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On 31 December 2002 Tube Lines assumed responsibility for the engineering functions on the Jubilee, Northern and Piccadilly Lines. Engineering functions on the remaining London Underground lines were passed to the Metronet BCV (Bakerloo, Central, Victoria) and Metronet SSL (all other LU lines) consortia on 4 April 2003. The companies that make up the private consortia are;
Before the Public-Private Partnership was introduced politicians, trade-union leaders, transport users and transport specialists were convinced that the scheme would not work.
In September 2000 the Industrial Society report, The London Underground Public Private Partnership, An Independent Review,explained that the PPP was offering a guaranteed 15.3% return on equity for 30 years with benchmarks for performance set 5% below the levels expected of the publicly owned London Underground. The report concluded "that the PPP should not proceed unless it passes the re-specified Public Sector Comparator we have outlined. In other words the PPP should go forward only if it meets much more vigorous safety and value-for-money criteria, and if it is substantially amended to protect against the risk that the contracts are incomplete and overgenerous. If it fails to meet these criteria, then the bidding companies should instead bid for turnkey projects funded and financed by LUL within the public sector. In the interim, this should be undertaken through orthodox Treasury financing, while the preparation begins for London to undertake its own bond issues."
In February 2002 the House of Commons Transport, Local Government and the Regions Select Committee report, London Underground, concluded "that it is inevitable that the PPP will lead to significant and expensive disputes over the contracts and between staff and employers". The report went on to explain that "The initial forecasts that the PPP would provide a saving of £4.5 billion over public sector management were inadequate and flawed".
In a series of hard hitting memoranda to the Committee, Transport for London maintained that Government should not sign the PPP because the scheme was not value for money, it was unsafe and unmanageable and the proposed contract terms did not properly protect the public interest.
The Capital Transport Campaign pointed out that "Underground passengers and taxpayers have been kept in the dark about the precise nature of the PPP contracts; they will foot the bill one way or another if there are subsequent problems such as costs being higher than originally anticipated. The prevailing secrecy means that they are effectively being asked to sign a blank cheque while blindfolded".
Also in February 2002 a press release issued by the Mayor of London explained "The PPP will saddle the travelling public and council-tax-payers of London with huge and unquantified liabilities while replicating the key mistakes of rail privatisation on the Underground"
In March 2002 the House of Commons Transport, Local Government and the Regions Select Committee report, London Underground - The Public Private Partnership: Follow Up, concluded "£100 million has been invested in developing and assessing the PPP contracts. After an exhausting four-year process there are considerable vested interests in seeing the deal completed. However, the evidence we have taken to date shows that the basis on which the decision has been taken is flawed. The shifting sands of the rationale for, and the assessment of, the PPP have lead to a process that has lost all credibility in the eyes of the public and professionals in the field. Parliament must now have the opportunity to have an unfettered debate on the decision to proceed with the PPP. It is essential that the Government allows Members a debate and vote in the House of Commons on a substantive motion on the future of the London Underground and the PPP".
Finally between 2000 and 2003 the London Underground trade unions - RMT, TSSA & ASLEF - organised a concerted campaign against the PPP that involved public meetings, rallies, leafleting passengers, lobbying MPs and borough councillors and industrial action.
Government chose to ignore the warnings and imposed the PPP against the wishes of the vast majority of Londoners. The results have been in line with the fears and concerns raised pre-transfer by the opponents of the scheme.
By July 2006 Metronet and Tube Lines had been paid £3.3 billion in performance-adjusted Infrastructure Service Charge. Given this huge taxpayers' subsidy it is little surprise that the Infracos have generated huge profits for their shareholders. Between 2003/04 and 2005/06 Metronet BCV, Metronet SSL and Tube Lines made pre-tax profits of £286 million (see Appendix A for complete figures). Regrettably, performance has not matched profit margins. A catalogue of no fewer than eight reports has cast serious doubt on the PPP's ability to deliver the upgrade of the London Underground in an economic and efficient manner.
2003/04
In June 2004 TfL published London Underground and the PPP - the first year. The report identified that during 2003/04 "the Underground's assets continued to provide dramatic demonstrations of their inadequacy". Despite acknowledging some achievements the report went on to explain "...the first year also gives significant cause for concern. The area of greatest concern is in planning and programme/project management, which drives the effectiveness of the maintenance programmes as well as major capital programmes. High-level asset management strategies have been haltingly produced and suffer from inadequate engineering input, while detailed work plans have sometimes been either non-existent, incomplete or inconsistent rather than competent or professional. The planning capability demonstrated this past year will not be adequate to manage the volume of work once the renewals programme accelerates".
2004/05
The 2005 TfL report explained that in 2003/04 it was too early to judge the performance of the PPP. However at the end of 2004/05 it was possible to begin to make judgements. TfL does acknowledge some progress but explains that this "could hardly be otherwise" given the sums involved. The verdict is put bluntly: "In short, performance is not good enough and is less than was promised". The report goes on to say: "The Infracos and their shareholders are earning significant sums through the PPP, but the volume of real work out on the railway is not consistent with the payments being made." The report also explained that engineering overruns had increased by some 35% on the first year and were averaging more than one a week. The overruns were often caused by poor project planning and execution.
