HL Deb 02 December 2002 vol 641 cc960-2

2.45 p.m.

Lord Newby

asked Her Majesty's Government:

What has been the cost to date to public funds of the bidding process for the public/private partnerships for the maintenance and renewal of the London Underground system.

Lord McIntosh of Haringey

My Lords, I understand from London Transport that it has spent £96.3 million on external consultants for developing the PPP modernisation plans since the Government's announcement on 20th March 1998. This represents less than 1 per cent of the £16 billion investment that will be delivered over the first 15 years of the contracts.

Lord Newby

My Lords, I am grateful to the Minister for that Answer. Is he aware that during the course of the second judicial review on the PPP, the barrister for London Underground, John Howell QC, said that negotiations on the contracts had involved very considerable amounts of money, some £400 million since the beginning of the programme and £100 million since the selection of the preferred bidden;? Will the Minister confirm that the figures quoted by the QC are correct? Will he acknowledge that spending such ridiculously large amounts on contracts that are not yet signed leads many people in London and beyond to believe that this is a fatally flawed project?

Lord McIntosh of Haringey

My Lords, I do not know how the QC reached his figures. I tried very hard to come to a global amount but failed. I gave the Answer in relation to external consultants for London Transport. One could add London Transport staff costs but some of those are not related to the PPP. Much of that amount relates to reorganisation and restructuring. Those costs would have been incurred anyway. There is an argument about whether one should include them. One could also include as part of the contracts the costs incurred by the bidders, which will have to be repaid by the taxpayer in due course. Again, that is normal commercial practice. What should and should not be included is not entirely set. I cannot therefore confirm or deny what the QC is quoted as saying.

Lord Barnett

My Lords, my noble friend told us previously that matters involving PPP or PH are decided not on an off balance sheet basis but in terms of value for money. Would he care to publish figures showing the costs of PPP, including these enormous consultancy fees, in comparison with the proposals from the Mayor of London?

Lord McIntosh of Haringey

My Lords, I can certainly give the assurance that the costs of consultancy have been taken into account. When the calculation was made by Ernst & Young, external consultants, the PPP was found to be value for money to the tune of £2 billion.

Lord Marsh

My Lords, does the Minister agree that our experience of the Dome and other enormous projects, some having the potential for massive losses, suggests that expenditure on consultancy fees of less than 1 per cent of the total cost is a pretty good bargain?

Lord McIntosh of Haringey

Indeed, my Lords; the whole principle behind the PPP is a transfer of risk from the public to the private sector. That transfer of risk involves not only construction costs, as is always the case for work carried out for the public sector by the private sector, but also the maintenance of the infrastructure being created by the initial investment over a period of more than 15 years. The transfer of risk justifies the costs. The noble Lord, Lord Marsh, is entirely right.

Lord Saatchi

My Lords, does the Minister remember saying last week in the debate on the Pre-Budget Report—I believe I have it correctly—that all contingent liabilities above £100,000 are declared in the Red Book? I have been looking for the rail and Tube borrowings to which he referred, which are guaranteed by the Government, but I cannot find them. Can he tell me on what page they appear?

Lord McIntosh of Haringey

My Lords, I am sorry to say—I wish it were not so—that we have not reached a conclusion on the public/private partnership for London Underground. Therefore, there is no final figure.

Lord Ezra

My Lords, following on what the Minister said, can he indicate when he expects the much-needed investment under the PPP will begin to flow?

Lord McIntosh of Haringey

My Lords, again, I wish that I could. We have virtually reached financial close. We are expecting the state aid approval from the European Commission any day now. Then the outstanding issue will be whether the Mayor chooses to appeal against the European Commission decision on state aid. If so, there will be another substantial delay.