The Transport Secretary face-to-face with his greatest critic 7/2/02

KIRSTY WARK:
Stephen Byers, the only reason the private sector comes out ahead is because Ernst & Young made the assumption that the private sector is 6% more efficient, likely to dig up the roads better and so on. That must be your assumption too?

BYERS:
The assumption is based on 200 different contracts that we looked at in relation to the public sector.

WARK:
So you agree with that.

BYERS:
I am agreeing the public sector comparator is important, because if you look at, for example, the cost overruns on things like the Jubilee line - 67% cost overrun, a few years' behind schedule - there is a cost to that. That should be factored in and it has been factored in.

WARK:
Your assumption is that the private sector does things more efficiently.

BYERS:
Not always. But in the round, when we look at a variety of contracts and put them together, then yes, the private sector can perform particularly, with large procurement contracts like this These are contracts where the private sector has expertise, but the public sector does not.

WARK:
It has never been factored in, in this kind of PPP, so it is an assumption that, as far as this Government is concerned, is untried.

BYERS:
This is an unique PPP. It is a large one. There's going to be £16 billion of investment taking place. It is the first time we have done it, so it's going to be unique. But what we have done is to make sure that all of the factors are taken into account in a fair and reasonable way, and then we have to take a judgement. The point about a subjective judgement is that the National Audit Office, the independent watchdog that consider these things, has always said that value for money will be a subjective judgement - it is not a pass/fail test.

WARK:
Ken Livingstone, this is a done deal. If you'd accepted this earlier, passengers wouldn't have had to suffer for so long.

KEN LIVINGSTONE:
No. It is not delayed because I have been opposing it. This is the quickest the Government could get to the start line. It was supposed to happen in the summer of 2000. Because it is an incredibly complex scheme it has taken forever. It is nonsense to assume the private sector is always better. The Channel Tunnel was done by the private sector - a disaster. What you have to remember here, is I have appointed Bob Kiley, who has a track record of modernising the Boston underground, the New York underground, doing it to time and cost. I have got the world class management that's better than anything that these private companies have got on offer.

WARK:
What is wrong with Bob Kiley?

BYERS:
The important point is that we look both at the public and private sector in the round. Some of the comparators we have used for the private sector have taken into account delays and cost overruns as well. But when you take into a whole variety of different contracts, I'm sorry to say the public sector comes out bad. And the reason why we feel it is important for the Government to hand this over is we're putting billions of pounds of taxpayers' money into this proposal. £5,000 for every household in London will be invested in the infrastructure of the Underground, so we have a responsibility for people in Scotland and the north-east of England to ensure that taxpayers' money is used effectively and efficiently.

LIVINGSTONE:
On some of these contracts, and you are not letting me see them until Monday, there is a 35% rate of return. We have a privatised bus system in London. I negotiate contracts with them. They get an 8% profit. Why on earth have we got to pay a third when the extra costs of borrowing, something like 45% of all the money that goes into this, will not go into modernising the Underground but into these extra costs and the profit margins.

BYERS:
You can't say that because, as you say, you have not seen the contracts. But when the rate of return is revealed you will see it is nothing like the allegations you are making. When you see that 16...

LIVINGSTONE:
What is the rate? You can tell us now, you have seen the contract.

BYERS:
You will find out on Monday. When you find out the £16 billion investment which is going into...

LIVINGSTONE:
Why on earth can't you...

WARK:
Let me just...You say Ernst & Young's report will be transparent, you are making everything freely available to people. Just answer the simple question - is it more than 8% for the privatised buses, is it less than 8%, is it nearer 35% than 8%. Give us a ballpark.

BYERS:
I think when people can see the risk that will be borne by the private sector they will recognise that the rate of return is appropriate, but people can arrive at their own judgements.

WARK:
Can you absolutely rule out it is 35%?

BYERS:
What I'm saying is, when people see the figures - and they will be available next week - they will see 35% is way off mark, and you know that.

LIVINGSTONE:
I'm getting them at 8.00 on Monday morning. Why can't you just tell the viewers what the figure is?

BYERS:
Because we are consulting you, as we should do, and we're consulting...

LIVINGSTONE:
I release you from any obligation. You can tell all the viewers right now.

BYERS:
As you know, it is a legal requirement. That's why we are doing it. The important thing is, we should have a debate. I have released the Ernst & Young report. I have got nothing to hide. I have taken the judgement, I believe it is value for money. Also, safety is not going to be compromised and there is no privatisation here - London Underground will control the system and it will remain publicly owned.

WARK:
How can you say safety is not an issue. It must be an issue. If it is not an issue I'm very surprised. You are doing exactly the same fragmentation as was done with Railtrack. It is not in private hands albeit, but the point is that it is leased, it is privatised responsibility.

BYERS:
That's simply an inaccurate reflection of the position. The important thing with safety is that it is not Ken Livingstone or Steven Byers that will decide whether it is safe or not. Politicians should get out and...

LIVINGSTONE:
It's going to be lawyers.

BYERS:
No, it's going to be the Health and Safety Executive - the independent people who, in this country, have got responsibility for safety. They will decide. I tell you this - if they say no, if they say the safety case has not been met, we will not go ahead with the public private partnership.

WARK:
Is that not perfectly reasonable? In the end it rests with Health and Safety.

