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There is now a colossal waste of money associated with Metronet’s administration. I believe the taxpayer is currently paying £14 million a week through Transport for London. If that goes on until 1 April, the total will reach £0.5 billion. In addition, there is the put option guarantee: the Government guaranteed 95 per cent. of Metronet’s borrowings from the banks, and the banks have now enforced that, as they had a right to do after six months. That will cost the taxpayer a whopping £1.7 billion. In this context, the repeated position of Treasury and Transport Ministers at the time that those private companies were taking a risk is truly a hollow proposition.
David Taylor: My hon. Friend and I are two of the few public sector accountants in this House. Does he agree that when PPP is at last laid in an unmarked grave somewhere in the City of London, its pallbearers will include Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water, whose avarice and arrogance have broken all previous financial records?
Harry Cohen: I do agree with that, but there is another point. I have given many speeches on PPP in this Chamber and Westminster Hall, and I am not opposed to a public-private approach provided that the public have control of the situation. That certainly did not happen here. This model was a catastrophe.
Metronet shareholders’ risk is far less than that of the taxpayers; it is limited to £70 million for each of its five corporate shareholders. It has in any case already made £130 million over its four years in pre-tax profits. The individual corporations get away virtually scot-free, because they are still able to secure, and make profits from, all sorts of other Government contracts. The failure is not held against them in any way.
My hon. Friend the Member for Liverpool, Riverside said that the tube upgrades are already well behind what was promised, but my concern is that they will be delayed a lot further. The briefing from the National Union of Rail, Maritime and Transport Workers said that the upgrades will be delayed by at least two years. I suspect that the delay will be much longer as the bills bite and the Government look for ways for them to be paid.
I spoke against the PPP model when it was going through this House. I asked countless oral and written questions, and I sponsored and led three specific Westminster Hall debates. I pointed out that PPP was not value for money, that it was risky in cost terms and in dividing maintenance and infrastructure from the operation of the rail network, and that it was front-loaded—a point that still applies in relation to Tube Lines. The contracts are front-loaded, so there is less risk at the beginning; the companies do the less risky work from which they can obtain the profit at the beginning and leave the complex, high-risk work undone. That remains a problem.
I come to the PPP auction. London Underground made 15 proposals, listing them in order according to which it thought could work. It put the one plucked by the Government 14th out of 15. It has not been applied to any other metro system in the world. The choice was foolhardy and we are paying the price for it by not getting the value for money that the Government said we would get.
The assumption that accompanied the PPP model was that the private sector would automatically be better than the public sector. It was an ideological obsession. When the Industrial Society, an independent body headed by Will Hutton, examined the matter, it found that the supposedly more efficient private sector was given performance targets that were 5 per cent. lower than what London Underground was delivering. That is how much confidence the Government had in the private sector’s ability to do better. That is the flaw in the ideological obsession with the private sector’s ability to run things better than the public sector.
The public sector had run the system for many years with a shortage of money, yet it was still doing a relatively good job in the circumstances. What could it have done with the sort of money available to these private companies? The Transport Committee found that a more than 20-fold increase had taken place in respect of the funding available to the consortiums—we are talking about £44.1 million in 1997-98 as opposed to £1.048 billion in 2004-05. As I said, that was set against a performance benchmark that was 5 per cent. below London Underground’s standard. A 2005 Transport for London report stated:
“In short, performance is not good enough and is less than what was promised.”
I fear that the taxpayer, the council tax payer and the fare payer will pay for this debacle in years to come. The commuter will suffer as maintenance performance declines and work is left undone. That is extremely serious in my part of the world—east London. It will hold the Olympics, and the Government must get a grip on the situation or there will be a transport safety problem in the build-up to the games. That cannot be allowed to happen.
The Treasury is still exposed to further financial risk from the Tube Lines contract. If Tube Lines is so good, why cannot the guarantee in respect of 95 per cent. of the bank debt be taken away? Why has the taxpayer still got to guarantee 95 per cent. of that debt? Tube Lines deals with Jubilee line maintenance, but that is a new line and loads of money was put into building it, so the job is easy relatively. A lot of investment was also put into the Northern line before it was taken over by Tube Lines. I forecast that the front-loading will mean that when the difficult and expensive work comes up in later years of the 30-year contract, Tube Lines will walk away. The work should be taken fully back in-house. That division between the maintenance and infrastructure, and the operation of the London Underground did not make any sense at the time and certainly makes no sense now. We cannot give any more blank cheques to private consortiums.
Despite that, a briefing issued today by London First, the business community organisation in London, states:
“The modernisation programme is likely to cost more than the funds available—in this situation, the programme will have to be scaled back”.
I suspect that that is true, but there is no apology for the failure of the private sector and business, despite a great deal of money having gone in. It also states:
“A private sector client—like Tube Lines or London and Continental Railways—is more likely to bring commercial discipline and accountability, fresh thinking and contract management than a public sector one”.
