London Underground: Funding (Hansard, 26 March 1998)

§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman)
My Lords, The Government's proposals for a public-private partnership for London Underground will indeed secure the long-term funding that the Underground needs. Investment will not be constrained by annual public expenditure plans, so contractors will be able to manage their investment programme far more efficiently. The higher cost of borrowing within the private sector needs 1340 to be set against the substantial savings that will result from an efficiently funded long-term investment programme.

§ Lord Ezra
My Lords, I thank the noble Baroness for that Answer. I generally welcome the Government's proposals, but I wish to ask a couple of questions. First, does the noble Baroness feel that the sums now proposed—that is, the additional public funding together with private funding—will be adequate to meet what are described as the "steady state" requirements of the London Underground together with overcoming the backlog of £1.2 billion that is recorded as being the under-investment of the past? According to my estimates, a further £100 million a year is still required to meet those two requirements. Secondly, if the funding from the private sector turned out to be less than the Government estimate, will they ensure that the shortfall is made good from public funds?

§ Baroness Hayman
My Lords, I am grateful to the noble Lord for his welcome for the proposals. We believe that the combination of the £1 billion investment programme over the next two years, with the additional funds that were announced in the Chancellor's Budget, together with what we are confident will come in with the bids for the infrastructure concessions, will provide the £7 billion worth of investment which, we are informed by London Transport, will not only make up the backlog but ensure that the Underground system is brought up to a level at which it can function and serve the needs of Londoners adequately.

§ Lord Brabazon of Tara
My Lords, will the Minister say why, in the Deputy Prime Minister's Statement on Friday, there was absolutely no mention of fare levels, which are of great concern to many Londoners? While one welcomes the investment programme over the next 15 years it will undoubtedly cost money and will have to be serviced. Will the noble Baroness therefore give the House an assurance that government support for investment will continue after the two-year period which has been announced in the Statement in addition to what was planned before? Will she give a further assurance that fare levels will rise no more than the rate of inflation, as was proposed in the previous government's plans?

§ Baroness Hayman
Yes, my Lords, I think I can give that assurance. It will be done on the basis of the proper investment in London Underground, which was certainly not assured by the previous government's plans and is the reason for the problems that we have inherited. We have no reason to expect that fare increases above those of recent years will come from the investment programme that we have announced. Our analysis does not assume that there will be such fare increases. We are confident that there will be great interest from potential contractors and that we shall see very competitive bids in response to the innovative process that we have announced. However, were the 1341 bids to be higher than expected, I can give the noble Lord the assurance for which he asks—namely, that we would continue to give the subsidy that was necessary.

§ Lord Berkeley
My Lords, will the Government give the House an assurance that, alongside the new structure for the Underground, there will be a new management, so that never again will there be a disaster such as we have seen with the Jubilee Line? A signalling system has been chosen for that line that has never been used on a heavy railway system anywhere in the world, except between Hong Kong and Guangzhou, the result being a delay of over three years before the Jubilee Line is finally up and running effectively—I believe not until after the millennium.

§ Baroness Hayman
My Lords, I know of my noble friend's concerns over signalling. The signalling for the Underground will be an important element in the specifications which contractors, in relation to the concessions that we are offering, will be required to deliver. We need to learn the lessons that the Jubilee Line in particular provides regarding the future of signalling.
On management arrangements, the creation of a Greater London Authority with a subsidiary body, Transport for London, announced in the Statement made in both Houses yesterday, will be a great improvement on the current situation. The mayor and the assembly will have a mandate from Londoners to get to grips with all the capital's transport problems.

§ Earl Russell
My Lords, will the Minister say whether the total cost of the proposed arrangements will be greater or less than the cost of continuing public funding? Will it be easier or harder for London Transport to co-ordinate and control the arrangements?

§ Baroness Hayman
My Lords, we believe that London Transport will be able to co-ordinate the arrangements. We are not suggesting the sort of major fragmentation of services that occurred with the privatisation of British Rail. All the operating services will be provided by the public service operator. There will be a maximum of three concessions for the infrastructure. There may be, if it is best value for money, only one concession for the infrastructure. We believe that with the integrated approach of the stewardship of the Greater London Authority, which can also integrate with other forms of transport within the capital, we shall be able to ensure the right sort of co-ordination.
So far as expense is concerned, we are absolutely convinced that the stable funding regime that we propose will allow the most cost-effective way of ensuring the investment that is needed. There are very substantial savings to be made from having that stability of investment as against the year-on-year constraints of public expenditure. The advisers on this particular project suggest that savings in the order of 15 per cent. should be achievable.