7 CONCLUSION
93. Contracts that were supposed to deliver 35 station
upgrades over the first three years in fact delivered 14—40%
of the requirement; stations that were supposed to cost Metronet
SSL £2 million in fact cost £7.5 million—375%
of the anticipated price.; by November 2006, only 65% of scheduled
track renewal had been achieved.[125]
They have ended in collapse and chaos. It was a spectacular failure.
94. The Secretary of State was adamant that the Government
would be working in partnership with the Mayor of London to decide
on how best to proceed with the maintenance and upgrade of the
Tube system:
We are not in the business of imposing anything
on anyone. I think both the Mayor and I accept there will be private
sector involvement in the future, and it is right that there should
be, including an element of risk transfer. Quite what the appropriate
way of doing that is, as I say, I am open-minded. We need to do
the work, we need to understand the state of the assets, we need
to understand the cost to the taxpayer and see what interest there
is.[126]
It was, of course, the imposition of the PPP on Transport
for London—before London Underground was released from central
Government control when the contracts were signed—that led
us to the present lamentable state of affairs. The future of most
of London Underground's upgrade and maintenance work is in doubt
and the public, whether as taxpayers or Tube passengers, must
pay for the private sector's inefficiency and failure. Any reasonable
person, looking at the current situation, would find scant evidence
to sustain a dogma that the private sector will always deliver
greater efficiency, innovation and value for money than the public
sector.
95. While the Government and the Mayor of London
negotiate over who should foot the bill for Metronet's collapse,
the parent companies are left with relatively modest losses of
£70 million each. Metronet itself was little more than a
buffer-zone between its parent companies and the obligations of
the PPP Agreement. The shareholders were able to reap the rewards
of the PPP contracts while Metronet, a company with few assets
and little real purpose beyond acting as an intermediary between
London Underground and its owners, absorbed all the risk. The
Secretary of State told us that the companies concerned had suffered
significant "reputational" damage as a result of Metronet's
collapse. The Government should bear the Metronet debacle in
mind if and when its parent companies—Atkins, Balfour Beatty,
Bombardier, EDF Energy, and Thames Water—next come to bid
for publicly-funded work.
96. The Government should remember the failure
of Metronet before it considers entering into any similar arrangement
again. It should remember that the private sector will never wittingly
expose itself to substantial risk without ensuring that it is
proportionally, if not generously rewarded. Ultimately, the taxpayer
pays the price.
97. If the Government is again tempted by a seemingly
good deal from the private sector, it should recall Metronet's
pathetic under-delivery and the deficiencies in the contracts
that allowed it to happen. We recommend that the Government publishes
a candid analysis of the events preceding Metronet's collapse
and its consequences, both in terms of increased costs to the
public and delays to the work programme.
98. It is doubly unfortunate that the product of
Metronet's efforts bore such scant resemblance to the expectation
of its contracts because information as to the efficacy in principle
of this private sector management model has been thoroughly confused.
Whether or not the Metronet failure was primarily the fault
of the particular companies involved, we are inclined to the view
that the model itself was flawed and probably inferior to traditional
public-sector management. We can be more confident in this conclusion
now that the potential for inefficiency and failure in the private
sector has been so clearly demonstrated. In comparison, whatever
the potential inefficiencies of the public sector, proper public
scrutiny and the opportunity of meaningful control is likely to
provide superior value for money. Crucially, it also offers protection
from catastrophic failure. It is worth remembering that when private
companies fail to deliver on large public projects they can walk
away—the taxpayer is inevitably forced to pick up the pieces.
99. Finally, now that the Government is considering
the future of the Underground upgrade programme, it should prioritise
transparency and clarity to taxpayers and ensure that any future
contracts result in clear accountability to national or regional
Government, thereby providing the public with the opportunity
of applying sanctions in the event of poor performance.
125 Office of the PPP Arbiter, Annual Metronet Report
2006, 16 November 2006 Back
126
Q 352 Back
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