Examination of Witnesses (Questions 1-33)
MR BORIS
JOHNSON AND
MR RICHARD
PARRY
9 DECEMBER 2009
Chairman: Good afternoon, gentlemen.
Welcome to the select committee. Do Members have any interests
to declare?
Ms Smith: I am a member of GMB and Unison.
Graham Stringer: I am a member of Unite.
Mr Martlew: I am a member of Unite and
GMB.
Sir Peter Soulsby: I am a member of Unite.
Q1 Chairman: Louise Ellman, member
of Unite. Could I ask our witnesses, please, to introduce themselves
for our records?
Mr Johnson: I am Boris Johnson.
I am the Mayor of London.
Mr Parry: I am Richard Parry,
the acting managing director of London Underground.
Q2 Chairman: Thank you very much.
Mayor, you have had to take over from the consequences of the
collapse of Metronet. What would you say you have learned from
that on how you are handling Tube Lines?
Mr Johnson: May I begin by saying,
Mrs Ellman, what a joy it is to be back before you and your Committee
and, just for the avoidance of doubt or any suggestion of any
possible misconstruction of my motives at the end, I must leave
unfortunately at 3.15 to go and do something else, but also because
I do not want to hold up your timetable, as I know you have Tube
Lines waiting in the wings. I do not want TfL to be in any way
responsible for a Tube Lines delay, which is very much the issue
in hand. What we have learned from the collapse of Metronet has
been I think several things, or at least a couple of things. One
is that I am afraid there was a system that was not operating
in the interest of taxpayer value that ballooned until the point
of explosion. We were then obliged to take it over in London Underground
and to deliver the upgrades that Metronet had failed to do in
a timely and economic way. If you look at the record of LU over
the last year or so, I think it is pretty good on the Metronet
upgrades. I would pay tribute to everybody at LU for the way they
have got on with the work of the Victoria Line upgrade and in
saving 2.5 billion from the budgets. As you may know, about 1,000
back office staff have been let go and that is because there are
substantial savings to be made. I really learn two things. The
first is that I think the Metronet structure was wrong. It did
not serve the interests of the taxpayer well. It did not serve
the London travelling public well and I think, going forward,
what we need is a system that protects the taxpayer, that protects
taxpayer value, and above all that enables London Underground
to have proper oversight of the contracts that are essential for
the delivery of a good service to London Underground passengers.
Q3 Chairman: Have you concluded that
the public-private partnerships are wrong in principle?
Mr Johnson: No. I am not an ideologue
who wants to take back the track or renationalise every aspect
of London Underground; nor do I defend every particular of the
public-private partnership because patently it has not worked
to the advantage of the taxpayer and it has not worked to the
advantage of the London travelling public. All I would really
say is that I think what we need is a sensible system going forward.
The key thing it has to deliver is taxpayer value and it can only
really deliver that, in my view, if London Underground is given
the ability to see what is really going on. I think part of the
problem that we had with Metronet and certainly the problem that
we have at the moment with Tube Lines has been just a lack of
transparency. That is a key difficulty for us in London Underground.
Obviously, the consequences for the London travelling public are
pretty dire.
Q4 Mr Hollobone: Mayor, can we just
get some of these time lines sorted out? Can you remind the Committee
when you were elected Mayor of London?
Mr Johnson: I can. Thank you.
I was elected in May 2008.
Q5 Mr Hollobone: When was Metronet
taken into TfL ownership?
Mr Parry: That was shortly after
that.
Q6 Mr Hollobone: In your mayoralty,
one of the first problems you have encountered is the legacy of
this system.
Mr Johnson: Yes. Patently, I think
it was a poorly conceived system. I think if you were to get Shriti
Vadera before your Committee to go through her thinking now about
the PPP, I do not think that you would find her defending it very
vigorously. I do not think anybody now thinks, even in the Treasury,
that it was the right model, the right way to transfer risk to
the private sector, which is what after all was intended by that
PPP model, to try to liberate the energy and competitiveness of
the private sector without greatly exposing the public purse to
unnecessary risk. That was the idea. I do not think it did achieve
that. It has been a substantial drain on TfL finances to have
to deal with the ensuing catastrophe.
Q7 Mr Hollobone: You have inherited
the problems caused by Metronet but under your mayoralty I suppose
the big question is: is Tube Lines going the same way as Metronet?
Surely on that question the signal is at least at amber, if not
at red?