LIVINGSTONE:
No, and I'll tell you why not...When John Prescott was in Stephen's job, I met him privately, the first conversation we had about this, said are you going to get this past the Health and Safety? Oh there will be no problem with that they are useless, they'll do what they're told. These are people that never pulled the plug on Railtrack. They discovered after Hatfield what was going on. I have no confidence in the Health and Safety Executive. The reality is, you are replicating that same problem. It would safer for Londoners if you just privatised the whole thing to one firm so the chain of command wasn't broken. We're going to have hundreds of lawyers arguing...

WARK:
There is Ken Livingstone saying it is better to privatise it.

BYERS:
Well, I'm interested to hear Ken say this...

LIVINGSTONE:
It would be safer for Londoners.

BYERS:
No, it wouldn't be, for the simple reason that with our proposals we have a unified management structure with London Underground.

LIVINGSTONE:
There is not.

BYERS:
It is. They have three contracts, quite different to Hatfield and Railtrack. The other important thing is that London Underground will be publicly owned. There will be no shareholders. It will be the ticket-holders that come first. That's a huge difference.

WARK:
But in the rail disasters we've had, the inquiries have repeatedly said that fragmentation was one factor, You are pursuing fragmentation in exactly the same way in the London Underground.

BYERS:
No, I'm afraid it is totally different. You have believed a lot of what Ken has been saying. It is not the same. It is quite different. When people can look at the system which is in place they will recognise it is London Underground that will retain control. They will have step-in rights if they feel safety is being compromised in any way.

WARK:
Isn't that a perfectly legitimate position to take, that the management of all this will stay with London Underground, which is in the public sector.

LIVINGSTONE:
It is not. There are contracts. I will have to employ lawyers to argue about who should pay with this. I had David Gun, the most respected man in the world in terms of managing rail. He looked at this scheme and looked over London Underground. He came back to me and said, you have got to remember a rail system has to be like military discipline, a train of command - someone gives an order, it is done. You can't have lawyers managing and accountants arguing about what should be done. I pushed him on this point. I said, if this system goes through, is it a danger and he told me yes. I said, I want a simple answer, yes or no, Will this cost lives? His answer was two words, "Eventually, yes."

WARK:
If this is, for you, such an issue of principle, and perhaps of ideology as well, and you stood on this plank, as Mayor of London, if you don't get your way, surely you have to consider resignation.

LIVINGSTONE:
No I don't. You stay and fight. The first thing, we're getting get our best lawyers in on Monday morning at 8.00. If we can find a ground to stop this legally we will. If it is imposed on it, I will try my best to make it work, we will try and make it as safe as possible. The reason people voted for me and not some Government stooge is because I will tell them the truth - I don't think it is safe.

WARK:
Let's make it clear you are prepared, perhaps, to put money from London's council tax payers into what may well be a futile legal dispute which could delay this even further and delay the chance people have of getting cleaner trains and better stations.

LIVINGSTONE:
If we pass it to Bob Kiley on the terms that he has proposed, we would have, basically, the Tube modernised within ten years. Most of this won't even start for ten years.

WARK:
What was the point of you trumpeting devolution, saying you are going to have a Lord Mayor of London, if at the first hurdle you don't let him do what the people of London wanted him to do.

BYERS:
It was part of the Act. It was an Act that Ken voted for, which was that the Government would decide the terms of the public-private partnership and then we would pass it over. The reason for that...

WARK:
You saw his overwhelming vote.

BYERS:
The reason for that is that there are billions of pounds of taxpayers' money going into this. It is not all coming from Londoners. It is coming from people in other parts of the country. We've got our responsibility for them. The important point is this - there is no privatisation. London Underground will remain in public ownership. Secondly, safety won't be compromised and thirdly, we can argue about value for money until the cows come home, but what I do know is that we are going to get £16 billion of investment going into the London Underground.

WARK:
You have talked about billions of pounds being put into this and taxpayers' money as well. Let's put this right. You are in a position now where in every public sector area you have got disputes with the unions. The unions hate this. You are pushing this all in the private sector. It is much more likely you will have industrial action which is going to impose more costs, which undermines the assumption the private sector is more efficient.

BYERS:
I think when people can see what we are proposing they will recognise this is actually in the public interest. The unions may disagree with it, but they don't have a veto. We will move forward on this. We won't let vested interests stand in the way of something that will deliver the investment that the London Underground so badly needs.

WARK:
But will the unions fall in behind?

BYERS:
We can starve the investment for generations. We have to get on with the job.

LIVINGSTONE:
The unions can't stop this. Perhaps lawyers can. He reality is this - Ernst & Young couldn't give this a clean bill of health even though they are employed by both the consortia as accountants. One could even say there is a conflict of interest there.

BYERS:
Ernst & Young are also employed by Transport For London, which you chair. You employ Ernst & Young as well. They've got contracts...

WARK:
Well, let's not trade about consultants...

BYERS:
Well, no, because this is an accusation which has been made. And also Deloittes, who you use, are the auditors of Seeboard who are part of the Metronet consortium. Where is the conflict?

LIVINGSTONE:
No-one is independent if you are paying them. There is only one truly independent group...

BYERS:
You employ Deloittes.

LIVINGSTONE:
...and that was the transport committee, those MPs who specialise in transport. They published their report this week.

BYERS:
Who haven't seen the contracts.

LIVINGSTONE:
They rejected every single one of your arguments and every Labour MP on that committee.

BYERS:
They haven't seen the contracts.

LIVINGSTONE:
If you can't persuade one Labour MP on that committee, how dare you impose this on Londoners when you can't persuade your own MPs.

BYERS:
We'll ensure that we'll get the investment going in which the Underground has been crying out for for generations, and we'll do that.

WARK:
We have a month of consultation. No doubt you will be putting your views to each other again.