HC Deb 20 March 1998 vol 308 cc1539-56

11 am

The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott)

With permission, Mr. Deputy Speaker, I wish to make a statement about the London Underground.

The underground is part of the lifeblood of London. More than 800 million journeys will be made on the underground this year. London Underground has made great strides since the King's Cross fire 10 years ago. Its management systems have been overhauled, its employment practices modernised, and productivity improved. All that reflects great credit on everyone who has worked for London Underground, but, for many years, investment in the underground has simply been too low to ensure that the worn-out assets are properly replaced. Without the necessary investment, operational efficiency is constantly undermined by old and unreliable infrastructure.

For a very long time, funding plans for the underground have been chopped and changed every year, both under the Greater London council and under the previous Government. I might add that all Governments have been involved in making cuts in investment in the underground at different times. Our analysis shows that such uncertainty and short-termism generally increases the cost of completing the underground's investment programme.

According to London Transport, there is now an "investment backlog" of some £1.2 billion. Despite that, the previous Government in their last Budget announced sharp reductions in the funding available to London Transport for the next two years. Combined with the cost overruns on the Jubilee line extension project, those cuts led to London Transport's planned investment being cut by almost a half.

In our election manifesto, we rejected privatisation and we promised that we would implement a new concept—a public-private partnership—to modernise the underground, to safeguard its commitment to the public interest and to guarantee value for money to taxpayers and passengers. I can now tell the House how we plan to deliver on that commitment.

Over the past 10 months, we have undertaken a thorough and careful analysis of all the options for developing the public-private partnership. We have examined a wide range of options, and have taken advice from a number of expert sources, including financial and engineering advisers, the Health and Safety Commission, the passengers committee and London Transport itself. A summary of the key facts and analysis will be placed in the Library of the House. I also want to mention the expertise that my hon. Friend the Paymaster General has contributed to our work, along with his Treasury colleagues. Their support has been much appreciated.

Our solution represents an entirely new approach—a third way. It is not a privatisation—or even partial privatisation; nor is it an old-style, publicly funded nationalisation. It is a publicly owned, publicly accountable model to get the best from both the public and the private sector.

Our solution has three main elements: first, operation in the public sector; secondly, infrastructure investment in a public-private partnership; and, thirdly, an extra investment now. First, we believe that the operation of London Underground services should remain as a single, integrated entity. We are also convinced that the operations should be firmly and securely a public sector responsibility. The underground network, integrated ticketing, travelcard, the tube map and logo—all the key features of the underground system—are valued by tube users and will remain the responsibility of London Underground, acting in the public interest, publicly owned and publicly accountable. We are convinced that that will be best for reliability, safety and public confidence.

The second element of our plans is to involve the private sector by awarding one, two or three contracts to finance, maintain and modernise the underground's infrastructure. There will be a competitive bidding process. We shall seek expert advice on the best way to structure that competition, including the best length of contracts. We will choose the contractor or contractors and the set of arrangements that will deliver the best value for money. If the best value can be obtained by having a single contractor, that is what we will have.

The infrastructure contractors will be under an obligation to eliminate the investment backlog, and to maintain and modernise the underground's trains and other assets, such as track, signalling, stations and escalators. There will be a performance regime with incentives and stiff penalties. That way, the operating company will be able to ensure that the contractor performs to the required standards. The freehold ownership of the assets will remain with the public sector. At the end of a contract, the assets will be returned to the public sector, in a much improved condition.

The contractor or contractors will be responsible for financing the investment that the underground urgently needs. They will be free to borrow the sums needed from the private sector capital markets, and will not be constrained by the annual public expenditure plans. As a result, they will be able to use their capital much more efficiently. Their constraint will be a practical one of how much work can be done without causing unreasonable disruption to passengers.

I have already paid tribute to the hard work of the London Transport and London Underground work force. The fact that the system runs as well as it does is a tribute to their efforts and, frankly, their efforts alone. Most underground staff will remain employees of London Underground, but it will make sense for staff who currently work on the procurement, installation and maintenance of hardware—track, signalling, escalators and rolling stock—to transfer with their work to the contractors. All this will be subject to detailed future negotiations. A small nucleus of engineering staff will be needed in the operating company to administer the contracts with the infrastructure companies and to ensure that they deliver.

I am today writing to every member of staff in London Transport to explain our policy and the commitments we are giving to reassure them. I will place a copy of the letter in the Library. I want to reassure staff that the rights they have under their contracts of employment—covering pay, hours, union recognition, and so on—will be protected as we move into the new structure. Existing staff will continue to benefit from concessionary travel. We will work with London Transport, the London Transport pension scheme trustees and the Inland Revenue to ensure that staff have the right to remain in the London Transport pension scheme as contributing members.

We want to make a start on modernising the underground, in preparation for its return to the people of London. On 7 May, Londoners will vote in a referendum, in which they can choose to establish a strategic authority for Greater London to put it on a par with other great capital cities around the world. When the Greater London authority is established, the underground will, with the rest of London Transport, transfer to it. It will then be not only publicly owned, but properly accountable to the people of London, through the mayor and the assembly. Mrs. Thatcher nationalised London Underground: we will return it to the people of London. [Interruption.] That is a statement of fact.