Mr Johnson: I am not going to
be tempted now into reading the last rites over Tube Lines or
over the PPP. I do not think that would be right. Richard may
want to amplify this but my feeling is that the arbiter is going
to produce his view on 17 December about the equitable price for
the second review period. I think we should see what happens.
What Londoners want is a convincing account from Tube Lines about
how they are going to deliver these upgrades.
Q8 Mr Martlew: Is it not a fact that
Tube Lines are doing the work 30% cheaper than London Underground?
I think there was a freedom of information request from The
Guardian that says that. Is that not correct?
Mr Johnson: No, it is not.
Q9 Mr Martlew: Mr Parry, what is
your view?
Mr Parry: We do not think that
is correct.
Q10 Mr Martlew: Can I be less specific
then and take the 30% out? Is it not correct that Tube Lines are
doing the work cheaper than London Underground?
Mr Parry: There are exercises
under way to benchmark the work that Tube Lines and London Underground
undertake to maintain the railway and upgrade the railway.
Q11 Mr Martlew: Let us just talk
about Tube Lines.
Mr Parry: When you examine those
costs, there are various different ways of comparing costs. You
have very different railways. You have very different arrangements
that apply. There are some legacy arrangements and when you look
at that you can find different ways of cutting that, some that
will show you Tube Lines is cheaper, some that will show that
London Underground is cheaper and some that will show that they
are broadly the same. The key thing that we have tried to work
with Tube Lines and the arbiter on is to understand how there
is scope for improvement and for delivering greater economic efficiency
in the way that we manage the Underground. It is not true that
there is a simple comparison that just says they are 30% cheaper.
Q12 Mr Martlew: Therefore it is not
true for the Mayor to say, "No, they are not" either,
is it, by definition, which he has just said. You have the Jubilee
Line which is a signalling issue. I think I was reading something
in the paper about the number of weekends that it needs to be
off operation recently. I think it was about 28, if I recall.
How much of that will be for driver training on the Jubilee Line?
It is a new signalling system. I understand you have not negotiated
with the trade unions about this at all yet. Is that the case?
Mr Parry: No, that is not true.
Q13 Mr Martlew: How much of it will
be for driver training?
Mr Parry: Any major project of
this sort delivering new signalling includes within its programme
a last stage which is about bringing the railway into operational
readiness for use in revenue service. That has always been the
case for the Jubilee Line upgrade, as it has been for every other
upgrade. That will require a short amount of access at the back
end of this plan. We are still discussing with Tube Lines the
full scope of the additional closure that they need in 2010, having
used significant access as we all know through 2009 and the years
prior. We expect that Tube Lines will use of the order of 28 closures,
as I said earlier this week. The exact detail of that is being
worked out. They will not all be full line closures. They will
not all be full weekends, but there will be some closure activity
most weekends through first six to eight months of 2010. At the
very back end of that, some of that time will be used with our
drivers using the system prior to going into revenue service.
It is a very, very small proportion of the overall volume of access
that will be needed.
Q14 Mr Martlew: That is something
we can take up with ASLEF when they come before us later. The
Jubilee Line is being upgraded by Tube Lines. The Victoria Line
is being upgraded by yourselves. When is that likely to be completed?
Is there going to be any overrun on costs?
Mr Parry: On the Victoria Line,
it was a former Metronet project to deliver. Their contract date
was 2013. They always had a target date that was ahead of that.
Since the collapse of Metronet and us picking up that work with
Bombardier and Invensys as the contractors, we have sustained
the programme. We are delivering the programme as expected. We
are seeing the first new train running in passenger service on
the line today. The new signalling system is also in place and
is working when we are testing that system. That will run and
we expect to deliver on schedule by something like the early part
of 2012, which will actually be about a year ahead of the original
date that Metronet were working to.
Q15 Mr Martlew: And the costs?
Mr Parry: We are confident that
the costs are within the budget we are working to. A lot of the
contractual arrangements were inherited from Metronet, but we
have picked up those contracts and we are delivering that project
on time and on budget as we stand today.
Q16 Chairman: And the Jubilee Line?
Mr Johnson: The Jubilee Line is
being upgraded by Tube Lines, as Mr Martlew correctly indicated.
That frankly is not going well. Mr Martlew referred to the number
of closures he had read about in the newspaper. Indeed, there
has been a very significant number of closures since last year.
