HL Deb 15 June 1999 vol 602 cc167-80

5.29 p.m.

The Under-Secretary of State, Department of the Environment, Transport, and the Regions (Lord Whitty)

My Lords, I wish to repeat a Statement which is to be made in another place by my right honourable friend. The Statement is as follows:

"With permission, Madam Speaker, I wish to make a Statement about London Underground.

"London Underground is part of the lifeblood of London, and indeed the whole country, carrying 850 million passengers each year. For too many years, however, under different governments and even under the GLC, investment in the Underground had been inadequate to secure a modern, reliable Underground system.

"As I explained to the House last year, we inherited an investment backlog of £1.2 billion. We intend to modernise the Underground through a £7 billion public/private partnership which will bring long-term stability to the investment programme.

"Train and station services will continue to be operated by a publicly owned, publicly accountable London Underground. However, in order to raise long-term finance, we will invite private companies to take responsibility for upgrading the infrastructure, including track, tunnels, signals, escalators and trains. This would be for a limited period only, after which the upgraded assets would return to the public sector.

"This means that for the first time in living memory London Transport will know what it can spend on investment for years to come. Until now, London Transport investment plans have been approved in theory for a three-year period; in practice, they were chopped and changed every year. I cannot over-estimate to the House the value of being able to plan ahead in this way and to secure greater productivity in the use of capital. It will mean the travelling public—and London Underground employees—will get more reliable, better quality investment, delivered far more efficiently and cost-effectively.

"Over the past year LT has been laying the foundations for the public/private partnership. We have restructured the LT Board with Sir Malcolm Bates as chairman, Denis Tunnicliffe as chief executive, and Derek Smith as managing director of the Underground. New board members with substantial financial and other experience will be announced shortly.

"London Underground is creating within itself three infrastructure companies as well as the operating company which will remain in the public sector throughout, and will be made properly accountable to Londoners through the new mayor.

"I am pleased to announce that London Transport is, today, inviting companies to pre-qualify as bidders to invest in the Underground. Bidders will need to demonstrate the right mix of professional and project management skills and to harness the finance needed to take the Tube into the 21st century.

"Some concern has been expressed about the time needed to get to this point. I can assure the House that we do not intend to repeat the mistakes made by the previous administration in planning the Jubilee line extension (now more than £1 billion over budget), the money wasted in British Rail privatisation, or the Channel tunnel rail link deal, which we had to rescue from financial collapse. We decided to take the time to get it right.

"In the autumn, selected bidders will be invited to submit tenders, based on the rigorous performance and payment system LT has devised. For passengers this will mean fewer delays, greater capacity and a higher quality of service. The Health and Safety Commission have been fully involved because safety is, of course, a top priority.

"We are aware of considerable interest in the market so we have good reason to expect keenly priced bids. However, as I have made clear before. we will not contemplate deals being done if they do not offer best value to the taxpayer.

"For many years I have advocated linking the national railway with the Underground to make it easier for the public to travel to, from, within and across London.

"I have therefore decided to allow LT to explore with Railtrack the a way of linking the national rail network to sub-surface lines in a public/private partnership under which Railtrack would undertake and finance the maintenance and upgrading of the subsurface lines for London Underground—under contract to London Underground; and Railtrack would build links between the Underground and national rail lines.

"This 'London Link' plan opens up exciting new possibilities for integration between surface and Underground rail, providing fast new connections between all the major transport hubs, including London's five airports and the Channel tunnel rail link terminals. In particular, new services could run directly from Heathrow in the West into the City. There will be improved links from Brighton via London Gatwick and East London to North London and beyond. Once these are all in place, all five London airports, including Stansted, Luton and the City airport, will have direct rail links into and through London, all connecting with the Channel tunnel rail link. This plan will deliver a joined-up London—real integration for a world-class city.

"There has been considerable speculation about a possible Railtrack take-over of the Tube. That has never been part of our thinking. Unlike the party opposite, we reject the approach based on selling everything in sight quickly and then hoping for the best.

"Railtrack has confirmed and will announce that it will not be seeking to pre-qualify for the two deep-tube public/private partnership competitions. Let me make it clear that throughout the negotiations we will be imposing rigorous conditions. Railtrack will have to improve on its previous record, particularly on project management.

