Memorandum by ASLEF (LU 05)
ASLEF welcomes the opportunity to submit evidence
to the Transport Sub-Committee on the new enquiry into the London
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".
We fear that the introduction of the three PPP companies will
create fragmentation on a similar scale to that of the main line
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
2. How much information about the precise
nature of the contracts should be made public before they are
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
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
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
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
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