As he says, another 25 seem to be demanded by Tube Lines. The
situation is really very unsatisfactory and I do think that it
goes to the heart of what is wrong with the structure, because
you fundamentally have a system in which Bechtel, a leading engineering
firm as you know, has to manage a software programme which is
basically being delivered by a bunch of Canadian software programmers
in Toronto. With the best will in the world, I could not, hand
on heart, now say that that programme of managing the software
delivery for the Jubilee Line upgrade has been effectively done.
I am going off piste here, but that is the fundamental problem.
Q17 Chairman: It is a management
problem?
Mr Johnson: I would say it is
a management problem. The difficulty that the Tube Lines/PPP structure
creates is that, because Bechtel is not only a shareholder but
also a contractor, there is no very clear way of making sure that
Bechtel has a very strong incentive to get it done in a timely
way and to deliver taxpayer value. Getting back to what Mr Martlew
was saying about the relative costs of Tube Lines versus London
Underground in doing the upgrades, I happen to think that Richard
is right and that the statistics that you have seen are misleading.
If Tube Lines can do this very cheaply and if they can do it in
a timely, effective way, that is what we want to see. I want to
be totally pragmatic about this. If they can do it cheaply and
in a transparent way and get a grip on the upgrades, then I think
that would be ideal for all concerned.
Q18 Ms Smith: In the memorandum of
evidence from Transport for London, it does say that the National
Audit Report put the losses to the taxpayer of Metronet's failure
at something between £170 million and £410. Is that
accurate?
Mr Johnson: I will ask Richard,
if I may, to elaborate. We think that when you take various other
costs into account the bill rises to about £550 million.
Q19 Ms Smith: We are talking at the
top end of that initial estimate and more?
Mr Johnson: That is correct.
Mr Parry: We understand how the
NAO made their calculation but it was limited to an historical
analysis so it did not really look at the additional cost being
incurred by Transport for London in getting hold of the programmes
of work that were left, in some cases as we saw on the stations,
in a very poor state. We have had to spend additional money to
complete work that in effect Metronet had been paid for doing
so you have to add that amount on top of the amount identified
by the NAO. The other thing that is also worth saying of course
is that the collapse of Metronet brought forward a lot of costs
that would otherwise have been paid but would have been paid over
the 30 years. For example, the costs of the debt that had to be
paid. The costs incurred with the new trains, the new signalling
that were proposed to be paid over the 30 year term are now going
to be paid for in 2009/10 going forward. That has changed the
profile of the costs as well as the total cost.
Q20 Ms Smith: You mentioned the refurbishment
of stations. You will have seen the media speculation today about
the possible closure of 142 and the intention to ensure that smaller
stations will only have staff issuing tickets during peak hours.
Is this true?
Mr Parry: We are firmly committed
to providing staff at all stations across the London Underground
throughout the day. That is fundamental to our service proposition.
We know it is what customers value. We are looking at options,
as every public service is doing right now in the current economic
climate, as to how we can ensure that our overall service operation
is efficient, effective and delivers the service that customers
value. That piece of work is ongoing. It is part of the overall
change we are bringing about on the Underground which will bring
forward the new trains, the new signalling. We have changed the
focus within the Underground to make sure that we have the business
that we need going forward.
Q21 Ms Smith: Mr Johnson, your manifesto
commitment was to ensure that there was a manned ticket office
at every station.
Mr Johnson: I prefer to use the
phrase "staffed".
Ms Smith: I am using what I thought was
your phrase.
Chairman: I am glad to hear you have
the up to date words.
Q22 Ms Smith: Are you now saying
that that will only be during the day time?
Mr Johnson: No, but you are right
to raise it. There is no question that in very tough economic
times you have to look at what savings you can make in a pragmatic
way. I have not seen the leaked document that I think forms the
basis of your question but Richard is absolutely right to stress
that it is our job to make sure that the London travelling public
have all the safety and reassurance that they deserve and that
goes with having a fully staffed station at all times. Whether
or not you have a person behind glass in a ticket office at all
times is another matter. I understand that people want this and
I understand that a lot of people believe that this is absolutely
essential to the safe operation of stations. I am going to have
to look at the evidence and decide whether or not we can deliver
that kind of safety and that kind of reassurance by staffing all
stations at all times and not staffing ticket offices at all times.
That is the issue for us. I fully understand where you are coming
from. All we have to do is make sure that we give the travelling
public the reassurances that they need.