That is almost laughable in the context of the Metronet failure. It is almost as though that never happened. London First’s position is unbelievable, and it is peddling the same failed ideology. I repeat that the division of responsibilities is awful, inefficient and potentially dangerous.
The situation is not Mayor Ken’s fault. He warned against it and is making the best of a bad job. It is a private sector failure and it was the Government’s mistake in choosing the system. Mayor Ken is the best hope of putting it right. The Government should not be seduced a second time by the nonsense of putting the contract out to the private sector. That will not do. They should take the whole lot back in-house and put it under the control of the Mayor and Transport for London.
I agree with my hon. Friend the Member for Liverpool, Riverside that there must be full transparency and accountability. Serious costs have flowed from the Metronet failure, and the matter must be out in the open. The Government must not compound the problem by covering things up and continuing with the failed system of putting unwarranted faith in the private sector.
8.37 pm
Mr. Greg Hands (Hammersmith and Fulham) (Con): I have just taken part in the Northern Rock debate, and there seems to be something of a theme today: disasters made in Downing street, shocking mismanagement of public funds and cavalier abandon on the part of the Prime Minister. In the case of Northern Rock, the Prime Minister was very much in the background of the fiasco, which involved the credit boom, poor banking oversight, low savings rates and so on. In the case of PPP, he is right at the heart of the matter. Of course, there is another individual involved. The hon. Member for Leyton and Wanstead (Harry Cohen) and I will disagree about the role of the current Mayor, Ken Livingstone, but he is certainly part of the story.
Before examining what has happened with PPP in the past eight or nine years, I shall share with the House some of the experiences that my constituents face daily on the tube. According to the 2001 census, the borough of Hammersmith and Fulham has the highest percentage of tube users of any local authority area in the whole of Britain, but we suffer from some of the worst lines. My hon. Friends the Members for Wimbledon (Stephen Hammond) and for Putney (Justine Greening) are in their places: we share the Wimbledon branch of the District line, which goes from Earl’s Court to Wimbledon, and doubtless both of them will say something about it later.
A couple of years ago, the Wimbledon branch of the District line was at 92 per cent. of capacity, which was significantly higher than the District line branches to Richmond and Ealing, which are overcrowded themselves. My constituents generally wait between the hours of 7.30 am and 8.30 am on Monday to Friday at such stations as Parsons Green and Fulham Broadway. By the time the train reaches those stations from Wimbledon and Putney, it is already incredibly, inhumanly full. People often have to wait for the third train—
Stephen Hammond: It is even worse than that. As my hon. Friend knows, by the time the train reaches Wimbledon Park, which is where I get on, the shorter rolling stock is full.
Mr. Hands: My hon. Friend is absolutely right. I was going to talk about some of the shorter trains on that line in due course. It is already very difficult to get on at the second or third station, let alone the seventh or eighth station on the line.
After lobbying by the three of us in June 2006, Transport for London agreed to put on one additional peak hour train a day. It was taken from the Olympia line, which upset some of my other constituents. Nevertheless, it was not particularly effective in doing something about the inhuman conditions that prevail on the Wimbledon branch of the District line.
Justine Greening: My hon. Friend might be interested to hear the statistics that I have pulled off London Underground’s website, which show that our stretch of the Wimbledon branch has had the footfall equivalent of three trains-worth of extra passengers joining it in the morning rush hour every single day for the past three years.
Mr. Hands: I thank my hon. Friend for that intervention. I am sure that her figures are absolutely right. I was going to talk about the overall passenger numbers on the tube and how they have developed in the past couple of years.
Let us consider the population in our part of west London. Just last year, my local borough, Hammersmith and Fulham, had 7,300 foreign national applications for national insurance numbers. That is a huge number of people among an adult population of 120,000. My parliamentary constituency has the second largest population of any in Britain after the Isle of Wight. Most of those people are in employment and a lot of them go by tube, as my reference to the 2001 census showed. There is an enormous crush to get on that branch of the District line.
The story is not necessarily much better for the Piccadilly line. In January, I met Piccadilly line managers, who had some very interesting things to say. I met them in the course of a campaign that we have been running to get the Piccadilly line to stop at Stamford Brook and/or Ravenscourt Park stations in my constituency. The District line stops there, but the Piccadilly line sails through. There seems to be no obvious reason why the Piccadilly line should not stop there and it has done so at various times, on a fairly impromptu basis. That is what the campaign is all about.
The Piccadilly line managers made a strong case against the idea. They said that the sheer number of passengers on the line meant that adding one or two stops would simply compound the overcrowding—the journey would be lengthened by two or three minutes and therefore the number of trains would be reduced. The managers told me that passenger numbers on the whole tube network have risen by 15 per cent. in the past two years. Numbers on the whole network are up by 7 per cent. year on year.
The numbers on the Piccadilly line have increased the most in that time. In the past 18 months, the number of daily journeys on that line has gone up from 540,000 to 680,000. That is a 24 per cent. increase. Each Piccadilly line train, I was told, is running on average seven minutes late.
