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The Transport Secretary face-to-face with his greatest critic 7/2/02
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?
The assumption is based on 200 different
contracts that we looked at in relation
to the public sector.
So you agree with that.
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.
Your assumption is that the
private sector does things more
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.
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.
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.
Ken Livingstone, this is a done deal. If
you'd accepted this earlier, passengers
wouldn't have had to suffer for so long.
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.
What is wrong with Bob Kiley?
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
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.
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...
What is the rate? You can tell
us now, you have seen the contract.
You will find out on Monday. When you
find out the £16 billion investment which
is going into...
Why on earth can't you...
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.
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.
Can you absolutely rule out it is 35%?
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.
I'm getting them at 8.00 on Monday
morning. Why can't you just tell the
viewers what the figure is?
Because we are consulting you, as we
should do, and we're consulting...
I release you from any obligation. You
can tell all the viewers right now.
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.
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.
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
It's going to be lawyers.
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.
Is that not perfectly reasonable? In the end
it rests with Health and Safety.
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...
There is Ken Livingstone saying it
is better to privatise it.
Well, I'm interested to hear Ken say
It would be safer for Londoners.
No, it wouldn't be, for the simple reason
that with our proposals we have a unified
management structure with London
There is not.
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.
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.
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
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.
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."
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
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
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.
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.
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.
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...
You saw his overwhelming vote.
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
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.
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.
But will the unions fall in behind?
We can starve the investment for generations.
We have to get on with the job.
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
Ernst & Young are also employed by
Transport For London, which you chair.
You employ Ernst & Young as well. They've
Well, let's not trade about consultants...
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?
No-one is independent if you are
paying them. There is only one
truly independent group...
You employ Deloittes.
...and that was the transport committee,
those MPs who specialise in transport.
They published their report this week.
Who haven't seen the contracts.
They rejected every single one of your
arguments and every Labour MP on that
They haven't seen the contracts.
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.
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.
We have a month of consultation. No
doubt you will be putting your views to
each other again.