Memorandum from ASLEF (UPP 01)
1. The Associated Society of Locomotive
Engineers and Firemen (ASLEF) is the UK's largest train driver's
union representing approximately 20,000 members in train operating
companies and freight companies as well as London Underground
and Overground. With our long experience and extensive knowledge
of the UK rail industry, ASLEF is well placed to comment on the
current issues and developments in the sector.
2. ASLEF welcomes the opportunity to contribute
to the Transport Select Committee's update on the London Underground
and the PPP agreements.
3. ASLEF is opposed to Public-Private Partnerships
in principle and believe that the collapse of Metronet gives a
clear example of why such agreements are an inefficient and damaging
way of developing much needed upgrades on the Underground system.
4. The union believes that the public contracts
given to private companies are too often a risk free venture for
the contractor who can only make profit from the public purse
and have no danger of losses. This is quite clearly demonstrated
by the fact that Metronet's demise cost its five parent companies
(Atkins, Balfour Beatty, Bombardier, EDF Energy, and Thames Water)
£70 million each. It cost the tax payer £1.7 billion.
This means each parent company has lost just 4.1% in comparison
to the public purse.
5. In addition to the huge financial drain
the failed PPP with Metronet was to the taxpayer, it also meant
that much needed work was delayed or not done. The collapse of
Metronet had enormous implications for the London Underground
system, the workforce and the travelling public. Contracts that
were supposed to deliver upgrades to 35 stations over three years
in fact only delivered 14 (this is just 40%). Stations that were
supposed to cost Metronet £2 million in fact cost £7.5
million, 375% of the original stated price. By November 2006,
only 65% of scheduled track renewal had been achieved.
6. The union takes the view that within
the flawed PPP system, there were additional errors such as Metronet
having a tied supply chain which guaranteed the majority of work
to its parent companies but without safeguards. This system also
prevented any competitive tendering for the sub-contracted work.
7. ASLEF would point that the return anticipated
by Metronet's shareholders appears to have been out of all proportion
to the level of risk associated with the contract. The implication
of this was that the Metronet contract was completely ineffective
in transferring any risk from the public to the private sector.
Therefore the contract has almost no benefits for the taxpayer
but gives guaranteed money to the parent companies.
8. The committee previously stated that
"it is worrying that the Government's confidence in such
savings appears to stem from a belief that inefficiency is more
endemic and irreversible in the public than the private sector."
9. ASLEF would urge the Government to learn
that the private sector is not inherently more efficient than
the public sector. This is especially the case when there is such
limited risk for a company and there is no competition within
the supply chain. In short, the company simply has a licence to
take money from the public purse with no concern for the work
taking place and no risk of financial loss from mismanagement
or inefficiencies.
10. The union believes that lessons have
clearly not been learnt as significant failings are now evident
in the case of Tube Lines. London Underground has revealed that
it has "grave doubts" over Tube Lines ability to deliver
the upgrades needed on the Jubilee Line. They have had to extend
their weekend closures, creating great inconvenience for the public
and still look to be falling behind targets. Tube Lines is now
claiming that works that had been priced at £4.1 billion
to improve the Jubilee, Northern and Piccadilly Lines will cost
£5.5 billion, leaving a gap of £1.4 billion. Other estimates
suggest costs could rise to £7.2 billion. ASLEF is deeply
concerned at these develops both for its members on London Underground
but also the travelling public.
11. It therefore looks like the one remaining
PPP company is destined to fail in a similar way to Metronet.
Lessons have clearly not been learnt and ASLEF believes this shows
the fundamental flaw in PPP and its ability to ensure infrastructure
upgrades.
12. It should be clear from the Metronet
catastrophe that the optimum means of delivering Underground infrastructure
improvements is within an internal, vertically integrated structured.
PPP is simply a flawed model and we can only hope this expensive
mistake can perhaps have one positive outcome, an end to the presumption
that the private sector is good and the public sector is bad.
13. There are clear risks in the PPP Agreement
with Tube Lines and as a result of the previous issues with Metronet.
The lack of any real risk along with reduced competition means
that innovation, competition and efficiency do not occur at any
stage of the process with the resulting spiralling costs and taxpayer
bailouts.
14. ASLEF believes that the current economic
climate will have very grave implications for PPP and PFI schemes.
Construction and infrastructure companies are being affected more
than most during this recession. If they feel they cannot make
money from their public contracts they will simply cut their losses,
withdraw from the contracts and leave the taxpayer to pick up
the bill and the mess. This is exactly what happened with Metronet
and is more likely to happen during periods of economic instability
and recession.
15. ASLEF would highlight that the previous
Mayor of London opposed PPP but the scheme was pushed through
by the Government. The Government's policy has since been proven
wrong. It is therefore essential that the Government learn from
this costly mistake and heavily scrutinise all PPP and PFI schemes
in the light of the Metronet collapse.
16. To conclude, ASLEF welcomes the revisiting
of this vitally important issue by the Transport Select Committee.
The union believes that the PPP model as used on the London Underground
is utterly discredited, leaving the taxpayer saddled with huge
debts while letting the companies involved walk away with minimum
liabilities. We hope that lessons are learned by the Government
for the future of all public sector infrastructure projects.
October 2009
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