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Friday, 24 August, 2001, 22:28 GMT 23:28 UK
Tube plans branded 'flawed'
The London Underground
The value-for-money of Tube plans is questioned
Government plans to part-privatise London's Tube are "flawed and simplistic", says a controversial report which has been published after a legal battle.

London Underground (LU) lost its attempt to ban publication of the Deloitte & Touche report on the 13bn public-private partnership (PPP) plans for the Tube.

Three judges in the Court of Appeal refused leave to appeal against a ruling last month lifting the injunction on the report, which says there is no evidence the 30-year public-private partnership plan would deliver better value-for-money.

Tube boss Derek Smith has described the report as "rushed, wrong and riddled with mistakes" and he argued it did little to further informed debate.

'No firm prices'

The report says: "The selection of a 30-year contract period for this purpose is flawed because bidders were not required to submit firm prices for the whole period."

It is critical of the way the costs of PPP are compared with other options for financing the Tube.

London Mayor Ken Livingstone and his transport commissioner Bob Kiley
Livingstone and Kiley say PPP should be shelved
"Judgmental, volatile or statistically simplistic" adjustments totalling 2.5m had been made to the method used for the comparison.

And it argues that the selection of preferred bidders for the new scheme too early in the process damages the scheme's value-for-money.

Instead, there would have been a strong case for delaying choosing those bidders until talks on conditions, technical issues and other details were complete.

The report concludes the public sector bond method of Tube investment, favoured by London Mayor Ken Livingstone, had been "largely dismissed despite an assumed efficiency gain of around 900m and an interest rate advantage of 800m".

Gag claim

Mr Livingstone had accused the government of trying to "gag" a debate through the court action.

But LU had insisted lifting the ban on the report would make public commercially-sensitive information and could harm the partial sell-off of the Tube.


The report does little to further informed debate

Derek Smith
London Underground
After Friday's ruling, Mr Livingstone said he expected the government to honour its pledge to abandon PPP if it did not provide value for money.

In an exclusive interview with the BBC's Ten O'Clock News, he said: "It's pretty obvious that making such effort to prevent its publication will be damning and it's hard to see how the government can proceed given all their promises that they wouldn't proceed unless the value of the money was proved.

"Here's the first time an independent firm has been able to look at the figures and they just do not stack up."

Transport commissioner Bob Kiley echoed Mr Livingstone's sentiments.

He said: "The big question is why the Underground was so keen to keep this vital information from the public.

Key test failed

"The answer may lie in the fact that the government has regularly said PPP contracts will not be awarded unless they demonstrate clear value for money when measured against the public sector alternative.

"The Deloitte & Touche report suggests that the government's plan does not pass the test."

Mr Smith denied the court effort had been an attempt to gag Mr Kiley and said that rather than being a defeat for LU, it established rules for dealing with the mayor.

'Noise and posturing'

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

It was more important to concentrate on bringing immediate investment to improve the Tube, said Mr Smith.

He explained another City accountancy firm, PricewaterhouseCoopers, had worked on the plans for "three years not three weeks as Deloitte's were" and come to very different conclusions.

"Through all the noise and posturing, we intend to deliver a Tube which is publicly and privately built," added Mr Smith.

'Very critical'

Liberal Democrat Susan Kramer, a member of the Transport For London board, said the report was "very, very critical".

"This report really blows apart the government's case that it is value for money," she told BBC News.

Ms Kramer said ministers could not just try to brush off what was a "very thorough report", which showed an "almost mysterious" 2.5bn penalty had been thrown at the public sector option, making PPP look better.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Political Correspondent Shaun Ley
"London Underground mangers did not want the report published"
London Underground managing director, Derek Smith
"This is all political noise"

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The Kiley Factor

TALKING POINT
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