"The vast majority of London Transport staff serve the public well, often suffering the same frustrations with the ageing infrastructure that passengers experience. I would like to place on record our appreciation for their efforts; and I would like to reassure them of two things—first, that they will benefit more than most by having an upgraded system with a secure investment programme for years to come. Nothing could be worse for LT staff than to leave the Underground to rot. Secondly, I would reiterate the assurances which I gave them last year on employment rights, concessionary fares and pensions.

"People have welcomed the guarantees given to staff who transfer to a London Underground infrastructure company; but they ask what will happen to those who transfer to a sub-contractor. I can confirm today that the concessionary travel and pension arrangements also apply to any current LU staff who subsequently transfer to a subcontractor, provided they remain in Tube work. We will take the necessary steps to ensure this.

"London is withstanding severe competitive pressure. We are determined that London should remain the premier city in Europe as we enter the new millennium. Investing in a world-class transport system is a vital element of these plans. We are already expanding the public transport network. By the end of 1999 London will have four major additions to its transport network—new Riverbus services, the full Jubilee Line extension, the Croydon Tramlink and the Docklands Light Railway extension. From next year, the mayor for London will be able to build a properly integrated transport strategy for London.

"At the end of the last century the London Underground was the world's first metropolitan railway. During this century, it enabled London to grow as a great capital city. Our aim as we enter the 21st century is to ensure London remains a global city, with a world-class transport system.

"Madam Speaker, the public/private partnership will bring £7 billion to modernise the Tube. It will get away from stop-go investment and improve the quality of service for passengers. By exploring the imaginative 'London Link' of through-running surface railways and sub-surface Tube lines, London can look forward to a genuinely joined up transport system—no less than Londoners deserve."

My Lords, that concludes the Statement.

5.38 p.m.

Lord Dixon-Smith

My Lords, the House is most grateful to the Minister for repeating the Statement on London Underground made by his right honourable friend the Secretary of State in another place. I suspect that that is so if only because it gives some welcome relief from the intensity of the earlier debate.

After a two-year period of gestation, I must admit to feeling somewhat let down. Instead of witnessing the birth of a new dawn for London Transport and the Underground system, what we have is news that we can only hope will bring improvement to perhaps part of the system. The background of this Statement is that, under the previous government, investment in the Underground system as a whole was running at around £700 million per annum—£7 billion over a decade. The Government's announced programme of £7 billion is to take place over an undefined but possibly longer period. The people of London may feel that they have been short-changed.

It has been announced that the Government are to invite companies to pre-qualify as bidders to run the Underground in an autumn tender process that will divide the system. That announcement then appears to go on to make it possible for a large section of the system to be placed under the control of Railtrack.

The Government in the persona of the Secretary of State and the Department of the Environment and Transport and the Regions have been running a consistent campaign of vilification against Railtrack, and threatening ever-tightening regulations to bring them under control and reduce their profitability.

The Government have done that to such effect that shares in Railtrack have lost 25 per cent of their value over the last few months. Now, having had their capacity to raise capital diminished as a result of that lower share value, they are suddenly trusted, perhaps, to take over a large part of the Underground system without the apparent necessity of competing through a tender process.

That is a remarkable turnaround. The House is entitled to ask what has brought it about. While there is logic in the integration of Railtrack's system with the sub-surface parts of the Underground system wherever possible, there is no logic in simultaneously campaigning to diminish the economic viability of the preferred contractor. Will the Minister assure the House that that inconsistency will now stop and that the Government will work to ensure that those responsible for the running and improvement of the system will feel that the Government are allies rather than opponents?

The Statement itself does not mention the period of time involved in the possible arrangement with Railtrack. In today's Evening Standard—and it is funny that one has to obtain such information from a newspaper—the period is stated as being 30 years. Will the Minister either confirm that this figure is correct or give the appropriate duration of the arrangement?

Londoners will have rightly been concerned that the disintegration index for the Underground system coined in the Chantrey Vellacott survey as reported in the Evening Standard yesterday has worsened by 20 per cent since the Government came to power. The Government have ducked the issue of clear-cut privatisation for the Underground. They have instead favoured the public/private partnership route that we now see emerging from the smoke screens which have been clouding the atmosphere for so long. Londoners will welcome the clearing of the air, but in view of the past mixture of prevarication and obfuscation, they must be forgiven if they remain sceptical about the future of this system which is so vital to the well-being of the whole of their great community, as it carries so many of them to and from their daily work. Will the Minister give the House any clear information about the time scale for announcements determining the future of the remainder of the Underground system? Without such information, this Statement, while welcome, is incomplete. Londoners are entitled to know when they will be informed of the remainder of the necessary arrangements to secure the future of this essential service.

