Examination of Witness (Questions 200-214)|
WEDNESDAY 10 APRIL 2002
200. Have you worked out the potential value
of the contingent liability that the comfort letter has given
(Mr Byers) For the reasons I explained in the letter
I sent to the Chairman of the Public Accounts Committee, it is
impossible to put a precise figure on that because we do not know
when the liability might occur. The point about the liability
is it will vary depending on what time within the 7½ year
period of the contract that liability might fall.
201. Mr Kiley estimated your liability would
be at least £4.1 billion over the first 7½ years, do
you think that is a realistic assessment?
(Mr Byers) I would like to see the basis on which
he brought forward those figures. As I say in my letter, because
of the way in which the contracts are construed, it is impossible
to give a precise figure because one does not know when the liability
202. He was suggesting that if you included
the new private interest termination right, it would put that
figure up to £5.2 billion, but you are not able to give that
estimate at the moment?
(Mr Byers) Because one does not know when the liability
might fall, if it falls at all.
203. Do you think the issuing of comfort letters
was a sensible thing to do? Is it not a rather unsatisfactory
(Mr Byers) Not really. It is not a guarantee but,
on the other hand, it is quite clear that the Government is not
going to walk away from London Underground.
204. Surely the banks will regard it as a guarantee,
otherwise they would not ask for it, would they?
(Mr Byers) As I say, it is not a guarantee. That is
the legal position. It is a comfort letter to say exactly what
they expect the responsibilities of the Government will be.
205. Does it underwrite the payments or does
it not underwrite the payments?
(Mr Byers) It outlines the situation in which the
Government would underpin some of the debt which has been incurred.
206. Not underwrite, but underpin?
(Mr Byers) The distinction to be made is between the
situation of shareholders in the infrastructure companies where
all their equity is at risk. There is no government underpinning
of that. As far as the financial arrangements for the bidders
are concerned, thoughso the third-party debtthen
yes, the Government has indicated that we will take some of the
responsibility for that.
207. Originally, Secretary of State, you will
remember, even before your Arrival, the Government's position
was that the reason it had to go for a private finance deal was
that it did not want this particular public finance to appear
on their balance sheet. That was 1999. Has there been a major
change in policy since then?
(Mr Byers) I think I have said to this Committee on
several occasions that there were three issues that I felt were
very important in relation to our proposals for the Underground.
One was that safety must not be compromised; two, the fares and
value for money to achieve that; thirdly, that this was not going
to be a privatisation. I have made sure, in the way in which the
contracts have been drawn up, that this is not a privatisation.
It is not for me to judge, but if that means that our proposals
fall on the government balance sheet
208. So who takes that decisionthe Chancellor?
(Mr Byers) No, it is a decision taken by accountants.
209. Yes, but somebody employs these accountants.
I do not want to push you too hard, because I do not want to be
(Mr Byers) This will not be an issue which will be
decided by the Chancellor or by myself. What I am very clear about
is that we have accountants who will decide according to their
proper procedures. However, I as Secretary of State for Transport
am not motivated in this exercise by getting this off the government
balance sheet. What I am motivated about is to ensure that this
is not a privatisation, which is why London Underground will remain
publicly owned and accountable. If the consequence of my insisting
that this is not a privatisation results in this being on the
government books, then so be it, that is a price that, as far
as I am concerned, is worth paying.
210. Which would in fact be a change in the
policy which was originally enunciated? You are saying that that
categorisation would not be taken by anybody other than an Audit
Commission or an accountancy professional; it would not be a political
(Mr Byers) It would not be a political decision. The
political decision is one that I have taken on behalf of the Government,
which is that this is not a privatisation, that London Underground
will remain publicly owned and accountable. If the consequence
of that is that these modernisation proposals remain on the balance
sheet, then so be it, but that is my position, my position as
Secretary of State for Transport, it is the position of the Government.
211. Now can I ask you, who gets the proceeds
of the property vial the deal for the Underground? Does that go
to Transport for London or does it go to the Treasury?
(Mr Byers) My recollection is that as a result of
representations made by the Mayor, we have put on hold the proposals
that we were moving forward as far as property is concerned. I
have to say, I need to refresh my memory about that.
212. So that will be another note you will send
(Mr Byers) It will be another note, yes. I am pretty
sure, because we just took the decision two months ago, that because
of the concerns expressed by the Mayor, we put all of that on
hold to be determined after we have completed the transfer over
to Transport for London.
213. Minister, let me ask you once more, at
the risk of being boring, are you going to allow a substantive
debate in the House of Commons on the Underground public/private
finance deal before the actual financial deal is closed? You have
today said something very interesting.
(Mr Byers) I hope I have said many things which are
214. Of course, you always say everything which
is interesting! Perhaps something which is slightly more interesting
than the normal interesting things which you say is that you said
today that you will at that pointmeaning after you have
gone through all the figuresdecide whether or not to go
through with the modernisation scheme. Now I ask you, why should
you therefore not accept that the House of Commons should debate
this on a substantive motion, either just before you take that
decision or at some point at which we can influence the Government
over such a massive and important political and financial decision?
(Mr Byers) As you know, Chairman, the Select Committee
has already made its views known to the Government on this issue.
In terms of matters on the floor of the House, those are issues
for the usual channels and not for myself as Secretary of State.
Chairman: Well, Secretary of State, you have
as always been interesting, and we are very grateful to you. Thank
you very much for your attendance.