2005/06
The 2005/06 report explained that London Underground had issued a Corrective Action Notice (CAN) to Tube Lines due to "persistent poor performance" on the Northern Line which "was manifest in repeated track, signal and rolling stock failures". In relation to Metronet the late delivery of only 14 of the 35 station upgrades and the incorrect preparation of District Line tracks for summer temperatures and disruptive incidents on the Victoria and Central Lines "undermine the progress Metronet is making and our confidence in the capability of Metronet's management." The report goes on to say that the upgrade of the Waterloo and City Line "is an acid-test of Metronet's capability to manage major projects". In the event the Waterloo and City Line re-opened over a week late on 11 September 2006, exposing Metronet to fines for the late completion of works. The line has since been closed twice due to dust and dirt caused by on-going engineering works causing visibility problems for train operators.
In June 2004 the NAO published two reports into the PPP. The London Underground PPP: Were they good deals? detailed the PPP's huge start-up costs including £109 million spent by London Underground (LU) on external advisors and £275 million paid by LU to reimburse private-sector bidder costs.
The report went on to say that final PPP costs remained uncertain. Not known for its radical language, the NAO states: "…there is only limited assurance that the price that would be paid to the private sector is reasonable".
June 2005 saw the publication of the GLA Transport Committee's report The PPP: Two Years In. Whilst recognising strong performance on the Piccadilly and Central Lines the Chair's foreword found "…poor performance on the Northern Line has led to Tube Lines' proposals to close sections so that work can be carried out to repair track and signalling. On some lines the programme for track and station renewal is running behind schedule".
In March 2005 the House of Commons Transport Select Committee published their Performance of the London Underground report. RMT provided written and verbal evidence to the Committee, as did our sister rail union TSSA. Oral witnesses also included representatives of Metronet, Tube Lines and London Underground Ltd.
The report found that "disregarding the costs of the Jubilee Line extension, central government expenditure in constant terms has increased from £44.1m in 1997-98 to £1,048m in the current financial year (2004-05); an increase of 2,276% - over twentyfold". Even taking into account the increase in maintenance funds following the completion of Jubilee Line extension, funding from central government has more than tripled since 2000-01. RMT believes that in this financial context it is a matter of huge concern that "improvements" have been so poorly delivered.
In relation to performance the report found: "Availability is the most important factor for Tube travellers. All the Infracos needed to do to meet their availability benchmarks was to perform only a little worse than in the past. On most lines, they did not even manage that. We hope that they will be able to meet the more demanding targets for availability expected in the future; we have no confidence that will be the case" (emphasis added).
The report also raised some concerns in relation to the consortia membership noting that Jarvis had sold its shares in Tube Lines during the course of the Committee's inquiry.
On 16 November 2006 the Office of the PPP Arbiter published the first review of Metronet performance. The Arbiter found that between April 2003 and March 2006 Metronet BCV and Metronet SSL had not performed in an overall efficient and economic manner and in accordance with good industry practice. The Arbiter found that Metronet's station programme across BCV and SSL was behind schedule, with only 14 of the 35 station upgrades completed. Only 12.7km of the expected 30km track renewals on the sub-surface Lines had been carried out.
Despite being behind with key infrastructure upgrades, unit costs have proved to be more expensive than expected in the bids submitted by the Metronet Infracos. The Arbiter report explains: "In summary, Metronet has delivered significantly less than was expected in its bid, at higher unit costs and has earned less performance revenue than expected."
The result is that the consortium is on line to overspend by some £750 million by 2010. It is not yet clear if Metronet shareholders will have to pay for this shortfall or whether the burden will fall on the tax-payer through additional payments or the scaling back of the renewals programme.
As noted in the Transport for London annual reports on the PPP there have been a number of high profile derailments on the London Underground post-transfer.
Thankfully none of these incidents resulted in passenger or employee fatalities. However the official reports into the incidents raised some serious questions as to the Infracos' ability to learn and apply the lessons resulting from the derailments.
The report into the Chancery Lane derailment revealed that information contained in a vital safety alert issued by Infraco BCV following the September 2002 Loughton derailment, had been inadequately disseminated to both London Underground and infrastructure operational staff. The Loughton derailment occurred in the three years of shadow running; a period during which the Infracos were charged with learning and applying the lessons of operating the network before full asset transfer in 2003.
However, the investigation into the White City derailment found that these lessons were in fact not being learned. Metronet managers had not been fully conversant with the terms of the Chief Engineer's Regulatory Notice (CERN) issued following the Camden Town derailment. In consequence measures required to avoid serious incident hade not been adequately relayed to track operatives.
Since 1 April 2006 (the period after the Arbiter's assessment) there have been a number of high profile problems on the London Underground, notably the late re-opening of the Waterloo & City Line and the massive disruption to whole sections of the network in November caused by infrastructure failure and over-running engineering works.
It is now four years since the beginning of the PPP. RMT believes that the PPP structure remains so fundamentally flawed that it is incapable of delivering the required improvements to London Underground's performance in order to provide an economic and efficient service to the travelling public and put in place the world class transport system required for the 2012 Olympics and Paralympics.
We contend that the PPP's separation of 'wheel and steel' and the fragmentation of Tube maintenance has in many instances resulted in deterioration in service and value for money for the tax- and fare-payer.
We believe that performance can only be sufficiently improved through the complete scrapping of the PPP, and that the government should therefore bring forward the necessary legislation that will lead to London Underground assuming direct control of the Tube's infrastructure.
December 2006