5.43 p.m.

Baroness Thomas of Walliswood

My Lords, nobody in this House underrates the importance of the London Underground system. Certainly, a Statement on its future was long overdue.

First, perhaps I may mention some aspects of the Statement which I welcome. The first is the proposal for links between London Underground lines and the surface rail lines to provide rail connections between all of London's airports and between all of them and central London and the CTRL. That will make a useful contribution as a substitute for road travel in those areas.

Secondly, we are pleased that Railtrack is not to take on the entire infrastructure of London Underground, as was rumoured originally. However, there were recent indications that that may not happen.

Thirdly, I welcome the reassurance offered by the Minister and his colleague in the House of Commons to the employees of London Underground. It is a period of great change for them. It must be hoped that they will be treated with good sense and encouraged to take a positive view of the changes which affect them. No one likes change and they need reassurance.

However, we regret, even now, that the Government have chosen the PPP route, albeit that it is far preferable to outright privatisation and total loss to the public sector of the assets involved. We should prefer some sort of public interest company. However, given that that is the Government's decision, I wonder what has been the reaction among government Members to the Tony Travers's articles which confirm what many of us had supposed for a long time; namely, that because it is more expensive to borrow money in the private than in the public sector, there must be a danger that financing public services from private money will mean an increase in fares—in other words, the cost to the user. Will fares be capped?

Secondly, Railtrack has apparently been allocated the near-surface level of the London Underground track to play with, thereby avoiding the problems inherent in modernising the deep-track lines—for example, the Piccadilly line. Are the Government confident that they can make Railtrack perform to its promises? Everyone knows that it is now facing about £20 million in fines arising from lower than promised performance in relation to rail services. Londoners will not forgive a government who allow similar back-sliding on the London Underground.

As the noble Lord, Lord Dixon-Smith, said, the Statement is defective with regard to any information about timing. With tenders being invited in the autumn, when do the Government expect the tender process to be completed? How does that fit in with the election of the mayor? When will the strategic thinking and planning for London transport by rail be in the hands of London's mayor? The noble Lord spoke about joined-up thinking. Will joined-up thinking and joined-up London begin before or after the election of the mayor?

I turn briefly to the competition for the two deep-level rail contracts. What criteria will the Government use to test bidders beyond their financial viability? What are the building blocks of what are called London Underground's rigorous performance and payment systems? With breakdowns on the system every 16 minutes contributing to ever less satisfactory service levels, will minimum standards and levels be among those criteria? How will value for money be measured? Will a public sector comparator be used? What protection will be given to the property currently in London Underground's portfolio?

Perhaps I may recap my main areas of query. We are worried about the likely fare increases and we want to know whether they are to be capped. We want to know about the public sector comparator. We want to know about minimum passenger level services; and we want to know when the mayor will have an impact on the various negotiations.

We share the Government's stated ambitions for London. Like the people of London arid its visitors, we shall be watching to see what happens. By their acts, we shall judge them—and I do not mean Acts of Parliament.

Lord Whitty

My Lords, I thank the noble Lord and the noble Baroness for not entirely rejecting this proposition. They gave it a slightly cool welcome. Nevertheless, I believe that the noble Lord, Lord Dixon-Smith, is wrong to say that this is incomplete. It extends the whole concept of public transport within London. We are not merely talking about who owns, manages and invests in the London transport system as we have known it; we are talking about a new interface between the tube line and rail services in London. which will focus on the strategic development of that network and, in particular, provide a means of transfer through London, including from London's airports, terminals and the main Underground interchanges. It is a different and wholly more imaginative concept than one of straightforward privatisation; or, indeed, of going on running London Transport in the way that it has been run previously.

The noble Lord, Lord Dixon-Smith, accused us of inconsistency in our attitude to Railtrack. We are not inconsistent. We have a consistency of purpose here; namely, to make Railtrack perform. As the noble Baroness, Lady Thomas, said, there have been problems in its performance on the rail network. There are serious inadequacies under the regime that we inherited in terms of enforcing performance standards on the railway side, both for Railtrack and for the operating companies that we are intent on addressing.

