4 LONDON UNDERGROUND
78. Responsibility for the performance of London
Underground (LUL) was transferred to Transport for London (TfL)
in July 2003. The Department's PSA target—to cut underground
journey times by increasing capacity and reducing delays—was
therefore dropped in the 2004 Spending Review. In its place, the
Department agreed with the Mayor of London a set of six key indicators,
five of which are increased incrementally.[119]
The targets are:
- excess journey time;
- excess train journey time;[120]
- operated train kilometres;
- percentage of schedule operated;
- overall customer satisfaction; and
- the percentage of peak trains cancelled because
no driver is available.
79. The terrorist attacks of July 2005 had a very
significant impact on LUL's performance against its targets: five
lines were closed or partially suspended until 4 August 2005,
LUL have been without the trains involved in the incidents, a
new requirement that trains must have a working radio to remain
in service has been introduced, the number of security alerts
has increased and some of the staff involved in the incidents
have as a consequence taken time off work. It is therefore difficult
to evaluate LUL's performance against its targets accurately,
though figures up to 25 June 2005 suggest that five of the six
targets were being met or exceeded.
80. In the longer-term, many of the improvements
to London Underground's service rest on the success of the public-private
partnership agreement (PPP). They include an overall increase
of 25% in the capacity of the system by 2016 and the replacement
or refurbishment of 80% of the Underground's track. Under the
PPP, three private-sector infrastructure companies (infracos)
lease the Underground's assets for a 30-year term, during which
time they are required to maintain and upgrade them. Payments
to the infracos are performance-based, with companies receiving
bonuses if certain performance thresholds are met and paying abatements
if they are not.
81. The PPP Arbiter, an independent statutory office-holder
appointed to give directions and guidance to the parties to the
PPP agreements, published his first annual review of the two of
the infracos, Metronet BCV and Metronet SSL, in November 2006.[121]
The review, initiated by the infracos concerned, asked the Arbiter
to "provide a definitive statement by reference to the facts"
as to whether or not the two infracos had "performed [their]
activities in an overall efficient and economic manner and in
accordance with Good Industry Practice".[122]
82. In reaching this conclusion, the Arbiter recognised
that Metronet had introduced a number of initiatives over the
previous year to address shortcomings in its performance and to
put more emphasis on whole-life asset management but identified
a number of areas of weakness remain including:
- stations, where Metronet is
significantly behind schedule in delivering its obligations;
- track, where there have been insufficient resources
to deliver required volumes of work and poor delivery of maintenance
and renewals;
- asset management and risk management, where there
has so far been limited application of risk-based approaches that
link to underlying costs and serviceability of assets, and changes
in costs have been inadequately challenged at project level.[123]
83. These findings give rise to serious concern,
given that the Government's plans for longer-term improvement
to the Underground rest almost entirely on the PPP. The Secretary
of State and the Permanent Secretary both acknowledged the severity
of the problem but the Secretary of State was confident that the
framework of bonuses and abatements contained the solution:
"the contract has been designed in such
a way for the framework to provide the potential solution …
It is important that Metronet raises its game, but that the framework
of the PPP contract allows for both London Underground and TfL
to ensure that that performance in improvement is achieved".[124]
The Permanent Secretary described the financial penalties
for failure as "severe" and told us that, in his view,
Metronet was "in grave danger of having all of the shareholder
funds wiped out and that the shareholders may well have to recapitalise".[125]
84. Metronet's poor performance in discharging
its duties under the PPP agreement is cause for serious concern.
Though the PPP contract was designed to reward good performance
and penalise poor performance, we do not share the Secretary of
State's confidence that, having performed so poorly thus far,
Metronet will suddenly find that the contract produces an incentive
to improve. We will continue to monitor developments in this area
closely but the Government must be alive to the need to judge
the PPP on the improvements it actually generates, rather than
the hypothetical merits of the reward scheme it embodies.
119 Indicators were adjusted downwards following the
terrorist attacks on 7 July 2005. The target for percentage of
trains cancelled because no driver was available remains fixed
at 0.6%. See Department for Transport Annual Report 2006, Cm 6817,
pp. 271-273. Back
120
Excess train journey time means delays to services. Excess journey
time means excess train journey time plus delays experienced at
the station, for example, while queuing for tickets. Back
121
The Arbiter is appointed under sections 225-237 of the Greater
London Authority Act 1999. Back
122
Office of the PPP Arbiter, Annual Metronet Report 2006,
16 November 2006, p. 1. Back
123
Ibid., pp. 10-11. Back
124
QQ 104-105. Back
125
Q 110. Back
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