Memorandum from the National Union of
Rail, Maritime and Transport Workers (RMT) (UPP 05)
The National Union of Rail, Maritime and Transport
Workers (RMT) welcome the opportunity to respond to the Transport
Select Committee inquiry: Update on the London Underground and
the Public Private Partnership (PPP) agreements. The RMT is the
largest of the unions on the London Underground; our opposition
to the PPP is well documented.
The PPP lurches from crisis to crisis, as report
after report is published highlighting the structural and operational
problems with the scheme. Without exception all of the reports
and their recommendations are ignored by Government Ministers
who continue to blithely insist, in the best Panglossian fashion,
that all will be for the best, in the best of all possible worlds.
In all the discussions about the PPP, it is
often forgotten that London Underground's (LU) infrastructure
is groaning under the weight of record passenger numbers and is
in desperate need of renovation. Despite recent falls in ridership
due to the recession, London's population will increase by around
500,000 over the next decade. Many of these people will use the
Tube. In addition the 2012 Olympic and Parlaympic Games will place
the network under huge strain.
It is therefore essential that the right lessons
are learnt from the disastrous PPP experiment and a competent
public sector structure put in place to provide the basis for
clear lines of management accountability, effective strategic
planning and sustained investment streams to deliver the necessary
upgrade of the infrastructure. As part of the process by which
engineering functions are returned to the public sector, RMT believes
that Transport for London should create a major works department
that could be utilised in their subsidiary organisations including
London Underground, London Overground and work on the Crossrail
project.
LESSONS OF
THE METRONET
COLLAPSE, THE
FAILURE OF
PRIVATE SECTOR
INVOLVEMENT AND
THE JUBILEE
LINE
In the summer of 2008, Metronet collapsed under
the weight of its own inefficiency. At that time PPP defenders
rushed to explain the scheme was still structurally sound. Metronet
was simply an inefficiently run organisation with an inappropriate
governance structure and Tube Lines performance vindicated the
sell-off of engineering functions to the private sector. Giving
verbal evidence to your committee in the wake of Metronet entering
administration, the then Secretary of State for Transport, Ruth
Kelly, said she believed that the PPP structure could deliver
value for money.[15]
However, RMT believes that experiences both before
and after the introduction of the PPP brings into serious question
the assertion made by the Secretary of State. The current mess
on the Jubilee Line illustrates our view.
In the late 1990s, PPP supporters argued that
the cost overruns experienced in the Jubilee Line Extension (JLE)
project confirmed the inherent failures of public sector project
management and provided the rationale for outsourcing the Underground's
engineering functions. In fact, RMT believes the difficulties
the project ran into indicates precisely the opposite and demonstrates
the financial and operational failings the private sector has
caused on the London Underground over the past decade or so.
The signalling contractor working on the extension,
convinced London Underground Limited (LUL) management to install
a technologically unproven, `moving block' signalling system onto
the Jubilee Line. When it became apparent to the contractor that
the moving block system would not work and would therefore have
to be abandoned, they delayed telling LUL of the engineering problems
the project had encountered. The failure of the private contractor
was confirmed by the then Deputy Prime Minister (DPM), John Prescott,
who explained to the House of Commons on 20 March 1998 "...
but, to be fair, London Transport was not to blame for the failure
in the signalling system; it was the fault of a private company
that did not live up to its contract to produce on time".
Bizarrely, the DPM identified the failure of
the private contractor to fulfil its obligations during the same
Commons debate in which he launched the Public Private Partnership.
RMT maintains the failure of the signalling contractor should
have alerted the Government, at that time, to the potential dangers
of wider private sector involvement in London Underground's engineering
functions. That the Government failed to learn the appropriate
lesson has led to the waste of billions of pounds in public money
and delayed work to upgrade the infrastructure.
