Memorandum from ASLEF (PPP 05)
ABOUT ASLEF
ASLEF is Britain's trade union for train drivers.
Its 18,500+ members are employed in the Train Operating Companies,
the Freight Companies, London Underground and some Light Rapid
Transport.
The union's day to day direction is overseen
by its Executive Committee. Each of its 8 regions has a District
Organiser and Committee, while the main negotiations with employers
are undertaken by Company Council Representatives.
SUMMARY
ASLEF believes that the PPP is and will be a
failure. Both companies at the forefront of the PPP, Tube Lines
and Metronet, have failed to deliver on their promises, as many
predicted. The public, London Underground (LUL) and the Government
have, and will, bear the consequences of an initiative widely
condemned from its outset. ASLEF thus remains of the view that
the LUL should be run as a not for profit service.
Although there have been some minor achievements,
since the transfer to the PPP, these have been undermined by substantial
unacceptable failures. Furthermore, it is viable to propose that
these minor successes could also have been achieved by a publicly
run LUL.
The recent collapse of Metronet illustrates
all that can, and in this case has, gone wrong with the PPP. However,
Metronet has not just failed in the business sense—ie it
has gone bankrupt. Both Metronet and Tube Lines have failed to
improve LUL in a variety of ways to an unprecedented scale.
The financial cost of the PPP to the public
has been vast and the Government is now locked into a 30 year
legal agreement which involves funding LUL at an average of £1billion
a year till 2009. Furthermore, despite Metronet and Tube Lines'
failures, in the last few years they have raked in huge profits.
In terms of the LUL's performance since the
PPP, it is widely acknowledged to have not matched up to the vast
sums of money which have been invested in the network and has
in fact been worse than what was promised.
The fragmentation caused by the PPP has led
to a lack of accountability and responsibility. This has in turn
caused disruption for passengers and confusion for drivers and
their unions, as they are often not sure who they are supposed
to address their issues to.
With regards to the maintenance and refurbishment
of stations, aside from some minor success, the work which Metronet
and Tube Lines (in particular their work on the Northern Line)
have been responsible for is unacceptable. Furthermore, the majority
has been over budget and has taken far longer than promised.
The results on safety sine the implementation
of the PPP are likewise unsatisfactory. Although safety is not
significantly worse than before the PPP, incidents such as derailments
have increased.
The recent collapse of Metronet is merely the
pinnacle of an initiative which has failed on all fronts and one
which is likely to have wider consequences to the public and possibly
workers, through loss of guaranteed jobs, conditions and pensions.
ASLEF thus concludes that the Government must push through the
necessary legislation as soon as possible to put an end to the
PPP.
BACKGROUND
On 7 February 2002 the Secretary of State for
Transport announced approval of a decision by the board of London
Regional Transport to enter into three Public Private Partnerships
(PPPs) for the infrastructure of the London Underground.
As a result, in July 2003 London Underground
Limited (LUL) was transferred to Transport for London (TfL) which
was set up in July 2000 and reports to the London Mayor. Two companies,
Metronet and Tube Lines acquired three separate infrastructure
companies (Infracos), previously wholly owned subsidiaries of
LUL, covering all 12 London Underground lines, as follows:
— BCV Infraco—Bakerloo, Central,
Victoria and Waterloo & City lines (run by Metronet);
— JNP Infraco—Jubilee, Northern
and Piccadilly lines (run by Tube Lines); and
— SSL Infraco—District, Circle,
Metropolitan, Hammersmith & City and East London lines (run
by Metronet).
Although Tube Lines are still functioning, Metronet,
who were responsible for two thirds of the underground, went into
administration in July 2007. Since this is a recent development
it is not yet known what the cost of this might be for the public.
Between 2000 and 2003 the LUL trade unions—RMT,
TSSA and ASLEF—organised a large scale campaign against
the PPP. The unions' lack of faith in the PPP was shared by transport
users, transport specialists, Transport for London (TfL), the
London Mayor, the National Audit Office and private consultancy
firms, who all expressed substantial concerns regarding the financial
viability of the PPP and/or that it would ultimately not work.
Nevertheless, the Government chose to ignore these observations
and it is has since been proved wrong to a high degree.
As early as February 2002 the House of Commons
Transport, Local Government and the Regions Select Committee report
warned that "it is inevitable that the PPP will lead to significant
and expensive disputes over the contracts and between staff and
employers... The initial forecasts that the PPP would provide
a saving of £4.5 billion over public sector management were
inadequate and flawed."
