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Lord Brooke of Alverthorpe: My Lords, we have heard the approach that the Liberal Democrats favour, but we still wait with interest to hear what the Conservatives would do.

Viscount Astor: My Lords, this is a debate on the Government's proposals for London Underground,

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not the Opposition's. When, as I hope, I sit where the noble and learned Lord is sitting, of course the noble Lord will be entirely within his rights to question me on my proposals, but this debate is about the Government's proposals.

5.44 p.m.

Lord Falconer of Thoroton: My Lords, I join in the congratulations to the noble Lord, Lord Peyton, for three reasons: first, on winning the ballot so that we could have this important debate; secondly, on his contribution, because, although I disagree with a great deal of what he said, he delivered a speech that electrified the House and defined the issues; and, thirdly, on providing a template for transport Ministers, because, if what my noble friend Lord Faulkner of Worcester said is right, the noble Lord presided over a golden age in which he always won the significant battles against the Treasury. One solution to providing certainty of long-term investment might be to find a clone of the noble Lord, Lord Peyton of Yeovil, so that the public could always be sure that such battles would be won. Unfortunately, no such process is yet known to man, so we have had to seek other solutions for the Tube.

Lord Peyton of Yeovil: My Lords, it was kind of the noble and learned Lord to say that, but I have not so far been swept off my feet with gratitude to the Treasury as to admire them or wish them a long life.

Lord Falconer of Thoroton: I had noticed, my Lords.

Every speaker in the debate—with the exception of the noble Viscount, Lord Astor—came back to the essential point made by the noble Lord, Lord Peyton. The noble Viscount did not grapple with the issues and, although the noble Lord, Lord Brooke, asked the noble Viscount what his solution would be, he gave no indication of his ideas for the way forward, unlike everybody else who has spoken.

Viscount Astor: My Lords, does the noble and learned Lord accept that it is the job of the Opposition to oppose?

Lord Falconer of Thoroton: My Lords, I had hoped that the noble Viscount would make a constructive contribution to the debate and give us his ideas on the way forward, as everybody else did.

The noble Lord, Lord Peyton, said, in his excellent speech, that the Government's advisers had led us down the garden path and we should never have gone for the PPP. Instead, he said that we should have left it to Mr Kiley to run the Tube, because he is an experienced man who could provide the solution. Stripped of all the personalities and politics, that is the noble Lord's argument. He said that the Treasury could have provided the money and that would have been the way forward.

Everybody else in the debate has rightly identified two essential problems for the Tube. First, how do we ensure long-term commitment to finance? Secondly,

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how do we make sure that that finance is properly managed in ensuring the quality of the infrastructure? The noble Lord, Lord Peyton, suggested that we should go on as before. What is the evidence on that? The Jubilee Line extension was a considerable period late and had cost overruns of between £1.4 billion and £1.5 billion. Is that a sensible way forward? I suggest that it is not.

Raising finance on the bond market is another suggestion to find a way forward. It is absolutely right to say that that is probably cheaper than many other methods of raising money, but a cheaper method still is to rely on money from the Treasury. London Underground's record on previous projects shows what happens when we do that.

The cheapness of the money is not the issue, although it is one element. Borrowing on the bond market has no effect on the management. Something more than just cheap borrowing is needed.

What about the romantic solution that I think the noble Lord, Lord Fowler, suggested? He seemed to advocate privatising London Underground and breaking it into five separate bits that were operated separately. I am not sure if that is his policy or that of noble Viscount, Lord Astor, who rather grumpily tells me that it is not for him to tell me what his policy is. Does anyone believe that dividing the system into five is the way forward? We have experienced the effect of Railtrack. The noble Viscount, Lord Astor, was, I believe, shrewd and sensible not to let on because, if that was his policy, it would not find much support.

Therefore, the suggestions put forward by the noble Lords, Lord Peyton, Lord Fowler and Lord Bradshaw, and by the noble Baroness, Lady Hamwee, do not meet the problem. The problem is a very difficult one and we have wrestled with it. The solution that we have come up with is to keep London Underground together in operational terms. The line, the trains, the stations and the service to the customer will all remain with London Underground. However, it will enter into long-term contracts for the maintenance of the track and the improvement of the infrastructure with the infra-co companies.

Who are the infra-co companies? They are, first, expert contractors who know how to deal with the work. Secondly, in many cases, they have been carrying out work for London Underground for a considerable period of time, but they have been doing so on a short-term rather than a long-term basis. By entering into these contracts, they will have commitment to London Underground in the long term and a real interest in ensuring that they deliver high quality services.

It is difficult to reach a conclusion about what to do. It is difficult to ensure that one delivers a quality service to the people who use London Underground, but it is a vital obligation of any central government to ensure that that happens. However, we have worked through the detail and have reached this conclusion. The noble Lord, Lord Peyton of Yeovil, reminded us that the first consultant was Satan. He then referred to

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other consultants who advise his side of the argument. He said that they are right and that our consultants are wrong.

The analysis that we have carried out produces a result that refigures the management and brings about a step change in relation to the maintenance and organisation of the track and the stations. However, it also keeps the whole organisation together and keeps it in public hands. We consider that to be a sensible solution. The noble Viscount, Lord Astor, asked me to name someone apart from the Government who supports that solution. I take one name at random: Digby Jones of the CBI believes that it is a very sensible way forward. So do we, and, subject to the infra-co contracts being value for money—that will be attested by independent advisers to both London Underground and the Secretary of State for Transport, Local Government and the Regions—and with the NAO watching the whole process, we believe that we shall be able to proceed in a way that will deliver better services for Londoners.

Earl Russell: My Lords, in considering these contracts, does the noble and learned Lord agree that he has developed a system where the buck never stops? He has therefore discovered the secret of perpetual motion and is much to be congratulated.

Lord Falconer of Thoroton: My Lords, certainly not. Under the arrangements that have been made, London Underground will be responsible for running London Underground. It will enter into long-term contracts. It will be responsible for delivering the service and will be accountable to TfL. Once the PPPs are completed, arrangements will be made to transfer the service to TfL, who, in turn, will be accountable to the mayor. I do not believe that entering into a long-term contract means that one passes the buck round in a circle; rather, one identifies precisely where responsibility should lie and places that responsibility with people who are expert at dealing with it.

Having dealt with the central argument at the heart of the debate, perhaps I may go on to deal with particular points raised by noble Lords. The noble Lord, Lord Elder, made the point—in my submission, correctly—that it has fallen to this Government to deal with the problem after years and years of under-investment.

The noble Lord, Lord Fowler, said that we should not talk about the past. It is worth pointing out that under the previous government investment went down and down. If the plans of the Conservatives had been followed, investment would have decreased from £160 million to nil. However, I agree that we should not talk about the past; we should talk about the future. We need to have a system in place for the future which will ensure that we do not experience the cost overruns of the scale that we saw in relation to the Jubilee Line extension.

Lord Bradshaw: My Lords, I have heard about cost overruns on the Jubilee Line ad nauseam. That project

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did overrun. First, it was subject to the collapse of the Austrian tunnel method at Heathrow Airport, and work stopped for a considerable time. Secondly, the line had to run in time for the opening of the Dome. That placed the unions in an extremely strong position and they extorted vast sums of money to finish it. However, let us consider the East Coast Main Line and the Channel Tunnel terminal at Waterloo. Those were public sector contracts which were delivered before time and on budget. Because a project is placed with the public sector, that does not necessarily mean that it will be overspent or done badly. The case of the Jubilee Line is a bad one but it is a special case.

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