Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by ASLEF (LU 05)


  ASLEF welcomes the opportunity to submit evidence to the Transport Sub-Committee on the new enquiry into the London Underground.


  ASLEF has continually expressed its deep concern over the fragmentation of the London Underground by dividing the operations of the trains and stations from the core of the Underground — the track, signalling, bridges, tunnels, lifts escalators, stations and train maintenance. The splitting of wheel from rail was most criticised by Gerald Corbett when he said "splitting into all these different bits and particularly splitting the wheel from the rail has made it a managerial nightmare on the privatised national rail network"[11]. We fear that the introduction of the three PPP companies will create fragmentation on a similar scale to that of the main line rail system.

  We believe that fragmenting an integrated rail network has worrying implications for safety, planning and co-ordination. We foresee an uneasy relationship between London Underground and the Infracos as contracts adjust and readjust time scales and financial disagreements. The only outcome of such a situation will be at the detriment of the workforce and the travelling public.

  It therefore remains our contention that the London Underground should be retained in its entirety and we cite the disastrous consequences that befell Railtrack.


  1.  The desirability of an audit prior to signalling the contracts to ensure value for money.

  London Underground continually says that they will not sign the contracts if there is no value for money but surprisingly they are not asking the National Audit Office (NAO) to audit until all contracts have been signed.

  The only way public confidence will be secured in any process is if there is an independent report. Therefore, ASLEF strongly believes that the NAO must do a full audit immediately before the government signs any of the contracts. This course of action would justify or otherwise the argument of value for money.

  2.  How much information about the precise nature of the contracts should be made public before they are signed?

  As much information should be supplied without compromising negotiations. The only argument against has been on the basis of commercial confidentiality. This has now been removed with the announcement of preferred bidder.

  ASLEF takes the view that as the London Underground is publicly owned, and it is the public that indirectly pays for the system, the public should have access to the maximum amount of information in order to pass any acceptable judgement on contracts.

  3.  The allocation of risk between the public and private sectors.

  ASLEF argues that there can be no realistic transfer of risk to the private sector. The only time the private companies would be taking any allocation of risk will be in the early stages of equity investment.

  The University College of London calculated that on the basis of previous PFI's only 10-20 per cent of the finance (and therefore associated risk) would be borne by shareholders with the rest in the form of debt and London Underground. We would argue that future risk would come back to the public sector, it is they who will bare the risk what ever happens. It is a fact that the public sector cannot afford to let a PPP company go bankrupt, because if a PPP company goes bankrupt the public sector becomes liable for all of its debts. Therefore if anything goes wrong London Underground has to pay to keep the companies afloat, that means it is carrying the risk of their debts. It is also the case that London Underground has said that they will retain the revenue risk of unforeseen circumstances, new safety requirements and environmental factors.

  A fundamental point on the transfer of risk is that contracts appear to be rigid for 30 years. Locking one up for 30 years with no chance of escape seems ludicrous.

  Subject to details yet to be announced we would argue that the governments' proposed solution for Railtrack may be appropriate but not available for the London Underground. If things were going wrong the government would not be able to tap into that solution. The agreement of 30-year contracts is the total opposite of what is at present happening on the mainland railway and quite simply seems bazaar.

  4.  The opportunities to adjust the contracts after they have been signed; and the role of arbitration in the event of dispute over contracts.

  Any contracts signed between two agents can be changed by mutual consent at any time in the future.

  ASLEF believes that PPP companies will almost undoubtedly want to change the contract in order to keep making a profit. London Underground will be hampered because they have to keep those companies viable, so the balance of contracts are going to be unequal. We would argue that the bargaining power will be with the PPP companies.

  We are not comfortable that there are various mechanisms to resolve the Infracos problems that they may face. It is our understanding that the contractual mechanisms, and in the very nature of the arrangements, there are lots of opportunities for the Infracos to come back for more money. Therefore, giving the typical pressures of trying to keep an arrangement such as this afloat, there will be a real tendency to keep funnelling more and more money into the PPP companies.

  With reference to the dispute resolutions, if the parties have a dispute they do not go to the PPP arbiter who is parallel with the Rail Regulator, they go through a dispute resolution process consisting of a five-layer process that is not binding until the final layer. We view this system as extremely complex, time consuming and a total waste of money.

  5.  Regulation following the signing of the contracts and the expected relationship between Transport for London and the infrastructure companies, and how to ensure proper accountability for the Underground system.

  If you have a Mayor, who is accountable for the transport system, there is a limit to how far the Mayor should be influenced by an independent regular. The Mayor is elected to deliver transport for London and should be allowed to do just that.

  There should be an easy access to the regulator. Employees who are concerned of what is happening around them should be able to contact Transport for London and explain what is happening. Transport for London should not then have to go to a regulator.

  Regarding contracts, there should be some kind of mechanism to deal with conflicts but we see this as a fundamental difficulty in terms of how you would link that with assuring accountability which should be with the elected politician.

  6.  Setting and enforcing performance targets for London Underground.

  Quiet simply, if benchmarks were set too high we would be setting London Underground up for a failure, which could be very costly. If the benchmarks were set too low then they would be of no value at all.

  7.  Increasing capacity within the existing network, extending the network and integration within and between modes in London.

  This is absolutely essential, since there is an expected growth in London over the next 15 years. However, there is a worry that the PPP would become like Railtrack in the sense that they would do little more than keep the existing system running.

  8.  Industrial relations.

  ASLEF argues that the PPP structure may allow for a "fudging" of responsibilities and the fear of a "two-tier workforce" — that is, where PPPs lead to new employees being offered less generous terms and conditions that those workers who were originally transferred from the public sector.

  PPP companies will not achieve public legitimacy if they are perceived to be a backdoor way of cutting the terms and conditions of workers. Government needs to promote good employment practices within PPP deals. It must be understood that companies involved in PPPs need to recognise that a motivated workforce is absolutely critical to high quality services.

  Government should take action either through a trade union/employer negotiated voluntary code or, if need be, through legislation to protect the position of the employees. Bill Callaghan, ippr Commissioner and Chairman of the HSE, said: "Good employment standards and good public services go hand in hand. All those engaged in public service work, either as public sector workers or as employees of contractors, should be treated fairly. The report is crystal clear that partnerships should not be used to reduce the pay, terms or conditions of employees. In view of the concerns about a two tier workforce we attach particular importance to the recommendation on strengthening the regulatory framework through a voluntary code or, if need be, legislation."

  9.  Passenger and staff safety.

  ASLEF has concerns that safety under PPP will be less stringent.

  Currently, all of London Underground is covered by a "statutory" Railway Safety Case. Under PPP the Safety Case will only apply wholly to one of the four companies, namely London Underground, the designated infrastructure controller. It should be a matter of concern that the three new Infrastructure Companies will be exempt from having the additional check of a Safety Case. This will evidently encourage the Infracos to be less stringent in the application of safety standards.

  The three Infrastructure Companies are required to abide by a "contractual" Safety Case with London Underground, which will only involve financial penalties for breaching that safety case. However we believe that the PPP consortia would have factored the possibility of such fines into their bids.

  We would argue that in order for the companies to maximise profits and/or protect themselves from penalties, the maintenance and renewals programmes would ultimately be driven by financial considerations, not by safety. Therefore we believe the financial contractual structure of the PPP is in direct conflict with running a safe railway.

  We find it absolutely astonishing that, coupled with weakened legal action against Infracos, London Underground do not appear to have the power to step in and terminate the PPP contracts with the Infrastructure companies even if those companies continuously disregard safety.

11   Sunday Times 19 August 2001. Back

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