If we conclude a successful contract with Railtrack, as I believe we shall, it will be important for that contract to be tight and for it to hold Railtrack to performance standards. That will obviously be a matter of the most intense negotiations over the coming weeks. I cannot be absolutely precise on the questions about the final outcome of that contract which the noble Baroness asked towards the end of her remarks, but it will be a tight contract and it will be performance oriented. There is no inconsistency here; we are consistent in our aim of making Railtrack, and the other contributors to the public transport system of London, perform.

The noble Lord asked why we had ducked the issue of privatisation. The PPP is a much more imaginative and flexible system of financing public transport. It will provide not only the mobilisation of private capital but also the mobilisation of private sector expertise, together with a degree of stability in the investment pattern for London Transport, which it has long since missed.

In response to the question from the noble Baroness as to whether that means that the cost will be higher, the PFI projects that we have pursued indicate that the benefits in terms of both time-scale in meeting performance criteria and in improved management and productivity gains will be substantially higher to offset any additional cost of borrowing which the private sector may incur. Indeed, the ability to raise capital may make it easier in the private sector than in the public sector. I believe that we are right to choose the public/private partnership road here.

The noble Lord and the noble Baroness both asked about the timetable on the Railtrack element and with regard to other parts of the Underground network. As far as concerns Railtrack, we shall engage in negotiations immediately and we hope to conclude them as rapidly as possible. In regard to the other parts, we have now set up the structure for bidding. We have made it clear in the past that we shall not be rushed into giving specific dates and thereby being hamstrung by them. I believe that that was a problem encountered by the previous government with the rather tight political deadline that they managed to follow in order to rush through rail privatisation. We are not making the same mistake. I do not believe that it will be long before we can also make a decision on the other parts of the Underground network.

The noble Baroness asked whether the cost of this would be loaded on to fares and about the implications for fares. It is not expected that the cost of investment would be loaded on to fares; indeed, no decisions have been made so far on the actual fare levels in the immediate future. But the modelling on which decisions took place was based on the assumption that fares would increase by no more RPI plus 1 per cent in January 2000 and January 2001. Beyond that, I believe that the position will be stable.

London Transport is currently responsible for setting fares. Under the legislation which we considered earlier this week, the mayor will eventually assume that responsibility once elected. While talking about the mayor, and in response to the noble Baroness, I should point out that the mayor will be involved in the decisions about the running of London Transport, once he or she is elected, in the interim period before the PPP contracts are signed and before the Underground is passed to Transport for London and to the mayor. Railtrack will be working under contract to the London Underground which, via TfL, will be accountable to the mayor. It is therefore very important that the mayor should play a positive role in the later stages of the PPP competition. Amendments which the Government intend to bring forward on the GLA Bill will put London Transport and TfL under a duty to consult and co-operate during the interim period.

I believe that this is an important step forward and one which, it is to be hoped, will involve a detailed and tight contract to ensure the performance of Railtrack; but it will also extend the nature of the urban transport system within London in a very significant and important way to the benefit both of its inhabitants and the travellers to and from London.

Lord Dixon-Smith

My Lords, before the Minister sits down, perhaps I may point out that he did not cover one question that I asked about the duration of the possible arrangement with Railtrack.

Lord Whitty

My Lords, I beg the noble Lord's pardon. My eyes strayed passed that question in my notes. As with the other public/private partnerships on the three different elements of the Underground, we have talked about a period of 25 to 30 years. Obviously, the precise period may well be subject to some degree of negotiation, depending on assessments of the funding. However, it is of the order of 30 years.

5.55 p.m.

Lord Berkeley

My Lords, the intervention on the sub-surface routes as regards London Underground and Railtrack is long overdue. I congratulate my noble friend the Minister on coming forward with this proposal. It will be of enormous benefit to Londoners. However, perhaps I may ask my noble friend something about the proposed investment and the £7 billion figure. Can he tell us whether it is a Railtrack-type definition of "investment"? On the national network it was said to be £27 billion over 10 years, but, when we looked at the smallprint, it turned out to be £6 billion of its investment, £4 billion from other people and the rest was put down to maintenance. How much of that sum will be actual new investment from Railtrack in this proposal for the sub-surface routes?

Lord Whitty

My Lords, the sub-surface mileage and the investment requirements amount to something slightly over one-third of the total network. Therefore, one could conclude that it is something over a third of the total £7 billion. Railtrack will raise some of that money itself, while some of it will be covered by the normal income on those routes which eventually come to Railtrack. It is of the order of about £2 billion of that £7 billion.

