Examination of Witnesses (Questions 280
WEDNESDAY 6 MARCH 2002
280. What about the social costs involved? You
lay out there the three principles involved but social costs,
as you pointed out earlier, are a very important factor also.
Are they built into the value for money exercise?
(Mr Byers) That is part of the value for money exercise.
281. Can I press you on the subject of commitment
to London Underground and Transport for London. Is this
a commitment in any sense which could be reversed? If it was reversed
or changed or modified, could it be the subject of legal action
by Transport for London?
(Mr Byers) I think we want to enter into an agreement
which is as secure as possible. We always have a difficulty in
terms of binding governments in the future.
282. But if the Treasury changed its mind, the
Mayor would have no redress?
(Mr Byers) We want to have a situation where it is
contractually watertight as far as both parties are concerned.
What I also want to do as part of this funding arrangement is
to secure real improvements in terms of London Underground and
there will need to be targets which London Underground sign up
to, which Transport for London sign up to, as a result
of this funding arrangement.
283. At last week's Select Committee several
members had an interest in what kind of guarantee was being put
to PPP lenders, and the answer came back that by and large there
was not a guarantee, there was a comfort letter in prospect from
the DTLR. Is it true that in the PPP service contract if there
is no comfort letter arising, they have to get a comfort letter
equivalent to a guarantee from a bank? If that is the case, does
that not mean a comfort letter is effectively the economic equivalent
of a guarantee?
(Mr Byers) We get into the sort of legal niceties
of that. A comfort letter would not be a guarantee; it would describe
and clarify the role of the Secretary of State in relation to
the Greater London Authority and Transport for London and
the arrangements for paying grants to those bodies. The bidders
and the backers have said they would welcome such clarification.
We would want to be helpful, and we would then be prepared to
issue such a comfort letter, should the decision be taken to go
ahead with the modernisation proposals.
284. But does the contract actually say that
if there is no comfort letter than a bank letter of credit must
(Mr Byers) The important thing for me is whether or
not I should issue a comfort letter clarifying my role, and that
is what I would be prepared to do, subject to following the normal
285. I have a second point which is basically
relating to the contract. Schedule 1.9 of the contract addresses
key risk transfer and pricing issues. That is quite fundamental
to the whole deal. As I understand it, this as yet is not concluded
or even finished or finalised?
(Mr Byers) No. As I said to Mr Grayling, there are
still issues which are still not resolved. If they lead to any
material changeI said this very clearly, I think, in my
statement to the Housein a change which adversely affects
value for money, and the risk is clearly one of the key factors
there, then we will not proceed with the modernisation proposals.
286. I have a very quick question. £2 million
savings you say are going to be made. Is that still your view£2
(Mr Byers) That is based on the mid-point on the public
sector comparator compared with what we expect to achieve through
287. Given that these are cash savings, not
money in hand, what simple tests will be applied to ensure that
these savings will be made?
(Mr Byers) It will be a question of comparing what
we do achieve with what we expect would have been achieved had
we gone through the normal public sector route. That is the way
it needs to be judged, because the £2 million savings are
savings comparing the Public-Private Partnership with the mid-point
of the public sector comparator.
Chairman: In which we have already added in
the social element which has not been in the other estimates.
288. Neither Ernst & Young nor London Underground
actually supported that £2 million figure, did they?
(Mr Byers) London Underground did not address it.
As I say, the way in which it has been derived, the way
289. It is your hope, is that it, rather than
that it is supported either by Ernst & Young or London Underground?
(Mr Byers) It is based on the figures contained in
the public sector comparator, the mid-point of the public sector
comparator which London Underground had worked up, and the mid-point
seemed to be a fair way, a reasonable way, of trying to judge
the savings that would be achieved.
290. If the Health and Safety Executive want
to put a notice on requiring something to be done, or to stop
something happening, on whom do they serve the noticeLondon
Underground or these contractual companies?
(Mr Byers) This is if the modernisation plans go ahead?
291. Yes, it is.
(Mr Byers) At the moment the Health and Safety Executive
are looking at the safety case.
292. I understand that, but who actually will
own the various bits of the new operation if it were to go ahead?
(Mr Byers) That is something which is part of the
safety case. The important thing is, the infrastructure companies
will be reporting to London Underground. London Underground will
remain in control, but the safety case is still being considered
by the Health and Safety Executive, and they will need to decide
whether or not the safety case is one that they are prepared to
sign up to or approve. If they do not do that, then once again
we will not proceed with the PPP.
293. So who takes the risk that the Health and
Safety Executive will require something to be done? Is it the
new contractors, or is that a risk that remains with London Underground?
(Mr Byers) That depends on the safety case which is
finally approved by the Health and Safety Executive.
294. Secretary of State, I am going to let you
go. I am going to ask you some more questions in writing, but
I just want to say one thing to you. Are you prepared to let the
House of Commons and the elected Members debate this on the floor
of the House on a Substantive Motion, because many of the questions
that you have answered today leave us with worries about the transfer
of risk, the length of time, the health and safety, and frankly
these are things which should be debated by elected Members. Will
you give us that undertaking?
(Mr Byers) Those are not issues for a Secretary of
State, as you know, Chairman.
295. Would your Department be prepared to ask
the Leader of the House to find time on Substantive Motion to
allow the elected Members to vote on this particular arrangement
which, after all, is going to determine the future of transport
in London for the next 100 years?
(Mr Byers) As you know, Chairman, these are matters
for the business managers, not for a Secretary of State. What
I can say is that I am not prepared to see anything stand in the
way of £16 billion of investment going into the London Underground.
This has been discussed endlessly, and I think we now have to
get on with seeing the money going in.
296. So even though at the moment the contracts
are not signed, it is not clear what risk has been shifted, it
is certainly not clear from some of these other very basic bits
of information exactly what it is that has been handed over to
Transport for London, you would still not be prepared to
allow us to have a debate on a Substantive Motion?
(Mr Byers) It is not a question for me, Chairman,
it is a question for the business managers, as you know.
297. You have the right, Secretary of State,
to ask. I am asking, is it your view that before the contracts
are signed, or immediately upon the signing of the contracts,
you would come back to this House?
(Mr Byers) I will be judged by the House and will
be held accountable by the House.
298. Secretary of State, you have been patient,
and doubtless we shall meet again. Thank you for your attendance.
(Mr Byers) Thank you very much, Chairman.