A month later, the Committee in its report,
"London Underground—The Public Private Partnership:
Follow Up" concluded that "evidence we have taken to
date shows that the basis on which the decision has been taken
is flawed. The shifting sands of the rationale for and the assessment
of, the PPP have lead to a process that has lost all credibility
in the eyes of the public and professionals in the field. Parliament
must now have the opportunity to have an unfettered debate on
the decision to proceed with the PPP."
The lack of financial viability of the PPP was
also outlined by the National Audit Office, who stated that that
the Government "had not established the value for money of
the PPP".
In February 2002 the Mayor of London correctly
predicted that "The PPP will saddle the travelling public
and council-tax-payers of London with huge and unquantified liabilities
while replicating the key mistakes of rail privatisation on the
Underground".
Notably, distinguished private consultancy firm
Deloitte and Touche also expressed a lack of faith in the financial
viability of the project and stated that "neither the 30
year nor the seven-and-a-half year [value for money test] provides
a satisfactory basis for establishing value for money". They
also said that "highly material adjustments to the [Public
Sector Comparator] are judgmental, volatile or statistically simplistic".
1. Financial Issues
The PPP has had disastrous financial implications
for all parties involved, without even taking into account the
recent collapse of Metronet.
The Government has spent a fortune subsidising
the PPP and has locked itself into an initiative which does not
cap its contributions. On the other hand, the companies involved
have limits on the amounts they will contribute and although the
underground's performance remains poor they have raked in huge
profits.
The House of Commons Transport Committee's first
report on the PPP found that "disregarding the costs of the
Jubilee Line extension, central Government expenditure in constant
terms has increased from £44.1m in 1997-98 to £1,048
million in the current financial year (2004-05); an increase of
2,276%—over twenty fold".[12]
This is a shocking figure and, without even considering the potential
costs to the Government that the collapse of Metronet might lead
to, illustrates the extent to which the PPP is not a financially
viable initiative.
Nevertheless, Metronet and Tube Lines have made
vast profits along the way. Between 2003-04 and 2005-06 Metronet
BCV, Metronet SSL and Tube Lines made pre-tax profits of £286
million and by July 2006 had been paid £3.3 billion in performance-adjusted
Infrastructure Service Charge.
Aside from the possible costs involved with
the collapse of Metronet, there is also the fact that despite
the determined opposition of London's elected Mayor and Assembly,
the PPP contracts have locked the Government into a 30-year legal
agreement which involves funding LUL at an average of more than
£1 billion a year up till 2009-10.[13]
On the other hand, there is no significant binding agreements
in place for the companies involved with in the PPP and in fact,
"members of the consortia can sell their share in the Underground
relatively freely" whilst "the taxpayer is committed
to continued funding of the PPP whatever changes in ownership
occur".[14]
Put simply, the Government has effectively signed a blank cheque
to the companies involved in the PPP which will last for 30 years
Whilst it has been claimed that since the implementation
of the PPP the performance of LUL has improved, this "could
hardly be otherwise" given the sums involved, as a 2005 TfL
report explained.12
2. Performance
In relation to the performance of the LU since
the PPP, as explained in the previous section, it clearly does
not equate to the levels of investment on the LU. Furthermore
it is likely that any minor improvement in the performance of
the LU could have been carried out by a publicly run initiative
and almost certainly at a vastly lower cost.
The overall poor performance of LU has been
acknowledged by an array of bodies and institutions, including
the House of Commons Committee on Transport, who in 2005 reported:
"All the Infracos needed to do to meet their
availability benchmarks was to perform only a little worse than
in the past. On most lines, they did not even manage that."[15]
The 2005 TfL report describes how, "in
short, performance is not good enough and is less than what was
promised". The report goes on to say, "the Infracos
and their shareholders are earning significant sums through the
PPP, but the volume of real work on the railway is not consistent
with the payments being made".
3. Poor Communication
PPP has resulted in, what TfL describe as, "a
plethora of different arrangements with private partners all responsible
for different bits of the infrastructure".[16]
This has led to poor communication between Infracos and their
employees. Indeed, ASLEF LUL organisers have repeatedly complained
that since the PPP there have been a number of personnel changes
in LUL Human Resources Management that have disrupted the continuity
of working relationships between ASLEF and LUL and often drivers
"don't know who they should be addressing union issues to".