Q23 Mr Leech: You mentioned about
the involvement of Bechtel as a parent company and as a contractor.
This was part of the disastrous collapse of Metronet, the involvement
of the parent companies as contractors. My understanding is that
while Terry Morgan was the CEO they tended to be able to keep
the parent companies out of it and they were going out to the
market for best value. Why has that changed?
Mr Johnson: I am afraid I cannot
give you any guidance in the dispensation under Terry Morgan or
anyone else. All I can say is that it is my impression, as you
say, that with the structure of the PPP in which you have shareholder
companies being asked to deliver taxpayer value you have an inherent
conflict, because their duty is at once to their shareholders
and to the taxpayer. Those two duties conflict.
Mr Parry: The Tube Lines model
is different to Metronet's. The work is procured independently
of the supply chain. The point that the Mayor is making is that
Bechtel's role within the Tube Lines organisation is to second
people in who will then run the project side of that business.
Whilst that has been successful in delivering some of the stations'
programmes over the early years, it is the first really significant
test for the Tube Lines organisation that is delivering a line
upgrade. We have put on record our very grave concerns about how
that has been managed. It is undeniably very, very significantly
late. We cannot give you an answer. Tube Lines are on later to
talk about this. We do not have an answer for why it is late and
what has happened but our observation is you have people from
within the Bechtel organisation sitting in key roles who are,
it seems, not capable of delivering this upgrade. We have put
on record our concern about that and our need for getting from
Tube Lines a firm and credible plan for the delivery of this upgrade
so that we can then make our own plans and we can then communicate
to London to tell them what they are going to expect in the year
or so ahead in terms of the disruption that will be caused on
the Jubilee Line.
Mr Leech: What discussions have you had
with Tube Lines and Bechtel about warning them about the potential
consequences of going down this model road, because if two people
are stood in front of a cliff and one jumps off most people, if
they were the second person, would probably think that it is a
bad idea to go down that same route. Have you had any discussions
with Tube Lines and Bechtel about this?
Q24 Chairman: What can you tell us
about what is happening? Could you tell us briefly where you have
got to on it?
Mr Johnson: Where we are at the
moment is that we have of course had a series of discussions both
with Tube Lines and with Bechtel themselves. It would be fair
to say I had a meeting with Riley Bechtel himself in my office
in about September. It was what they call a frank, full and free
exchange of views about this issue of transparency. It seemed
to me at the time that there was no clarity for London about the
speed at which we could expect these upgrades to be delivered
and the number of times we were going to be asked to close sections
of the Jubilee Line, greatly inconveniencing Londoners. Yes, I
did have a fairly acrimonious exchange with Bechtel back in September
and those points were put across, I hope, in a vivid way, but
in the end what we want is to get to a stage, after the arbiter's
ruling, where as Richard says Tube Lines are able to put forward
a clear and convincing account of how they are going to get the
upgrades done.
Q25 Mr Donaldson: You mentioned earlier
about Metronet and how Metronet is effectively in-house again.
What is happening with their former obligations?
Mr Johnson: Their former obligations
are being very largely fulfilled now by London Underground though
clearly there has been scope to make substantial savings in the
way that we go about it. After all, if you think about the Metronet
structure, it involved in a large number of cases a great deal
of man marking and the pointless duplication of officials. We
have been able to winnow out quite a few layers of management
to save £2.5 billion. Otherwise, as we were saying to Mr
Martlew, the upgrades that Metronet was carrying out are broadly
continuing. What we have been unable to persist with at the rate
I would have liked is for instance the introduction of step free
access to some stations in London, simply because of the straightened
financial circumstances that we find ourselves in. There is no
doubt that there is a crunch in the budget, very largely caused
by a 6% fall in ridership on the London Underground. That has
cost us between £700 million and £900 million. That
is a huge abstraction of resources for TfL and we have had to
compensate for that by making some reductions in the scope of
the upgrades, but the principle has been at all times to deliver
those Metronet upgrades that maximise the capacity of the Underground
and get people moving from A to B as fast as possible and to reflect
the fact that we think, notwithstanding the current fall in ridership,
the demand for London Underground services is going to increase.
Q26 Graham Stringer: You said at
the start that you did not think the government would come up
with the idea of a PPP again for the tube. Rather surprisingly
in their written evidence they are still wedded to the idea and
they still think it is a jolly good thing. What would you put
in its place?