Over the next two years, my Department will work closely with London Transport in restructuring London Underground and managing the transition to a public-private partnership. That will involve a lot of work, and I will meet London Transport very soon to agree a programme for implementing our plans. I will also look to set London Underground demanding efficiency targets to achieve over the next two years, before it transfers to the GLA.

London Transport already has extensive powers to let contracts of the kind I have described, but should any additional legal powers prove desirable, we shall invite Parliament to consider giving them as part of the legislative arrangements to establish the Greater London authority.

Safety is, of course, a top priority and we have already consulted the Health and Safety Commission. The commission has confirmed that it believes that it will be possible to implement our proposals in a way that maintains and develops the underground's safety performance. The Health and Safety Executive will take that work forward, and I am writing formally to the chairman of the commission today to ask him to advise me on the outcome as soon as possible.

Our proposals will take a little time to establish and deliver. However, during the period of transition, we cannot allow the situation to deteriorate further. Therefore, as the third element of our policy—thanks to the prudent management of our public finances in the past year, as indicated by the Chancellor in his Budget—I can now announce that the Government will be providing an extra £365 million over the next two years. That additional money is over and above the money that the previous Government planned to provide and will be used for core underground investment, preparing the public-private partnership. By promising London Transport that money now to spend over the next two years, it will be able most efficiently to plan its investment programme.

The additional money will mean that, in the two years from April, total investment in the core underground—including private finance initiative investment—will be £1 billion. The extra funding that I have announced will enable more investment projects to go ahead in the next two years. Such projects will enable us to perform additional track works on the Victoria and Northern lines; to convert the old Jubilee line trains for use on the Piccadilly line—with 10 new trains available by 2001—helping to increase the line's capacity by over 10 per cent; to replace about 15 more escalators, including ones at key stations; and to refurbish 30 stations.

Our public-private partnership plans are based on long-term investment programmes—worth more than £7 billion in today's prices—over 15 years, aimed at creating a first-class underground for London. The investment will bring further benefits for passengers, such as track and civil works to remove speed restrictions, leading to faster journey times; increased train service levels as new signalling systems are introduced; and refurbished and modernised stations.

It is, however, not enough only to have a modern, refurbished, underground: it must be available to everyone, including disabled people. That objective will take time to achieve, but I am asking London Transport to examine how its current plans can be accelerated by the extra funding that I have announced today. I want to involve disability groups in considering our priorities, and will begin with my own advisory group—the Disabled Persons Transport Advisory Committee.

Earlier this week, I announced our plans for a £21 million river boat service for the new millennium and beyond. Today, I am announcing our plans for a £7 billion investment programme over the next 15 years for the Underground. I want London to become a showcase for a modern, integrated public transport system. We have produced a radical, modern and imaginative solution to achieve that goal. I shall be proud to return the underground to the people of London. I commend our plans to the House.

Sir Norman Fowler (Sutton Coldfield)

May I first question the manner of this announcement—on a Friday morning in private Members' time? I remind the Secretary of State that the House has been waiting for the statement for almost 12 months, as the underground is of importance not only to London but to the nation. By choosing a Friday morning for the statement, many hon. Members—as is entirely evident in the Chamber—have been excluded from asking questions on it.

The Government's proposals are an unsatisfactory and inadequate compromise. The Secretary of State has accepted the principle of privatisation for infrastructure investment—in total contrast to many of Labour's statements before the general election—but he is content for operations to remain as a nationalised industry, which almost everyone now thinks is an outdated and failed model.

Does the Secretary of State not accept that the split between the public and private sectors is almost bound to lead to in-built conflict, with the public-operated company blaming the private infrastructure companies when things go wrong? If that happens, will not the travelling public lose out?

Does the right hon. Gentleman not realise that one of the great advantages of privatisation is not only the possibility of attracting investment but the way in which it has successfully introduced private sector disciplines into the operation of old public sector organisations? Is that not the lesson of transport privatisations—such as the National Freight Consortium and Associated British Ports—which the Secretary of State personally opposed?

Can the Secretary of State say which of the models of privatised infrastructure companies he is aiming for? He said that he would accept that one company could run the entire infrastructure, but is that his preference—or does he prefer three separate organisations?

Will the Secretary of State make it clear whether the public money that he announced will go to the underground over the next two years will be new money—entirely separate from money that has already been announced in the Chancellor's statement—or is it money that was announced earlier in the week in the Budget statement?

We have always backed private investment. However, is there not a danger that the system announced today will prove to be the most expensive means of attracting private investment into the system? Will the Secretary of State therefore publish the consultants' reports and the options that were available to him? Will he tell the House today how much the Government have spent on those consultancy arrangements?

Is not the main trouble that the policy on the underground has been determined merely to meet the Secretary of State's aim of avoiding the Labour party's pre-election slogan about "wholesale privatisation"?

The prospect is that today's statement will bring us botched-up privatisation that will not serve the interests of the taxpayer or of London Underground staff, and that, above all, it will not serve the interests of the travelling public.