Work to resolve the signalling problems caused
by the abandonment of the moving block system is now being undertaken
by Tube Lines. However, the project is not progressing at all
well and once again indicates to the RMT that lessons that should
have been learnt after the collapse of Metronet, are simply not
being taken on board. Indeed, the recently published 2008-09 Transport
for London (TfL) document London Underground and the PPP explains:
"Over the past year the work has advanced
and the scale of disruption to customers at weekends has expanded
significantly, but progress has been slower than planned. This
is evident in the growing requests for additional weekend closures
that resulted, in April, with a separate Jubilee Closures Agreement,
that provided 12 additional weekends at short notice. This hunger
for more closures has stretched stakeholder and customer patience
to breaking point, and it is vital that Tube Lines meet their
commitment to deliver the upgrade by 31 December 2009. Their reputation—and
that of their shareholder Bechtel who is delivering this project—hinges
on meeting this commitment".
To the RMT these comments are all too reminiscent
of TfL remarks made in their annual 2005-06 review of the PPP
with regard to the upgrade of the Waterloo and City Line. TfL
explained at that time "The current closure of the Waterloo
& City line for works connected with the upgrade is an acid
test of Metronet's capability to manage major projects".
As the Committee will know the Waterloo and
City Line upgrade re-opened over a week late, exposing Metronet
to fines for the late completion of works. The line was subsequently
closed twice following the late completion of works due to dust
and dirt caused by on-going engineering works which led to train
operators experiencing visibility problems.
For the Jubilee Line, RMT understands that the
first phase of the current work will not be completed until March
2010 with the whole project overrunning to Quarter 2 of next year.
One impact of the delay will be that LUL will have to pay penalties
to the Canary Wharf Group caused by the failure of the private
contractor to deliver the work on time. No doubt, there will be
clauses in the PPP contracts enabling LUL to claw back the money
from Tube Lines. However, at the same time as this contractual
absurdity is being played out, RMT also understands that Tube
Lines has submitted a multi-million pound claim against LUL for
"additional works" that were not specified in the original
contract. This is precisely what happened with Metronet who claimed
that their cost overruns were in part the result of non-contract
specified, additional works, LUL had instructed them to carry
out.
In the past week, London Underground (LU) seems
to have finally lost patience with Tube Lines. Exasperated by
the overrun of works on the Jubilee Line acting managing director,
Richard Parry has called into question "everything about
the PPP" and made a referral to the PPP in an attempt to
resolve the on-going dispute over the Tube Lines funding settlement
for the next 7½ year PPP period. Given both the experience
with Metronet and the evident problems on the Jubilee Line we
are extremely concerned that it has taken London Underground so
long to act.
The referral further highlights one of the many
problems with the PPP. The scheme's contracts are rightly known
as being both extremely complex and shrouded in commercial confidentiality.
In our view, complex, multi-billion pound contracts should be
subject to the widest possible public scrutiny. RMT therefore
shares the view of your Committee's January 2008 report: the
London Underground and the Public Private Partnership Agreements
that a mechanism should have been put in place, by amending
the Greater London Authority Act 1999 if necessary, to allow the
PPP Arbiter to report annually on Infraco performance whether
or not one of the parties had called on him to do so. Government
should have taken this step in the immediate wake of Metronet's
administration; their failure to do so has made public scrutiny
and discussion about Tube Lines performance, in the run up to
TfL's referral, more difficult than should have been the case.
Additionally, the structurally flawed nature
of the PPP contracts causes unnecessary operational tensions and
confusion between LU and the remaining private Infraco. One example
is that of a new signalling standard that Tube Lines will not
recognise because it was not the standard applied at the time
the contracts were signed off. For the Infraco to hold this position
is utterly bizarre. The PPP was designed to last for 30 years.
During that time virtually every operational and technical standard
is likely to be subject to change. Tube Lines' strict formal adherence
to what was originally written down indicates to the RMT that
they are more interested in providing technical solutions to meet
financially beneficial capacity, accessibility and ambience targets
rather than being committed to running an underground network.
