were two other reasons for doing it in the way that we did. First, we needed to get the money from somewhere other than from Government. I know that my
hon. Friend will accept that. Secondly, we had to improve on the management of projects. I think that both those objectives will be achieved.
Ms Buck: I do not want to pursue that argument much further. However, money coming from somewhere other than Government will be repaid through the fare box and through Government grant, with a significant rate of return for the private companies. Of course we need to lever in private money, but the idea that is sometimes implied—although not by my hon. Friend—that private companies will make a philanthropic contribution to public transport is slightly inaccurate.
I happily supported the idea of the PPP in 1998 for precisely the reasons set out by my hon. Friend the Member for Coventry, North-West. In the absence of unlimited public money we need to bring in private money, but I remain unconvinced that this is the right way to go about it.
I return to the point that the PPP is only a small part of the formula for improving London's transport infrastructure. However, the major enhancements likely to be needed over the next 30 years to increase tube capacity—referred to by my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody)—are especially vulnerable to some of the value-for-money arguments about which we are concerned. When it comes to negotiating the scope for major enhancements under the PPP, Ernst & Young—the referee—said:
- "In practice, it will be difficult to resist the desire to maximise profit by the incumbent Infraco when Major Enhancements are planned. This is likely to have a negative impact on the value for money achieved although until such projects are brought forward, it is not possible to test the materiality of this issue. We have not tried to estimate what the costs of this behaviour might be, as the Major Enhancements are unknown".
How can we ensure that we can afford the whole framework of other major transport investments in London, whether it is additions to tube capacity or other transport projects such as crossrail and the east London line, if there is any risk that TfL's financial status will be compromised because PPP costs are not fully met? Other hon. Members have mentioned the matter, and I urge my right hon. Friend the Minister for Transport to do all that he can in the Department to ensure that Londoners—as taxpayers and fare payers using the transport system and London Underground—are not in any way disadvantaged by a contract between the Government and London Underground to which Transport for London is not party.
Transport for London will be contractually obligated to the PPP. Although the infracos within that partnership have received letters of comfort underpinning their financial security, Transport for London—which is responsible for the whole range of transport provision in the capital—will be exposed to a degree of financial risk, especially between years 3 and 7.5, for which it has not received comparable financial comfort.
If the PPP is to go ahead, the single most important thing is that TfL is given that financial security. It suggests that that might amount to £1 billion per quarter,
but I am sure that negotiating positions on the matter are being struck already. We must make sure that the full operating costs of any PPP contracts are guaranteed by the Government, and that TfL and Londoners are protected from the financial risk. In that way, the other transport projects so essential to ensuring that London is a moving city in the early part of the 21st century can be guaranteed, and taken forward by Transport for London.
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