Mr. Prescott

Clearly the right hon. Gentleman has not fully understood the implications of the statement. First, however—to correct him—we have been in government for only 10 months, so he could not have been waiting for the statement for 12 months. Perhaps he was expecting us to take office earlier than we did—[Interruption.] I made it absolutely clear that we were rejecting privatisation—[Interruption.] May I answer the right hon. Gentleman?

Sir Norman Fowler

Why was the statement on a Friday?

Mr. Prescott

I will deal with that point. [Interruption.] Can we stop this sort of harassment? [Interruption.] Would the right hon. Gentleman like to huff again? It was a very powerful comment. I should like to deal with the privatisation issue, but I shall deal with the Friday point—I would not miss it out.

We made it clear that we would not privatise the underground, and that we wanted a publicly owned and publicly accountable railway. I think that I have justified that decision in my statement. I would not attempt—having been in office for only 10 months—to try to justify the previous Government's privatisation measures, especially when I am trying to deal with the effects of those measures, such as the channel tunnel rail link, the sale of the rolling stock companies and of Railtrack, and underinvestment.

I shall not go into the sorry history of privatisation as operated by the previous Government; that will be for another time. However, that history is not evidence that such privatisations are the best way forward, and we totally rejected it.

The Government have made the statement today because, as the Chancellor said, statements will be made as a consequence of the Budget. Statements were made on Wednesday and on Thursday, and, today, we are taking the opportunity to make another one. I agree that the underground is a national issue, but it is very much a part of the interests of Londoners and of London Members—as we can see by the number of London Members in the Chamber for the statement. Today was a proper time to make the statement. Moreover, on Monday, I shall be involved in Brussels in negotiations on the Kyoto agreement.

Competing demands are made on the time of Secretaries of State, and I apologise if a Friday statement has caused any inconvenience to hon. Members. Nevertheless, it is quite proper for the Government to have made a statement on Friday. I do not think that Londoners will worry whether the statement was made on a Monday or a Friday—they will just be pleased that someone now has a future and a vision for London Transport, which is what I shall now deal with.

The right hon. Gentleman asked whether our proposals on splitting the underground would cause conflict. The advisers have told us no; as I said, the reports and the analyses of the reports are in the Library. The private sector can make a contribution by providing capital, but our proposals will not result in privatisation.

Although private capital can be invested—and we shall seek such investment—we believe that the model that we have chosen will be the best way of ensuring that taxpayers get the best value. That is our judgment. Once people examine the advice that we have received, and listen to the debate that will follow my announcement, they will make their own judgment. No doubt there will be debates in the House on the Greater London authority Bill and the changes that we may well have to make to meet those requirements, but, at the moment, our judgment is that it is the best way to proceed.

The right hon. Gentleman asked whether I believed that there should be one contractor or three contractors. If I can get the best value out of one contractor, that will be the best way to proceed. However, the choice through competitive bidding of one, two or three contractors will allow us to make a judgment on the best value. It is called the competitive bidding process, and I did not think that it would be challenged by the Opposition. Once we have received the bids, we shall make a judgment; that is the best way to use the taxpayers' resources. We want to get the best value and provide a good underground system.

The right hon. Gentleman asked whether new money was involved. As I said, £300 million of the £365 million was included in my right hon. Friend the Chancellor's statement of £500 million over three years. We have also taken into account money that London Underground was holding back because of the cuts in its investment programme imposed by the previous Administration. If we include the PFI, we shall now be able to invest something in the order of £1 billion over the next two years. The £360 million or so also takes into account the cuts that would have been imposed on London Underground by the previous Administration. It is extra money and it will be very welcome.

I do not believe that it will be the most expensive way to proceed. Checks and balances will be built into the negotiations. It is an excellent opportunity for London Underground. It is a publicly owned and publicly accountable solution, but, above all, it will give Londoners the chance to have a decent underground system.

Mr. Tom Brake (Carshalton and Wallington)

I welcome the additional funding that has been secured for the next two years. Will the Deputy Prime Minister clarify how much of the additional £365 million will be spent on privatisation consultancy fees? Will he confirm that safety will be a top priority if Railtrack is successful in bidding for the infrastructure? After all, just over a month ago, Railtrack was criticised for persistently failing to resolve poor track conditions.

Does the right hon. Gentleman believe that an opportunity has been missed to introduce environmental taxes such as congestion charges, which could reduce pollution in London, as well as giving Londoners a first-rate underground?

Finally, does the Secretary of State believe that Londoners will be prepared to wait at least 15 years for the misery on London Underground to be addressed?

Mr. Prescott

I am starting immediately by investing the extra resources. One of the major constraints will be the speed at which we can implement the investment programme without causing massive disruption on the underground. It is a matter of that, just as much as it is a balance of resources. We are investing the money that London Transport says that it requires, and I am aiming to provide the resources. The hon. Gentleman mentioned 15 years. It will take two years to negotiate the contracts and I have already announced the money.

