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9.17 pm
Justine Greening (Putney) (Con): I am pleased to contribute to the debate because the performance of the District line and the tube generally constitutes a major part of my constituents’ lives. If they have a bad time getting to work on the tube, they generally have a bad day. The debate is important for Londoners because it is about their day-to-day quality of life in this city.
I welcome the report. When Metronet collapsed, a full inquiry was needed and the report makes some valid comments about and has some valid insights into what happened. I was especially struck by the comments of Tony Travers of the London School of Economics, which appear on page 14. He referred to the £5 billion to £7.5 billion spent on the tube network in the past five years, saying that it
“is a huge amount of money to have delivered—at the very best—a train service that’s overall no different”
“when we began.”
My constituents, who have to use the tube every day, would agree with that.
I shall spend a couple of minutes considering our experience locally. On our local District line, we need a more reliable service, more capacity and signalling. That was in the PPP contract for Metronet. The work was not going to happen overnight, but it was initially pencilled in for, not today or tomorrow but probably 2012, perhaps lasting until 2018. My constituents are now concerned about the major question mark over those promised performance improvements that the failure of the PPP contract has raised.
As my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) pointed out, the backdrop to that is people doing what the Mayor wants them to do—using the tube to get to work every day. As I said in an intervention, in the past three years we have seen the equivalent of three trains-worth of extra people using the Wimbledon branch of the District line every day. That is one extra tube-worth of people every year. Our concern is not that the planned improvements will not happen, but that when they do happen, they will merely catch up with the extra capacity that we needed anyway, so we will not see much of an improvement.
Our daily experience is one of being crushed on overcrowded tubes—certainly not pleasant at any time of the year, particularly not in the summer—delays, being stuck in tunnels, being unable to contact people when late for meetings at work and long waits at Earl’s Court station coming home, with thousands of other people waiting for the occasional Wimbledon-bound train finally to arrive. My constituents find it particularly galling that they are never asked what they think about the service, but treated merely as people to be shunted around on it. The report does not cover this, but London Underground has never asked them their views following the Metronet collapse.
I felt so frustrated by the lack of feedback from customers that I set up what I call my MP textline, so that people can rant to me on their mobiles. They sign up on my website, get a mobile number and can text me when services are poor.
Kelvin Hopkins: Is not what the hon. Lady describing a demonstration that the privateers are simply interested in making money and have no care whatever for the passengers paying their fares or the public purse?
Justine Greening: That is one way of looking at the situation, but as we have discussed, what is interesting about the report is the contrast between the performance of Tube Lines, which appears to have prospered in its contract, and Metronet. The hon. Member for Eltham (Clive Efford) mentioned the materiality thresholds in connection with the risk borne by the different PPP contracts. With hindsight, it seems that they had a large impact. We shall have to wait and see whether Tube Lines will continue to prosper, but the one thing that we do know is that Metronet has failed. As I said, the report set out some interesting hypotheses on that.
My MP textline is frequently used by people to rant. Here are some typical messages that I can read out in the Chamber:
“To justine. 18 oct. Arrived on southfields platform 07.33, long wait for train. Sardines! Many people unable to get on. Arrive earls court 7.58. A typical journey on the district line.”
“Took 30 mins to get from Wimbledon to Southfields on District Line last night”—
a journey that normally takes about four minutes—
“because of signal failure. This always seems to happen when it rains hard!”
I could continue for a long time with messages that I have received on my textline over the past few months.
There is no doubt that Metronet’s collapse has had a profound effect on my constituents. We are concerned about delays to improvements to East Putney station and to lifts being installed in Southfields station. In relation to accessibility, I am particularly concerned about the impact of Metronet’s failure on those who are less able to get into London to work, such as people on incapacity benefit.
Finally, who is culpable? A lot of people are culpable. The Mayor is culpable, because his attitude from the word go was that he was not interested in the PPP being successful. My constituents and many others around London who are reliant on the PPP delivering, however badly it was structured, have been let down by various parties, including the Mayor, who have not done their best to make it work.
Metronet is culpable. When things started to go wrong it simply did not react, and much of that is contained in the report. The way in which London Underground and Metronet worked together when things were clearly going wrong was simply unacceptable.
Finally, as we have mentioned already tonight, the Prime Minister structured the poor contract, within which the PPP collapsed. I have no doubt that my constituents will remember that fact.
