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ppp Tuesday, 1 October, 2002, 10:53 GMT 11:53 UK
Tube test for PFI

What to do about the tube has been one of the government's biggest problems.

So introducing a public private partnership has been one of its biggest gambles.

Getting the private sector to build a hospital or a road is relatively straightforward compared to the tangled intricacies of the world's oldest underground railway.

The tube's million plus passengers a day won't need to be told the Underground has failed to meet any of the performance targets set by the government.

Strikes, staffing problems, security alerts and the actions of passengers are all partly to blame, but most of all the tube is still suffering from a severe backlog of maintenance work.

Just patching up the system will cost more than 1.5b, the bill to modernise it for the future will cost 750m a year.

But governments of both colours have failed to find the money and ministers have thwarted long term investment plans by insisting what money they do give is spent quickly.

PPP plan

The Labour government believes the private sector will be more efficient.

After all, it points out, the publicly-built Jubilee Line extension, linking Westminster with South and East London was a disaster - over budget and late-opening.

So London's famous tube map has been carved into three chunks, but one company - Metronet will carry out the maintenance and investment programme on 7 of the 10 tube lines.

Metronet is made up of construction firms like Balfour Beatty and the electricity company Seeboard.

Another consortium, Tubelines, will control the deep level Jubilee, Northern and Piccadilly Lines.

Its backers include the controversial engineering firm Jarvis, which maintained the faulty points that caused the Potters Bar train crash. But stations and train services will stay publicly-run by the new Transport for London body, and everything will be handed back by the private sector when the PPP comes to an end in 30 years' time.

Fight

For years the tube's managers have fought with London's mayor Ken Livingstone over the scheme.

But now it is going ahead.

The contracts have been signed, and the various companies involved are preparing to complete the deal in November.

The day that happens, work will start.

The government has increasingly tried to portray the tube PPP as akin to "getting the builders in" - but in effect, the private companies concerned will have considerable control over the way the work is done.

And they'll also reap the benefits.

Handsome rewards

They'll be paid handsomely to keep their section of the tube, and its trains operational, but they're also expected to carry out major modernisation work - improving tunnels, replacing track, upgrading signals, refurbishing stations and replacing old rolling stock.

Through this system, which it insists isn't privatisation, the government's guaranteeing investment of 13b in 15 years.

It will be paid for by increased public grants, private sector contributions and passengers' fares - which, ministers say, shouldn't have to go up.

Howard Collins, is one of London Underground's service managers setting up the new system.

He believes it will work:.

"If we are not happy with the contractor's performance we can ask them to leave and we can also bring in penalties against the contractors - we can even bring in other people to do the work if we're unhappy with the way its being carried out," he says.

Who's in control?

London Transport is adamant it will be in day to day control, but Tony Travers, transport expert at the London School of Economics has been watching the PPP closely:

"It's very difficult to make a judgement about how far there's a real transfer of financial risk to these companies, or whether they know that they can maintain the tube at more or less its present standard and still make a wacking great profit," he points out.

Those concerns, along with worries about the safety implications, are uppermost in the mind of Ken Livingstone.

He has tried everything to thwart the government's plans.

Several attempts to get the High Court to block the plans failed, but Mr Livingstone's lawyers did manage to force the publication of a highly critical report on the PPP.

Consultants' report

The consultants Deloitte and Touche wrote: "We have seen no evidence that there is a valid basis for establishing that the PPP will achieve Value for Money using commonly accepted techniques for projects of this nature."

The report highlights the fact that the competing companies have only been asked to name their price for the first 7 1/2 years - after that prices might go up, and the relationship with the private sector is expected to last up to 30 years.

The report is highly critical of the government's key argument - that by taking the private sector route it would deliver both the vital improvements the tube needs, and value for money.

The Underground's Managing Director, Derek Smith, himself tasked with ensuring PPP goes ahead, was quick to attack the report.

"It is rushed, wrong and riddled with errors," he said.

"The release of the report holds no fear for the Underground. But it does little to further any informed debate."

Delays

While the two sides have battled, the PPP project has inched forward, but the start of work has been delayed by two years.

It will be another ten years before the private contractors fully modernise most tube lines so that more trains can run, relieving overcrowding.

Instead the contractors will tackle station refurbishment first.

That will help ease congestion at many stations, but much of the work will be cosmetic.

Enduring problems

The private sector won't be able to solve two enduring problems on the underground: the heat, and the last train home.

The tunnels are too small to accommodate air conditioning units on the trains, and pumping hot air out of carriages into the tube's confined spaces could dangerously overheat the system.

Other ways of giving passengers more fresh air are being considered.

The PPP plan will also prevent 24 hour tube services because much of the modernisation work will have to be done at night.

Political risk

Ministers say PPP is the only way of guaranteeing long term investment. But critics believe it could end up being a dangerous experiment - politically as well as financially.

Labour has a big majority in the capital, and if the project designed to rejuvenate the city's most important transport system fails, the party will face a considerable backlash from voters.


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04 Sep 01 | Politics
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