The right hon. Member for Sutton Coldfield (Sir N. Fowler) asked how much was being spent on consultancy fees. We have spent only about £100,000 on such fees, but, considering the sums of money that are involved, it is only right that we should take proper advice. Although it will not be the hundreds of millions of pounds that were involved in previous privatisations and the selling off of under-valued assets, we do not yet have an estimate of how much the contracts will involve. I shall have to discuss that with London Underground. If there are one, two or three companies that will make a difference to how much is involved. Having established the principles in the statement, we will now need to enter discussions with London Transport.

I do not know who the bidders will be or whether Railtrack will be one of them. We shall wait for the bids, examine them thoroughly and consider which will provide the best value.

As to whether we might consider parking charges, environmental taxes and so on, such matters are part of an integrated transport system. We shall publish a White Paper which will address those issues. We are dealing with the problems on the underground immediately and in an effective way which will be welcomed by Londoners.

Mr. Keith Hill (Streatham)

First, may I congratulate my right hon. Friend on the sheer scale of the new investment that he is negotiating? This settlement has secured for Londoners a tube system of which they can be proud for a generation. Secondly, I congratulate him on the excellent deal that he has secured for the travelling public. I also welcome the assurance that he has offered the staff of London Underground that their present pay and conditions will be sustained, as will their pension provisions for the future.

Thirdly, while we very much welcome the commitment of private contractors to the partnership, will my right hon. Friend confirm that there will be tough sanctions for any shortfall in services that they pledge to deliver?

Mr. Prescott

I thank my hon. Friend for his words of support. I have made it very clear that staff conditions are extremely important, particularly given that previous privatisations often robbed them of their full benefits and pensions. We do not intend to make the same mistake.

We are clear that there will be tough sanctions in the contractual obligations in respect of the investment programmes. We are doing everything that we can to avoid the mistakes that were made in previous privatisations and were the reasons why we rejected privatisation. Public accountability will mean just that, and public ownership means that we shall have a stronger sanction in making sure that the contracts work.

Mr. Peter Brooke (Cities of London and Westminster)

While I join my constituents in Pimlico in thanking the Government for their investment in the Victoria track to address the recent problems, how far will today's announcement improve the signalling defects that have bedevilled London Underground in recent years and, in particular, have held up the Jubilee line extension? Given that there is a limit to the number of questions that we can ask on such occasions, will he promise an early debate, perhaps in Government time?

Mr. Prescott

I should certainly like to have a debate on the matter, but that is a matter for my right hon. Friend the Leader of the House. I shall certainly pass on the right hon. Gentleman's comments.

I shall be discussing with London Transport the many investment priorities. Signalling is extremely important. The right hon. Gentleman mentions it in regard to the Jubilee line, but, to be fair, London Transport was not to blame for the failure in the signalling system; it was the fault of a private company that did not live up to its contract to produce on time. These things can happen in public and private companies. Nevertheless, we want to establish a proper order of priorities, and signalling is very important.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

Is my right hon. Friend aware that his statement will bring great pleasure not only to Londoners, but to all those who use the grossly overcrowded tube system? It is clear that he has learnt many difficult lessons from the privatisation of British Rail, and I hope that, when the time comes, he will ensure not only that the companies maintain the high contractual obligations that he intends to place on them, but that the public are able to register their approval or disapproval in adequate terms.

Finally, it must have been a pretty incredible team of engineers that built an underground system that is still going after more than 100 years.

Mr. Prescott

I thank my hon. Friend for her support. She is quite right. I have always been impressed by the sheer scale of disinvestment in the underground system that had continued for decades and the sums of money that were required to replace track, bridges, tunnels and so on. It needed something more radical than reliance on the Treasury to provide resources from year to year, as that can change under different Governments, as we all know.

We have learnt a great deal from previous privatisations, and we shall take that into account in the contracts. We shall make it clear that we shall need tough contracts. As for the public having more of a say in the running of the London underground system, that is an important point and I shall say more about it at a later date.

Mr. Nicholas Soames (Mid-Sussex)

Does the right hon. Gentleman agree that it is important that the contractors are given the opportunity to be bold in the works that they will need to carry out? Such is the scale of the work required on some of the lines that it may be important for parts of those lines to be closed completely for a time to allow the contractors to deal with the problems in one go rather than on a bit-by-bit basis. Does he accept from all those who use the tube in London that if he succeeds in pulling this off, we shall want to have him stuffed and put in the British museum?

Mr. Prescott

Presumably that will be after I have died! The hon. Gentleman raises a serious point about how such a programme can be implemented. I said earlier that there are probably more constraints on the implementation of the programme than on the availability of capital resource. We shall consider that at length. Work can be undertaken during the night on the underground. However, we shall have to choose whether to close an entire unit to get the work done faster in the long run or to do it in bits and pieces. As we have seen from the motorway network, tackling a job in bits and pieces can result in a lot of trouble. We shall do our best to deal with the problem.

One of the advantages of the London system is that, because transport is still publicly owned and integrated, we can ensure that buses and trains work together to secure the maximum movement for people and the least disadvantage from whatever programme we implement.