Whatever the failings, the people who are left suffering—I will probably be one of them tonight, when I have to use the District line to get home—are my constituents, and there is a real danger that, if we do not secure improvements, through a PPP contract or any other means of attracting investment, London’s underground will start to be a serious drag on London’s economy. I am concerned that the quality of life of this great city, which we all love living in, will continue to be pulled down by a daily experience of travelling to work that, for many people, is simply becoming unacceptable.
9.25 pm
Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): First, I draw attention to my interest as declared in the Register of Members’ Interests.
I rise to speak to try to bring a degree of balance back to a debate that, to me, has been disappointing, first, because of a tendency to go from the particular to the general and to assume that the PPP is universally unsatisfactory because of the failure of Metronet, and,
secondly, because of a lack of realism in some respects about the context in which the PPP was developed.
The hon. Member for Richmond Park (Susan Kramer) made an interesting series of observations on the negotiation of the PPP, many of which I would concur with, but she did not give us the background of the procurement of the Jubilee line, which was in many respects one of the most depressing and unsatisfactory procurement exercises that we have ever seen. The Jubilee line has a lot of things going for it. I take particular interest in it because it is my constituency’s only contact with the London underground. The line was well designed and there are some very fine stations—we have one here at Westminster that many hon. Members use every day and can admire—but the procurement was fundamentally unsatisfactory. The scheme was seriously delayed and there were massive cost overruns—approximately £1.5 billion.
Susan Kramer: Will the right hon. Gentleman give way?
Mr. Raynsford: I will give way very briefly, but I am time-limited.
Susan Kramer: Does the right hon. Gentleman remember that those who wanted a public sector option also said that good, high-quality management needed to be brought into London Underground?
Mr. Raynsford: I absolutely agree, and I would only disagree because the hon. Lady berated the public sector comparator—the assumption of a 15 per cent. cost overrun. Would that it had been only 15 per cent. On the Jubilee line, the cost overrun was massively greater than 15 per cent. and it was therefore absolutely right for the Government to look for alternatives that would bring in good management and ensure that the very considerable backlog of repairs would be dealt with efficiently.
Greenwich and Woolwich has only one link into the underground service—the Jubilee line. We can look at the performance of Tube Lines in the past five years and see a number of areas where very considerable improvements have been made. On completion, the Jubilee line lacked the signalling system that had been part of the original specification and would have allowed a much more frequent service than we have enjoyed. The line opened with a less than satisfactory signalling system, which has been the subject of a great deal of work and will have to be replaced in another year’s time. Capacity was not up to the demand. Not surprisingly, the only link into the underground from Greenwich is hugely popular and there is very serious overcrowding.
By 2005, we had seen the first of the upgrades conducted by Tube Lines: the extension of the seventh carriage, to join the six carriages on the original specification, and improvements in the underground access to North Greenwich station. That improvement has already been entirely absorbed by further demand. Therefore, a further upgrade will be required next year, to improve the signalling system and make good the defects of the original scheme, which was specified according to the formula that some of my hon. Friends have been arguing for: public sector control. We should not forget
that the failure on some of those previous orthodox contracts was the background that led to the view that we should look for alternatives, such as the PPP.
I am pleased to say that when the signalling transformation is carried out next year—I am confident from my discussions with Tube Lines that it fully understands what is required, and I hope that it will be as efficient in doing that as it was with the upgrade of 2005, which was conducted in an exemplary fashion and completed over the Christmas holiday period, involving minimal disruption to the public—we will see an upgraded line with 40 per cent. more capacity than it had in 2003 when the PPP was introduced. I regard that as a rather important achievement.
I urge all Members, and particularly my right hon. Friends on the Government Front Bench, to take a balanced view. While rightly learning the lessons from Metronet’s failure—I make no excuses for its lamentable failure—they must recognise that other parts of the tube service have had a different experience. From our perspective in Greenwich and Woolwich, the improvements in the Jubilee line over the past five years are enormously welcome and I hope that they can be sustained.
9.30 pm
Stephen Hammond (Wimbledon) (Con): The Metronet contract was supposed to deliver 35 station upgrades in three years: it delivered 14. It was supposed to deliver them at a cost of £2 million: delivery actually cost £7.5 million. It was supposed to deliver an extensive programme of track renewals: only 65 per cent. of the work was completed. That lamentable failure is clear from the Select Committee report.
This evening’s debate was ably opened by the hon. Member for Liverpool, Riverside (Mrs. Ellman), who had the unenviable job of substituting for the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). I am sure that we all wish her well.