THE TRANSFER
OF RISK
AND THE
IMPACT ON
THE UPGRADE
OF THE
INFRASTRUCTURE
We have consistently made the point that the
transfer of revenue risk to the private sector on both the national
rail network and the London Underground is wholly inadequate.
That the public purse was left to pick up 95% of Metronet debt
is unacceptable and brings the London Underground Limited (LUL)
management team responsible for signing off the contracts into
disrepute. We are extremely concerned that the public purse could
also be exposed to Tube Lines debt should they abandon, for whatever
reason, their PPP contracts.
The effects of the 95% clause are already being felt
on the ex-Metronet contracts. LUL is struggling with the debt
inherited from administration and is therefore seeking to reduce
costs. In June 2009, RMT revealed that maintenance work on the
ex-Metronet lines was being cut by around £60 million, made
up of £26.2 million in track and signal work, £18.9
million from fleet and trains and £18.5 million from the
station upgrade budget.[16]
The result of Metronet's failure is that the travelling public
and the public purse is being forced to pay twice; firstly by
having to pick the huge debt and secondly by facing cuts to vital
upgrade work owing to budgetary constraints caused by the debt
inheritance.
EFFECTS OF
THE RECESSION
ON OTHER
TRANSPORT SCHEMES
RMT warmly welcomed the Government announcement
to electrify the Great Western Main Line. Contained within the
announcement was the good news that the Crossrail project would
proceed as planned. There had been speculation that funding for
the scheme was becoming problematic and that a future Conservative
administration might scrap the scheme altogether. Funding now
appears to be more secure given the announcement in late September
that the Mayor of London has secured a £1billion loan from
the European Investment Bank to pay for the scheme. RMT supports
the Crossrail project and believes once it begins operations,
passenger services should be run in the public sector. We have
already mentioned in this submission the creation by Transport
for London of a major works department to work on schemes such
as Crossrail.
September 2009 saw stations from the South Central
franchise transfer to Transport for London as part of the East
London Line extension project. The ELL will re-open next June.
In order to complete the orbital London Overground network we
are keen to see work begin on Phase 2 of the project at the earliest
possible time.
THE ROLE
OF GOVERNMENT
Government has not played a positive role during
the history of the PPP. Ignoring the opposition of the rail unions,
the then mayor of London, your committee and the vast majority
of passengers, it pressed ahead with the scheme; a decision that
has proved to be disastrous. The best course of action the Government
can now take is to bring forward legislation at the earliest possible
time to return all privatised services, including out-sourced
cleaning services, back under London Underground control. Such
a move would restore a clear line of management accountability,
enable strategic planning across the whole network and provide
the basis for sustained investment to deliver the necessary upgrade
of the infrastructure.
CONCLUSION
As stated above a number of independent reports
have emphasised the failings of the Public Private Partnership.
Sadly these have not been heeded by Government and the taxpayer
has been forced to account for 95% of the cost of the failure
of Metronet to fulfil its obligations under the PPP contract.
This has resulted in important maintenance work being cut back
which ultimately will see a deterioration in service at the expense
of ordinary passengers.
It is of real concern that similar problems with
the upgrade of infrastructure have started to occur with Tubelines
in respect of the Jubilee Line. The difficulties being experienced
with Tubelines, and in particular Tubelines insistence that work
in the next funding period will cost far more than London Underground
consider reasonable, has resulted in London Underground losing
patience and making a referral to the PPP Arbiter over funding.
This is not a sound basis for moving forward
with the essential upgrade of the infrastructure, especially with
the numbers of people using the tube expected to grow significantly
in the next 10 years. RMT believe that the upgrade of the infrastructure
should be returned to London Underground and public control and
accountability. As we have demonstrated this will be the most
cost effective solution and will end any further contractual disputes
with Tubelines, and the consequent waste of resources that this
involves.
October 2009
15 Ruth Kelly verbal evidence to Transport Select Committee
7 November 2007. Back
16
RMT press release 17 June 2009. Back
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