Mr. Neil Gerrard (Walthamstow)

May I thank my right hon. Friend for the new investment coming soon to the Victoria line, which I use every day? I should be grateful if he would clarify a detail about the contracts. He has talked about £7 billion of investment over 15 years. Does he envisage the contracts running for the whole of that period, particularly if there is a single contract? I appreciate that value for money will be the key to deciding whether there will be more than one contract. If there is more than one, will lines be put together, or might there be more than one contractor on a line?

Mr. Prescott

Those are matters for further discussion and negotiation with the contractors. My hon. Friend has raised some real problems, to which we hope to find the best solutions. I cannot give an effective answer yet.

My hon. Friend welcomed the investment programme. It is possible because the Treasury gave us new money, against the cuts that had already been imposed on the underground. That is an important reason why we shall be able to get on with investment. When the previous Administration made a statement to the House, a cut of almost 50 per cent. in investment was envisaged because the Treasury thought that if the system was to be privatised—a policy to which the previous Government were committed—the money was not needed at that stage. We have taken a different view. My right hon. Friend the Chancellor has found new money for investment so that we can pass on an improving system to the people of London.

Sir Nicholas Lyell (North-East Bedfordshire)

We shall want to study the complex plan carefully. Under the public-private partnership, who will take the tricky decisions on manning levels and fare pricing?

Mr. Prescott

The same people who are taking those decisions now—London Transport. There has been a 10,000 reduction in the work force, with increasing numbers of people using the system and a considerable increase in productivity. The same people will be in control. That is why it will be publicly owned and publicly accountable.

Ms Karen Buck (Regent's Park and Kensington, North)

As my constituency includes 10 tube stations, I greatly welcome my right hon. Friend's statement. I hope that some of the investment may be available to deal with the persistent signalling problems on the Bakerloo line and with Ladbroke Grove station, which is literally propped up on stilts.

Does my right hon. Friend agree that the London public will favourably compare the pragmatic, partnership-based investment approach to the underground with the dogmatic approach to privatisation of the Conservatives, who made such a mess of the privatisation of the former British Rail?

Mr. Prescott

I shall leave it to the people of London to make their judgment about that. Every hon. Member has a point to make about their local line. They all have problems of disinvestment. London Transport has estimated the total at £1.2 billion. I am not covering all that, but I am making a start. We hope that the programmes that we plan in the contracts for 15 years and beyond will deal with everybody's problems, because we want a modern tube system that meets the needs of London and the tremendous investment needs of more than £7 billion.

Mr. John Wilkinson (Ruislip-Northwood)

Is it not remarkable that, after years of rhetoric in opposition and a policy hiatus of 10 months in government, the Secretary of State has come to the House to give a statement that perpetuates uncertainty rather than clarifying the future of London Transport underground? Is it not highly unlikely that contractors will take on a 15-year infrastructural lease unless they can impose exceptionally high charges to recoup their investment on such a short leasehold?

How will the right hon. Gentleman avoid political interference in the management of London Transport underground if the board is to be appointed by the Greater London authority, as the Labour manifesto proposes?

Mr. Prescott

London Transport will be accountable to the assembly and the mayor. The previous Government subjected its investment requirements to one and two-year considerations. In the proposals that I shall negotiate before it is handed over, we shall secure long-term stability in the investment programme. That will result in considerable efficiency gains. If an investment programme lasts for only one or two years and nobody knows what the third year will hold, the capital is not used efficiently. I am advised by people who should know that the new structure could result in considerable gains in efficiency and resources. We shall wait and see. We shall negotiate on those issues. I am advised that 15 years will be adequate. People are already queuing up for the contracts, so I do not accept the hon. Gentleman's advice on that.

As for uncertainty, of course the new third way of a public-private partnership raises many questions. We have rejected privatisation and are going for a new formula that will give us the best of both worlds. If the previous Administration had taken a little more time on some of their privatisation deals, the taxpayer would have been a lot better off.

Mr. Tony McNulty (Harrow, East)

Will my right hon. Friend ignore totally the curmudgeonly nitpicking from the Conservatives and the pre-pubescent whining—on time, rather than money, on this occasion—from the Liberal Democrats? Will he take it from me, as an outer London Member, that suburban commuters will welcome his statement? It is long overdue. The only lasting question that my constituents will ask is when they can get on with it and have the improved tube with a stable future that London deserves.

Mr. Prescott

I can tell my hon. Friend: they can get on with it now. That is what I have told London Transport.

Mr. Edward Davey (Kingston and Surbiton)

The Deputy Prime Minister has told the House that there will be £7 billion more investment over the next 15 years. Will he explain further how he has arrived at that figure? When the previous Government presented their proposals on public industries, they told us that their measures would produce billions of pounds of extra investment. We were often left waiting for that investment. Why is the right hon. Gentleman so confident about the figure of £7 billion?

Mr. Prescott

That is the assessment of the consultants and London Transport. They are well aware of how much investment is needed. The calculation is easy. They have said that there is £1.2 billion of disinvestment that should have been dealt with years ago. The average consideration is that £500 million or £600 million a year should be invested in the underground system. The £7 billion comes from the consultants' calculation, which has been agreed by London Transport. I have taken that as a proper figure.