ASLEF LUL activists have also described how since the implementation
of the Company Plan in 1992, LUL has gone full circle and returned
to a line based management structure. This has led to disputes
at local level, for example, at Arnos Grove depot, Acton Town
depot, North Greenwich depot and line based disputes, for example
on the District Line and East London Line.
Put simply, the PPP has meant that it is much
more difficult to sort out problems faced by our members. As all
the infrastructure is controlled by the PPP firms, getting even
the smallest thing done, like getting a mess room painted, takes
an unacceptable amount of time and effort.
One of the worst examples was the defective
tripcocks on the Northern Line two years ago. The infrastructure
is controlled by Tube Lines, the trains are owned by Alstom and
no one would take responsibility for sorting out the problem until
ASLEF members refused to drive on safety grounds.
At the very least, the infraco management and
LUL need to ensure that all employees know that no matter who
is employing them, the same standards of training are required
for the same tasks. There mist also be consistency in their personnel
and line managers.
The array of companies involved in the PPP has
also led to their being a lack of communication and accountability.
As the London Assembly Transport committee commented in their
2007 report, "the management of the preferred supplier contracting
arrangements employed by Metronet has failed to impose this discipline".
A clear line of responsibility and accountability needs to be
established between the work being done on the ground and those
charged with overseeing this work.[17]
4. Maintenance and Upgrades
Despite some minor achievements, on the whole,
the maintenance and upgrading of the underground is widely recognised
to be extremely disappointing and in the vast majority of cases
it has been both over budget and behind schedule. As the most
recent LU report on PPP states:
"After three years we are now 10% of the
way through these PPP contracts, but basic day-to-day maintenance
of the trains, tracks and signalling systems is still not good
enough and must improve."[18]
In addition, following the signing of the deals,
work to improve the Tube started in 2003, two years later than
planned.[19]
Station maintenance and upgrades has been so poor that both Tube
Lines and Metronet have been issued Corrective Action Notices
(CAN) for their repeated failures to deliver their station renewal
programmes.
a. Tube Lines
Although Tube Lines have achieved some successes
on their station refurbishment programmes, such as their work
on the Piccadilly Line around Heathrow which was completed in
time and within budget, these have been exceptions to the rule.
Tube Lines have failed in their main task, to
sort out the Northern Line and bring it up to an acceptable standard.
As LUL put it, "Tube Lines have failed to maintain the Northern
line to the standards we and the PPP contracts demand".[20]
In fact, even by the third year the Northern Line "remained
significantly worse than benchmark".[21]
Performance of the Northern Line was such that in December LUL
issued Tube Lines with a CAN, "which requires Tube Lines
to restore Northern line performance to at least the contract
benchmark in the fourth year".[22]
b. Metronet
Metronet's refurbishment and upgrading performance
is also widely acknowledged to have been unacceptable—far
worse than Tube Lines'.
Before Metronet's collapse, its station renewal
programme was way behind schedule, with only 14 out of a scheduled
35 delivered, all of which were late.[23]
Furthermore, Metronet failed to properly prepare sections of the
District and Metropolitan line track ahead of warmer summer temperatures,
which resulted in a series of disruptive speed restrictions. There
were also disruptive incidents on the Victoria and Central Lines.
The same TfL report goes on to say that the
upgrade of the Waterloo and City Line "is an acid-test of
Metronet's capability to manage major projects". The Waterloo
and City Line re-opened over a week late on 11 September 2006,
which led to fines. In addition, the line has since been closed
twice due to dust, caused by engineering works, which caused visibility
problems for drivers.
Metronet's performance was a failure to the
point that TfL effectively stated that there was no point in Metronet
carrying out anymore upgrades. TfL stated:
"Unless existing assets are maintained to
a higher standard that yields a more stable operating environment,
the coming line upgrades will be hopelessly disruptive ... . If
the existing network is failing at the same time as we are installing
the new system and addressing the inevitable design deficiencies,
we shall face even worse levels of disruption."[24]
5. Safety
Since the transfer to the PPP safety on the
LUL has got worse and there have been a number of serious derailments
(Chancery Lane, 25 January 2003—Hammersmith, 17 October
2003—Camden Town, 19 October 2003—White City, 11 May
2004).[25]
Furthermore, derailments in recent years have increased from 4,
in 2002-03, to 9, in 2004-05.
ASLEF believes this is at least in part due
to the infracos, whose priority is not safety but profits and
have thus in all likelihood put pressure on LUL managers to adhere
to this notion.