I have been fascinated by all the contributions. Clearly, we are not here to discuss the basic structure of public-private partnerships. Rather, our debate is about the failed Metronet contract, the awarding of the contract in particular circumstances, its operation and its failure to deliver.
As the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) pointed out, the basic structure of PPP or the private finance initiative is that the private sector can undertake infrastructural investment on behalf of the public sector. The exact structuring of the contracts will differ from project to project, but that structuring should transfer risk from the public to the private sector. The failure to do so in this case is a failure of this contract, not a failure of the general. PPP contracts allow the public sector to access facilities—for example, world-class project management and engineering talent—that would not otherwise be available to it; value for money can be guaranteed; and there can be innovation in working practices.
The basic structure of the PPP is that the private sector delivers the best for the public sector when the private sector is told what outputs to deliver and decides how they are to be delivered. That is at the
heart of tonight’s debate and at the heart of the failure. It is clear that this PPP did not follow that stricture from the beginning.
In 1998, the London Transport board had been informed of the need to investigate alternative methods of financing the London underground, including a future investment programme for the next 25 years. It is worth remembering that at that stage the whole bus system was running at break even and the whole of the London transport system was costing the taxpayer only £130 million. The bus network costs a net £700 million now and a total cost of more than £2 billion.
Kelvin Hopkins: The hon. Gentleman began by saying what a disaster PPP has been, so I am astonished that he is now saying that it is basically sound. The increase in costs that he mentions coincides exactly with the period of privatisation of both buses and trains.
Stephen Hammond: If the hon. Gentleman will let me continue, I am coming on to that. I am saying that the principle is sound, but that the contract was at fault. I will come on to re-emphasise that, and it is exactly what the Select Committee report makes clear.
The hon. Member for Richmond Park (Susan Kramer) will remember that in 1998 the board and its advisers, KPMG and Lazard, evaluated 15 different financing options. The first was to keep the whole operation in the public sector and use London Transport-backed corporate bonds, secured on future cash flows, to finance the capital investment. The second was to sell a 25-year franchise to the private sector to operate the whole system and to carry out the investment required. Fare levels and service frequency and quality were also prescribed. I think she will confirm that the London Transport board and its advisers suggested that if option 2 had been taken, it would have generated £2 billion for the public purse.
The board presented the Treasury and the Department for Transport with 15 different options. The Treasury started to exert influence for its favoured option. The Treasury Committee in 2001 noted that there was the
“excessive influence of the Treasury...to plump for a PPP scheme for London Underground to the exclusion of all other options.”
“the Treasury...has begun to exert too much influence over policy areas which are properly the business of other departments. This is not necessarily in the best interests of the Treasury or the Government as a whole.”
What was clear in the end was that out of those 15 options, the 14th best option was selected. The Government at the time said that the PPP would realise more than £16 billion and save more than £4 billion. The London Transport board and its advisers said that on a discounted cash-flow basis, the difference between options 1 and 2 and the 14th was a £3 billion cost to the taxpayer. Let us be clear about this: there was a cost to the taxpayer that could have been avoided right at the outset of the contract. It is also true, as the hon. Member for Lewes (Norman Baker) noted, that there was a bill of £500 million for lawyers. Mr. Travers, in his evidence to the Committee, said that the
“PPP is virtually impossible to understand”
and that the Government had been naive in believing that nothing could go wrong with the contracts.
At the very heart of what we are considering—at the very heart of the report—is the fact that the PPP was imposed on London Transport against the advice of the board and the financial advisers. It was the man who was in charge of the Treasury at the time who is culpable and responsible for that. This month’s issue of Rail Professional magazine says that
“the unravelling of the PPP at such expense to the tax payer is seen as a serious blow to”
the Prime Minister. The Prime Minister was responsible and is responsible. In the end, the total cost of the debacle will be much closer to £4 billion.
If the imposition of the structure of the PPP is one of the major causal factors, why did Metronet itself fail? In evidence to the Committee, Mr. Pimlott said that
“it ran out of cash because it spent too much money”,
and Mr. O’Toole answered, “Metronet lacked control.” Both of those may be correct, but they are not exactly insightful or particularly helpful.
As many hon. Members said, there is a clear difference between the two contracts and the two companies delivering them. The significant problem with Metronet was the tied supply chain. The same parent companies of Metronet were allowed to be organised into another company, Trans4M. It supplied the station upgrades and delivered only 40 per cent. of its obligations. What is clearly at the heart of the failure of the contract was conceded by Mr. Pimlott when he said that
“the contractual arrangements were a very negative factor”
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