Ms Margaret Hodge (Barking)

Does my right hon. Friend agree that the one thing that Londoners sought from a new Labour Government was a modern, efficient, safe underground system? Does he agree that, with £500 million of new investment over the next two years and £7 billion over the next 15 years, we are setting about achieving that? Will he assure me that, in the regulatory framework that he sets up to administer the new system, he will ensure that fares remain affordable to Londoners?

Mr. Prescott

Of course fares are important, although whatever the fare, it is difficult to get on the underground at the moment. The top priority is to secure investment so that there is extra capacity for people to travel. To encourage people to use their cars less and use public transport more, it must be comfortable and accessible. Our programme is geared to achieving that.

Sir Michael Spicer (West Worcestershire)

Given the copper-bottomed financial guarantees that the right hon. Gentleman seems to be offering, and therefore the low level of risk, why are the arrangements to be outside the normal public sector borrowing rules? I realise that he may want the Paymaster General to answer that question, but perhaps he will have a go.

Mr. Prescott

This deal shows the constraints of public sector borrowing. London Underground has had to compete for resources against hospitals, schools and all the areas in which people think there is a higher priority. By adopting this private sector initiative, we will be able to use the assets and the income stream from London Transport operations to guarantee payments for long-term investment. That is normal in other countries; it is only in this country that we have chosen to operate differently. That is why other countries have better public transport systems than we do.

Mr. John McDonnell (Hayes and Harlington)

I am sure that my right hon. Friend agrees that, having sat on the Government Benches listening to report after report of privatisation scandals in recent months, it beggars belief that anyone could urge wholesale privatisation of London Underground. However, he will be aware that a number of us favour wholesale public ownership of London Underground and would therefore welcome assurances that contracts will be under continuous review, so that if they fail, he will intervene directly, as he has elsewhere, to return contracts to public ownership and control.

We must now seize the opportunity to install new management in London Underground, which involves representatives of the work force, passengers and the community as a whole, accountable to the new strategic authority for London and committed to providing a public service and protecting our environment.

Mr. Prescott

I understand my hon. Friend's point about public ownership, but, looking back over the years, as an advocate of it, I realise that one of its great disadvantages is that it is subject to Treasury control. That has meant that services received insufficient resources. I do not think that that is in any doubt any more or a difference between parties. Even under the Greater London council—with which my hon. Friend was involved—there was a failure to get resources for investment, which was at half the level of that achieved by even a Tory Administration some years later.

My concern is to ensure adequate levels of investment. I do not think that we are likely to get that under the PSBR and Treasury rules at the moment. I have enough to say about those on other occasions. I am a practical politician; I want investment for London Underground, and I have chosen to provide it. It will be publicly owned and publicly accountable. Indeed, the assets will still be owned by London Underground and will be returned. There is no need to worry about that. They are owned by the public sector. The contracts will last for whatever period is negotiated in order to achieve the investment, and, when they are finished, assets will be returned to the London authority.

On staff, management and labour, make no mistake that the process will propose many changes. There are not just easy options. The work force and the management will face a challenge. We will, of course, start proper discussions with them about how we implement the programme, now that I have made the statement.

Mr. Eric Forth (Bromley and Chislehurst)

Does the Secretary of State agree with the excellent comments and analysis of his hon. Friend the Member for Brent, East (Mr. Livingstone) on the radio this morning? Will the increase in finance that he has announced today bring the level of public money going to Londoners per head up to the level going to Scots per head?

Mr. Prescott

I did not hear the comments of my hon. Friend, but I have heard about them. I think that he has gone to Scotland to talk to my right hon. Friend the Chancellor of the Exchequer about the matter.

Mr. Martin Linton (Battersea)

Will my right hon. Friend reassure my long-suffering constituents who use the Northern line that the end of their misery is in sight and that there is a light at the end of a very long tunnel—at one point, the longest tunnel in the world—especially as they were the first to suffer from the postponement of the track and signalling programme, which was postponed until 2005 as a direct result of the £300 million cut in the previous Government's last Budget presented by the right hon. and learned Member for Rushcliffe (Mr. Clarke)? Will he ensure that everything will be done to relieve their misery and give priority to track works on the Northern line as part of the £365 million package that he has introduced?

Mr. Prescott

That was the line on which I used to travel from Clapham, and it was an uncomfortable experience at peak time. [Interruption.] I think that Conservative Members will find, if they go and have a look, that Clapham is on the underground. Travelling from there was most uncomfortable, and persuaded me more of the need to consider capacity and not simply prices.

Conservative Members endorsed the Northern line privatisation, where private money was involved—and it was a complete mess. We must offer people using the Northern line a better opportunity for the future. We must do so not only on the Northern line but for the whole London underground. In 10 months, we have produced a plan to enable us to achieve that.

