Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used

DAVID FROST:

And now I'm joined by Bob Kiley. Good morning, Bob.

BOB KILEY:

Good morning David.

DAVID FROST:

Now, three or four weeks ago peace seemed to be breaking out everywhere, compromise was in the air, resolution of the problems between the government and yourselves seemed just around the corner. What's happened in the last three or four weeks, what's gone wrong?

BOB KILEY:

Well, it appears we have an outbreak of rail and mouth disease because there's been a lot of talk and virtually nothing has happened. The issue now turns on this question of repairing the fatal flaw in the government proposal which is this segmentation of operations between the train drivers and all the activities that are designed to take care of the trains. Moreover there is the vulcanisation of the tube, three separate companies, very few ways in which they are going to be talking to one another on a sure-fire basis. We've been saying there needs to be unified management control. There needs to be someone in charge, who's reach is broad. The actual shape of the organisation is certainly open for discussion but every time we've made a concrete proposal on the issue of control, which the government on the 2nd February in a giant press guide, in an agreement with me, said they were in favour of unified management control, but it has been impossible to put flesh and blood on those bones.

DAVID FROST:

Why is that? Is that the Treasury influence?

BOB KILEY:

It has to be, because one key element in their proposal is to give, although they say that they're not really privatising it, this is a long-term franchise. They've essentially endowed the private companies with all the attributes of ownership. Why? To enable them to get to the private marketplace to raise money. Now that will turn out to be a more expensive way of raising money than if the Treasury was, if the government, was just transparently, openly up front making a long-term commitment to the rehabilitation of the tube.

DAVID FROST:

They don't want to do that because that goes on their books, rather than ¿

BOB KILEY:

This, well, they're judge and jury here. They're going to decide what goes on their books and what doesn't, because at the end of the day someone is going to have to make up the shortfall, which is estimated to be in the neighbourhood of about half a billion pounds each year for this effort. Now, who's going to pay for that and won't it be on your books if you're the paymaster?

DAVID FROST:

So that's the, that's your objection to what the Treasury are saying. And then, from the other point of view, their objection to unified management control or whatever, of the three private companies as well as the centre, is that if these three private companies go out and raise money they'd have to admit that someone else is going to tell them how to spend it, namely yourself? Then no one's going to give them any money in the first place.

BOB KILEY:

Well, I think we have to test that proposition. It's very commonplace for owners, which is what in effect they will become, to make significant delegations of management responsibility to those who are competent and equipped to run an organisation like the tube. Not only to run the operation but to oversee the reconstruction programme. It happens every day. It's commonplace and it can be done in this case, and that's one of the suggestions that's been made that's been rejected.

DAVID FROST:

And this weekend we read in the Times and on the PA wires and so on, a suggestion that you and Ken Livingstone have watered down what you are asking for, to use the quote, in the sense of the 51% of the instrastructure companies, and you've watered down your demands in that area. Have you?

BOB KILEY:

No. I don't know where exactly this 51-49% proposition came from. We've never made a proposal like that, but ownership arrangements, who's a majority, who's a minority, is obviously one way you can go. We, we'd be interested in that. There's been no watering down. The fact is, half a dozen proposals have been bantered about, both formally and informally and all of them have been pushed aside up to this point.

DAVID FROST:

But what, what is the possible outcome of this? I mean, we've been through the two proposals and one can see that they are, if not diametrically opposed, bridging that gap is obviously something that hasn't been achieved yet. What is the potential compromise? Or isn't there one? Does it have to be your plan, or their plan?

BOB KILEY:

It's, that's where the real mouth disease comes, that we just haven't been able to move. We've, I think, moved quite a lot. But the government has just been entrenched in this notion that the control issue is off the table. If the control issue is genuinely off the table it's hard to see how this gap can be bridged.

DAVID FROST:

Does that mean judicial review?

BOB KILEY:

I've just finished writing a detailed report on where we are right now to the mayor. I delivered it to him late yesterday. It, it re-hashes where we've been, where we are now, what I think can still be done. It's in his hands at this point.

DAVID FROST:

Would you stay on if the government's PPP plan was imposed on you?

BOB KILEY:

You know it's a question I've been asked a lot and it's not a question that I'm thinking about, it's not one that I'd choose to answer at this point. Clearly I was brought here in no small part to get my arms around the tube and to re-energise, rejuvenate, and to re-organise it and prepare it for this rehabilitation progamme. If that proves to be difficult, if not impossible then it's a question I'll have to look at.

DAVID FROST:

At the moment, looking at the situation, is the London Underground in as bad a state, worse or better, than when you took over the New York subway?

BOB KILEY:

I would say that the New York situation was in worse shape back in the mid-1980s. The physical decay had advanced beyond what we find here in London. But London is just a few years away from being in those parlous circumstances. So, it took, it's a larger system in New York. The turnaround took four to five years before the evidence of real change was visible. It could take the same length of time here but, but we've got to get close enough to really do the kind of assessment that we're capable of doing. At the moment, with, the talk goes on and on and no action's occurring.

DAVID FROST:

And in fact if you were able to get underway you would then be warning people that it will take time, that it will, that the complaints will continue for a while and a new system could be created in how many years?

BOB KILEY:

Well, it's taken a quarter of a century for this decline to occur. And this is a major physical rehabilitation programme, major investment, somewhere between £500-700 million per annum being put back into the physical plan, while also delivering a service 20 hours a day. It's those two things combined that make the management challenge so significant and the reason why you need to have control. But it also means that it is going to take time, so between two and four years I think people will really start to see a change.

DAVID FROST:

Two and four years, that's encouraging. But coming back to what you said earlier, as of this morning you don't see what the viable compromise is?

BOB KILEY:

I see what a viable compromise is. I can see half a dozen ways of doing it, but apparently the other side chooses not to see it. This is really coming down to an act of will, a political, somewhere over there there's got to be someone who can make a decision to get this moving again.

DAVID FROST:

Who's that person? Gordon Brown?

BOB KILEY:

John Prescott is the person I've been dealing with. I have found him constantly available, interested in change, talking about it, I thought I had an agreement in early February with him. But then when we got to the details it fell apart again. So I, I can't, I'm a stranger in this land. So I don't pretend to understand the dynamics of all this but somehow when the money issue comes back into it, things grind to a halt.

DAVID FROST:

So there's someone there behind

BOB KILEY:

The wizard of oz

DAVID FROST:

The wizard of oz is behind John Prescott?

BOB KILEY:

And they haven't found the curtain yet to pull it back.

DAVID FROST:

Thank you very much indeed for being with us.

END