Indeed, the Chancery Lane derailment, for instance
was, according to the London Assembly, an "accident waiting
to happen" and raised serious concerns about the management
of LUL and the lack of full-time maintenance staff and the limited
availability of qualified experts able to respond
More specifically the London Assembly's inquiry
into the incident criticised LUL for failing to tackle a problem
relating to faulty bracket bolts and accuses officials of taking
action "more in line with maintaining a service than solving
the underlying problem".[26]
John Biggs, Chairman of the committee's Chancery
Lane hearings, said:
"The Chancery Lane incident has raised very
real concerns about the safe management of the system, about Tube
management structures and about the corporate response of LUL
to the incident."
6. Metronet—Who Will Pay?
Aside from Metronet's collapse illustrating
the detrimental financial and logistical costs of what happens
when the PPP goes wrong, it also exemplifies the personal loss
associated. Indeed, the bankrupt company's administrators have
failed to provide guarantees that there will be no job losses,
pension cuts or forced transfers.
CONCLUSION
It is clear that the PPP and the and the resulting
fragmentation of the Tube's maintenance has in many instances
resulted in a deterioration in services, value for money for passengers
and possibly workers' pay and conditions. ASLEF thus believes
that necessary improvement on the LUL will only be achieved by
dissolving the PPP.
Gordon Brown insisted that the PPP was the way
forward for LUL despite the opposition of Mayor Ken Livingstone,
amongst many others. ASLEF believes that private capital is driven
by entirely different concerns than public investment. One is
about making money; the other is about providing service. PPP
is a failure to reconcile two opposites. It is time it was ended
on LUL
THE ONLY
SOLUTION—A
PUBLIC UTILITY
THAT IS
PUBLICLY OWNED
European metros prove that well-funded publicly
owned networks deliver world class public transport.
ASLEF believes that London needs the following:
An integrated, publicly owned, publicly accountable
underground
Keeping LU as a vertically integrated network
is essential—the experience of rail privatisation proves
this. The tube, like any other metro, cannot make a commercial
profit, so its economic nature means it is best served by remaining
wholly in the public sector. The social, economic and environmental
benefits provided by the network are best delivered through the
elected London Authority, where responsibility and accountability
are best placed. The Mayor and the GLA should decide on how the
Tube should be funded—whether the PPP or another method
based on the best value and the best structure for safety and
efficiency
Cheaper more flexible finance
TfL should be given powers to issue bonds over
seven year investment periods. This would allow the Mayor and
the GLA the flexibility in the short-term to access direct funding
to address the investment backlog and specific maintenance and
renewals, in the medium term to relieve congestion through the
construction of new lines and over the longer term to reintroduce
passenger subsidies
It can be done
In June 1998 Treasury rules were updated so
that public borrowing would not automatically be included in the
Public Sector Borrowing Requirement (PSBR), providing that the
borrowing is for investment and not current expenditure
There is no obstacle and many good reasons why
the existing public subsidy cannot instead be used to back a cheaper
bond option. The bond option could be further enhanced by a combination
of fare revenues and congestion charges.
September 2007
12 House of Commons Transport Select Committee report
on the Performance of London Underground (March 2005). Back
13
London Assembly Transport Committee-A Tale of Two Infracos, The
Transport Committee's Review of the PPP, (2007). Back
14
London Underground and the PPP: the third year 2005-06 (TfL Report). Back
15
House of Commons Transport Select Committee report on the Performance
of London Underground (March 2005). Back
16
London Underground and the PPP: the third year 2005/06 (TfL Report). Back
17
London Assembly Transport Committee-A Tale of Two Infracos, The
Transport Committee's Review of the PPP, (2007). Back
18
Press Release: London Underground publishes third Annual PPP Report
(24 July 2006). Back
19
London Underground : Are the Public Private Partnerships likely
to work successfully?, 2003-04 (National Audit Office). Back
20
Press Release: London Underground publishes third Annual PPP Report
(24 July 2006). Back
21
London Underground and the PPP: the third year 2005-06 (TfL Report). Back
22
Press Release: London Underground publishes third Annual PPP Report
(24 July 2006). Back
23
Press Release: London Underground publishes third Annual PPP Report
(24 July 2006). Back
24
London Underground and the PPP: the third year 2005-06 (TfL Report). Back
25
London Underground and the PPP: the third year 2005-06 (TfL Report). Back
26
An accident waiting to happen?, A Transport Committee investigation
into the Chancery Lane derailment (2003). Back
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