Mr. James Paice (South-East Cambridgeshire)

I think that the Deputy Prime Minister said that he was to take powers to determine matters over the next couple of years before the Greater London authority materialised. Although I am sure we all accept that his entrepreneurial flair will mean that those powers are used benignly and helpfully, is not there a contradiction in giving extra powers to the Government and the Secretary of State—and his successor—which could count against the very development work and the use of private sector enterprise that he is trying to introduce?

Mr. Prescott

It is a bit rich for a member of the previous Administration, who wanted completely to privatise the underground, to talk about powers. I said in my statement that if it was necessary, in the negotiation of the contracts, to amend some of the legislation, we would do so. At the moment, London Underground has the powers. We will be looking at a Greater London authority Bill. That will give everybody an opportunity to discuss the extent of the powers and any changes that we feel it might be necessary to include.

Ms Linda Perham (Ilford, North)

I thank my right hon. Friend for taking the time to get this right. My constituents rely on eight Central line stations, some of which were under threat by the previous Government's all-out privatisation proposals, and they will welcome the proposals. The Central line has taken over from the Northern line as the misery line, mainly because of signalling problems. I look forward to the Central line, along with all the other lines, being improved under the proposals.

Mr. Prescott

It is that sort of change that we envisage in the investment programme.

Mr. David Tredinnick (Bosworth)

The right hon. Gentleman said that the investment will lead to faster train times, but, in the list of expenditure that he has given us, nothing is said about signalling. For Leicestershire and other midlands constituents who come to London and use the Northern line, are not improvements in signalling the key to faster train times? Will he give some undertaking about signalling?

The right hon. Gentleman referred to the river boat service and proposed new services. Is it not a fact that the river boat service that was introduced some years ago has not been a success? How will he make the new service a success?

Mr. Prescott

I mentioned signalling a number of times in my statement and in answer to questions. I mentioned some improvement in the first stage of investment and the £1 billion that might do something for signalling. The real improvements will come with the £7 billion investment programme. Signalling is absolutely critical to faster trains, as is improvement of track. That was in my statement, and I invite the hon. Gentleman to read it.

There have always been problems with the river boat service. The uncertainty on the river undermined the previous systems. We are introducing more piers, which will mean more pick-up points. About four or five new piers on the river will enable more pick-up places, which are designed to integrate with the bus and underground system.

With the millennium exhibition, more people will want to travel on the river. That will provide an opportunity for sustained demand. If we can fit the service into the integrated transport system, with common, integrated ticketing, another advantage will be gained. I believe that the service will be a legacy of the millennium dome, and will not go the way of other services, which have not had sufficient funds to continue.

Mr. Clive Efford (Eltham)

I congratulate my right hon. Friend on his announcement. Does he agree that one of the pleasures of having a Labour Government is seeing the faces of Conservative Members who know that they should have made such statements in their 18 years in government, but were too tied up in the dogma of privatisation to be capable of doing so? Will he give a guarantee that targets set in any contract that he lets in the new programme will not leave London underground users open to the spectacle of any operator receiving a bonus for providing a lower standard of service? My right hon. Friend will be aware that under the bargain basement sell-off of British Rail, that is exactly what resulted from privatisation. Will he guarantee that the service will not suffer under private sector involvement in the future plans for London Underground?

Mr. Prescott

I do not think that we will make the same mistakes that were made with rail privatisation, because we are not following the same policy and it is not privatisation. For example, the operator will be publicly owned. It will determine the service and run it—as happens now—until it passes to the GLA in two years' time.

On the point about the competence of contractors, the usual process will be followed and there will be penalties, which will be rigidly enforced. However, I have no reason to think that that might be necessary. We will go to the negotiations and see what we have to agree to get the necessary investment.

With regard to the service, that will be our responsibility for the first two years until we pass it over to the GLA. Then, Londoners will make their own decisions on service, through their assembly and the mayor of London.

Mr. David Chidgey (Eastleigh)

I am sure that the Deputy Prime Minister is aware that one of the problems with PFI projects is that they generally attract higher costs for servicing the capital raised, compared with Government borrowing.

The right hon. Gentleman said earlier that he was looking at the possibility of congestion charging in London—he referred to parking charges, but I think that he meant that in the wider sense—and put that in the context of an integrated transport policy. Is he considering how much money could be raised as a charge on congestion or parking in London and what proportion of that would be used to finance the new capital needed for London Underground, as a quasi-public sector contribution to the PFI exercise?

Mr. Prescott

The hon. Gentleman will have to wait for the White Paper to see our judgment on those important issues, which require careful consideration and consultation. We are putting together the White Paper and we want to include those issues in our consideration of an integrated transport system.

The hon. Gentleman said that the costs of servicing capital raised through the PFI would be higher than for Government borrowing. That is true in the sense that the Government can always borrow more cheaply, but we do not always have the resources available to do that. We must also take into account the fact that if we do not invest properly, the cost of disinvestment is very high indeed. If we put that disinvestment cost into the equation, and if long-term investment from the private sector can be guaranteed, the PFI may be a cheaper option in the long run.

Mr. Geraint Davies (Croydon, Central)

May I join other Londoners in warmly congratulating my right hon. Friend? Does he agree that it is a bit rich not to have a warm reception from Conservative Members, in view of their legacy of under-investment and the privatisation and cheap sell-off of public assets?