Mr Johnson: Mr Stringer, I am
not going to be tempted into reading the last rites over the PPP
or announcing the death knell for Tube Lines. I do not think that
would be right. Whatever model you come up with has to deliver
taxpayer value and it has to allow London Underground some understanding
of what is going on. That was the real flaw.
Q27 Graham Stringer: Do you think
that is possible within the PPP structure? I understand the principles
but is it possible within the PPP structure?
Mr Johnson: It has not proved
possible so far. Richard, you may want to come up with a brilliant
third way here.
Mr Parry: The answer for us, being
pragmatic, is that we have had to recover the work undertaken
by Metronet and put in new arrangements, often with supply contracts
that it was necessary to take forward because we needed to maintain
the work on the Underground. By having a much more straightforward,
conventional, direct relationship with suppliers and a much more
collaborative approach often in the way that we are delivering
the major projects, we have seen significant benefits from working
in that way. We always recognise that the delivery of these major
enhancements to the Underground will be a private sector delivery
model. What we have been able to establish is a much clearer,
stronger, publicly owned applied function that is able to work
very closely through direct contractual relationships to get things
to happen, rather than to have the complexities of the PPP stand,
as they are currently standing on the Jubilee Line, in the way
of some of the progress that we needed to make. We are seeing,
in the way that we have put in place arrangements following the
demise of Metronet, a simple, more effective way of delivering
these upgrades on the Underground.
Q28 Graham Stringer: The government
justify their support for the PPP in saying that—
Mr Johnson: Do they still?
Q29 Graham Stringer: Yes. There is
some written evidence that we have before us. They say that previously
London Underground, when they were building the Jubilee Line,
were 30% overspent and when you add the 1.7 billion for the debt
and the half a billion it is still only 10%. Do you think that
is a fair justification for the PPP?
Mr Johnson: I just think you have
to take ideology out of it and look at what the system—
Q30 Graham Stringer: I am looking
at the figures; it is not ideology.
Mr Johnson: In terms of the Jubilee
Line upgrades?
Q31 Graham Stringer: No. In terms
of comparing the old system. The government is saying that the
PPP, with all its failings, is better than the old system. It
is not a fair comparison. The question I am asking is: is there
a better system still?
Mr Johnson: I think that what
you want is a system where you do not have this conflict of interest
inherent in the structure and you have a strong measure of accountability
to London Underground of the people who provide the service for
passengers in London of what is going on in the upgrades. The
difficulty with the current system has been that it is just not
transparent. If from all that you could argue that I am in favour
of a more conventional model of the kind that is currently operating
on, say, the Victoria Line, then yes, that seems to be working
better. That seems to me to be delivering better value for Londoners.
Chairman: That sounds to me a bit more
like the principle. You said it was not about principle at the
beginning.
Q32 Sir Peter Soulsby: I just wanted
to take you back briefly to the role of the PPP arbiter. The original
arrangement with Metronet, as I understand it, was that the arbiter
would report annually on their performance, efficiency and economy.
In fact, the Committee recommended that that should be extended
in future to all of the Infracos. Indeed, I think that has been
supported by the National Audit Office. I understand you have
resisted that. Would you like to explain why?
Mr Parry: I do not think it is
a question of resisting it. I think we have an existing contract
with Tube Lines so we are not able to say how we want to do things
differently. There needs to be an arrangement agreed between us.
We see the role of the arbiter as being effective in terms of
what it needs to do right now. The arbiter has a role at this
point in determining what the cost is going forward for Tube Lines.
We have invited him to make that determination and we believe
he has adequate powers in the role that he has today to do that.
I do not think we believe that an annual review would have resolved
the Metronet situation at that time, given the status of what
was going on with Metronet at that time. We are reasonably comfortable
with the position that the arbiter has with regard to the Tube
Lines contract today but actually it is not something that is
in our gift to change right now.
Q33 Sir Peter Soulsby: Is that something
for Mr Bolt himself? A proposal has been made and has been rejected.
It is something that this Committee has supported, the National
Audit Office has supported and surely would be in the interests
of greater transparency?
Mr Johnson: It would be but it
just does not seem to have worked like that. I think Richard is
right to say that the arbiter, whatever his function, was not
able to stop the bill ballooning in the way that it did under
Metronet. He was not able to prevent the system from collapsing.
Obviously anybody who can exercise a downward pressure on the
costs of this system is to be welcomed by me.
Chairman: Thank you, gentlemen.
| 