Let me return to PPP. The amazing thing is that the upgrade of the Piccadilly line is not due to happen until 2014. The District line will be upgraded sometime after 2012, despite being a major route to the Olympic site. Those are some of the problems faced by my constituents.
I shall talk briefly about some of the origins of the situation. We have already heard how PPP was set up. I did some research through some old press cuttings and found the most extraordinary row, which went on between 1991 and 2001 in particular but is still going on to this day, between the current Prime Minister and the Mayor of London over PPP. An article in The Independent, published on 7 June 1999, was entitled “If your train is late, you should blame Gordon Brown”. It is an interesting article, especially when we see that it was written by Ken Livingstone. He went on to say:
“We all know that when John”—
the right hon. Member for Kingston upon Hull, East (Mr. Prescott)—
“settled on ‘Public Private Partnership’...as the means to raise the resources, it was because it was the only option the Treasury would sanction.”
Clive Efford (Eltham) (Lab): Does the hon. Gentleman recall that at the time, his party time was in favour of a wholesale, unbridled privatisation of London Underground, similar to the privatisation of the railways? Does he still advocate that?
Mr. Hands: I am glad that the hon. Gentleman mentioned that, because I checked what our party’s position was at the time. Archie Norman, then Conservative spokesman on the issue, said:
“Only...Gordon Brown believes that proceeding with PPP would be in the best interests of Londoners.”
As I recall, the only mayoral candidate in favour of PPP in 2000 was the right hon. Member for Holborn and St. Pancras (Frank Dobson), who ironically made a speech earlier today attacking the capitalist nature of the Northern Rock takeover; it was a classic old Labour, socialistic speech.
On 19 January 2000, in response to Ken Livingstone’s article in The Independent , the then Chancellor, now the Prime Minister, riposted in the Evening Standard:
“Livingstone must not be London Mayor.”
“Chancellor of the Exchequer Gordon Brown takes the offensive to argue why ‘Red Ken’ must not get the job.”
In the article, the then Chancellor focused heavily on PPP and attacked Livingstone’s opposition to it. He referred to Livingstone’s dogma on how to finance the tube, which I find rather ironic, and said that Livingstone was threatening London with the loss of key investment.
My point is that the row has been going on for nine years, while my constituents and many other Londoners have been suffering. They are victims of a row at the highest level between the Prime Minister and Mayor of London, and the row is still going on today. The Prime Minister refuses to back, or even name, Ken Livingstone in any debate in this House, or any press article. He may refer to the Labour administration at City hall, or say that London needs a Labour Mayor—
Kelvin Hopkins (Luton, North) (Lab) rose—
Mr. Hands: I will not take any more interventions because time is short. In 19 years-worth of Hansard, the Prime Minister has never mentioned Ken Livingstone, either by name or by constituency. The heart of the matter is the row between the Prime Minister and Mayor of London, which has been going on for so long. Unfortunately, it is my constituents who are suffering.
Madam Deputy Speaker (Sylvia Heal): Order. There is limited time left in this debate before the Front Benchers make their contributions. I hope that hon. Members will reduce their contributions, so that more of them can catch my eye. I call Mr. Graham Stringer.
8.47 pm
Graham Stringer (Manchester, Blackley) (Lab): Thank you, Madam Deputy Speaker. I will try to limit my remarks, although one could easily take the rest of the time available to go through the issues. A number of hon. Members have said that there are lessons to be learned from the financial fiasco. The real tragedy is that the lessons were known and talked about right at the beginning, when PPP was first considered. Before I come on to those lessons, let me say that my position is that if capital is scarce, and if one can transfer risk, fine: introduce PPP, but make it transparent, know what is going on, and make sure that it is the vehicle that works best. The same goes for the public sector: when it is used, one should make sure that it is the best vehicle for the occasion.
On 15 July 1998 and 12 July 2000—right at the start of the process, when PPP was being considered—the Select Committee on the Environment, Transport and the Regions asked all the questions that appear in the recommendations in the Transport Committee’s January report. We said that risk must be transferred, that there must be a process for resolving disputes, that the amount spent on consultants must be limited, that there must be an arbiter who can take action, and that the infrastructure companies should not be able to renegotiate their contracts. Those are all issues that came up when we discovered that the process had been a disaster.
What was the Treasury’s response? Ministers refused to come before the Select Committee to discuss the issue and refused to release the PricewaterhouseCoopers report on what went on so that it could be properly assessed. If the Treasury had listened to the recommendations, a better method of financing the much needed improvements to the tube may well have been used.
Kelvin Hopkins: I agree with everything that my hon. Friend is saying, but does he accept that when it comes to vital national institutions such as our railway system and the transport system for our capital, risk is never transferred? It is always ultimately with the Government.
Graham Stringer: Experience shows that my hon. Friend is right. That was the experience of Railtrack and of Metronet. I am a broad-minded person and I think all issues and processes should be looked at, but it would be surprising to find a vehicle with a major national asset where the risk could be transferred.
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