Can my right hon. Friend give me some reassurance about the sophistication of contracts for the private sector? Will they ensure that the evolution of public transport in London—especially guided buses, trams and the possibility of road pricing technology—will be part of an integrated system for the capital? Will the contracts take into account such changes in transport and the environment?

Mr. Prescott

Those are most important issues, and they are an essential part of any integrated transport system. I hope that, through the investment in London Underground and the plans that I have announced for river services, we will have a showcase for integrated transport. That is my intention, and more will be said about that in the White Paper.

Mr. Geoffrey Clifton-Brown (Cotswold)

The Deputy Prime Minister said that there would be a £7 billion investment in London Underground over 15 years, of which £2 billion would be invested over the next two years. That leaves a £5 billion gap, which, presumably, the right hon. Gentleman expects the private service operator to fund. In order to get a return on that huge sum of money, will not fares inevitably have to rise substantially over and above inflation over the next 15 years?

Mr. Prescott

First, I did not say that £2 billion would be invested over the next two years; I said £1 billion. The £7 billion relates to the contracts that we will let after two years, once they have been negotiated. We are saying that £7 billion investment is needed to modernise the underground system, and our advisers tell us that there is no difficulty with that. It is not simply a matter of a fare increase. There has already been a tremendous increase in the number of people using the tube. If we can achieve greater capacity, that will bring more money to the underground system. The money does not necessarily have to come from fare rises. Greater efficiencies in the system could contribute to the final solution.

Mr. Andrew Dismore (Hendon)

May I tell my right hon. Friend how welcome his announcement will be to my constituents who have suffered the vagaries of the Northern line for far too long? In particular, they will welcome the restoration of the track modernisation programme, which was postponed by the previous Government.

Will my hon. Friend be considering the computerised control system at Euston, which is way out of date, and the modernisation of stations on the Northern line, especially Colindale where there are even holes in the wall?

Mr. Prescott

We are all well aware of the difficulties and the obvious signs of disinvestment in the underground system. One consequence of the decision by the previous Administration to cut the investment programme for London Underground by almost 50 per cent. was that London Transport had to hold back some of the extra resources that it had planned to invest. That meant that about £100 million of investment was cancelled. I have now carried over that money from this year and added it to the £1 billion I announced. We can now get on with dealing the problems that were not dealt with previously because of the mishandling of the finance programme by the Conservative Government.

Mr. Edward Garnier (Harborough)

May I welcome the right hon. Gentleman's enthusiasm for the use of the River Thames as a means of transport, not least because it will mitigate the absence of an underground system in north Battersea? I hesitate to trespass on the constituency responsibilities of the hon. Member for Battersea (Mr. Linton), but, as a former resident of Battersea, I can confirm that we noticed the absence of an underground system, so we would very much welcome a river service there. If the right hon. Gentleman can ensure that north Battersea gets one before too long, a great many people will be grateful.

Will the right hon. Gentleman say more about the corporate structure of the new London Underground and about the split in responsibilities between the chairman or chief executive of London Underground and the future mayor of Greater London?

Mr. Prescott

I am grateful for the hon. and learned Member's comments about river services. I am sure that everyone looks forward to the development of the river, as it will unite the two banks, so that there is no longer a separation in the transport system.

On the point about corporate structure and management, we will enter discussions with the parties involved to come to a decision about that. It is clear that there will be changes throughout the system, in one form or another. However, the hon. and learned Gentleman will have to wait to know more until I have had further discussions.

Mr. Andrew Lansley (South Cambridgeshire)

I wonder whether the right hon. Gentleman could explain a little more about the relationship between what he is proposing and any decisions that may be made by the GLA and the elected mayor two years hence. What scope will they have to revisit the issue of privatisation of the operation of services across London Underground?

Why has the right hon. Gentleman set his face against the privatisation of services? He advocates integrated transport policies, and there are many commuters into and out of London who want integration between train operating companies on the former British Rail network, with the potential to run services in and across London. That is an example of integration that the right hon. Gentleman appears to be frustrating today.

Mr. Prescott

Public opinion now is even more overwhelmingly against privatisation of the underground than it was before the general election. It made the previous Administration extremely nervous about privatisation. The evidence clearly shows that privatisation is not the way forward, and the advice we have had from consultants has confirmed that.

Privatisation of the underground would involve two or three years preparation and then, if we followed the policy of the previous Administration, selling it at a knock-down price. As it is such a disinvested system, why should we want to sell it now? That would be robbing Londoners of their previous investment in the underground system. This is the best and most practical way to modernise it—using the £1 billion, which I have mentioned, until the GLA takes over, and then using the £7 billion to get on with really modernising it. That is the best, quickest and most practical way of modernising the system so that it can be maintained and passed over to the people of London in a better state. That justifies it being publicly owned and publicly accountable.

Several hon. Members


Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. I am sorry to disappoint some hon. Members, but we must return to the main business: the Community Care (Residential Accommodation) Bill. Mrs. Eleanor Laing had the Floor.