Lord Archer of Weston-Super-Mare

My Lords, I have two questions for the Minister, both of which, strangely enough, came from both Front Benches on this side of the House but which I do not believe were fully answered. First, can the Minister say why, despite the fact that there has been a sustained attack on Railtrack for the past two years, it is suddenly the acceptable and only body which should have this initial contract? We should know why Railtrack is suddenly all right.

Secondly, the Minister very kindly said—and I did not get this when I heard the Statement in the other place—that the mayor would be brought in for consultations in the second part of the agreement.

Everyone knows that it is the second part of the agreement that really matters; everyone is waiting to see what PPP actually means and what this Government will suggest. Can the Minister say how the Government will react if the mayor says, "This simply isn't a good enough deal for Londoners"?

Lord Whitty

My Lords, before I respond to the noble Lord, perhaps I may make a slight correction to my last comment to my noble friend Lord Berkeley. I believe that the figure is nearer £3 billion than £2 billion; in other words, it is between the two, but nearer £3 billion.

As to Railtrack's credibility in this area, there have clearly been problems about its performance on the infrastructure of the national rail network. It has been important both that the Government have drawn attention to that publicly—indeed, it does not take the Government alone to draw attention to that—and that we have taken steps to try to improve its performance. We have to deal with a rail network which we inherited. Therefore, in practice, Railtrack is the main infrastructure owner of the national rail network. It is, of course, a clear front-runner for any interface between that network and a contract from London Underground to run the parts of the Underground system which would most easily be integrated with that network.

As I said earlier, the contract which London Underground will have with Railtrack will ensure adherence to the performance criteria which we shall set in the new regime. It is important to recognise that although Railtrack has failed in certain respects, it has a wealth of expertise which, if given its head, could deliver a modern, up-to-date and effective new rail system not just for London but for the country as a whole. There have been problems with project management within Railtrack which must now be dealt with.

I now turn to the question of the mayor. I realise that the noble Lord, Lord Archer of Weston-Super-Mare, may be straining at the leash here as the mayor will not be involved in this matter in the early stages; I referred to the latter stages. We intend to put the PPP in place before we hand the Underground part of the system over to the mayor. In the latter stages, we shall consult closely with the mayor on PPP. I consider it unlikely that the mayor would disagree that the PPP is a major step forward for London in terms of the mobilisation of resources and expertise. I am sure that any mayoral candidate, and any actual mayor, would recognise that that process is a major advantage for London. I think it unlikely that the mayor would wish to dissociate himself from what I believe is a favourable step.

Lord Graham of Edmonton

My Lords, in the early part of the Statement, which I warmly welcome, the Minister referred to London Transport as part of the lifeblood of London. It is a lifeline for many people who work in London but who live outside the London Transport area. I live in Loughton which is on the Central Line. It does not comprise part of the Greater London area. Loughton, Debden and Epping had no say whatsoever on whether a Greater London Authority should be set up; nor on whether a mayor is appropriate. I support the establishment both of a Greater London Authority and of a mayor.

The people in my area are concerned at the following words which appear in the legislation. I refer to the words, in so far as they consider it necessary". Are the Minister and his colleagues seized of the possibility that there could be many disgruntled people who work in London, but who live just outside the area we are discussing, who have not been consulted on what the mayor is able to do in this matter? We should bear in mind that these people, who pay their taxes and their rates, are entitled to a fair crack of the whip. They would not want to see services outside the main area neglected for any reason whatsoever.

Lord Whitty

My Lords, with all due respect to my noble friend Lord Graham and to the noble Lord, Lord Dixon-Smith, I have always known that there are a number of disgruntled people in Essex! The mayor will he elected by the people of the GLA area. Nevertheless, the main function of the whole authority will be strategic. It is essential that the transport planning department of that authority takes into account the needs and interests of neighbouring authorities. It is important that the planning bodies of the GLA co-operate with the planning bodies outside its area, including the counties, to deliver a transport system for the South East and, in some cases, beyond.

Baroness Ludford

My Lords, I have three questions. First, as an aid to evaluation of the PPP, will the Government now publish the Price Waterhouse study which, it is rumoured, shows that a public interest company borrowing externally is the best deal? Secondly, will there he open competition for bidding for the other lines in future and if not, why not? Thirdly, as the Statement and the proposals concern lines including the District and Circle Lines, and therefore Westminster Underground Station, when is access from the Palace of Westminster to Westminster Underground Station likely to be improved, given that anything that we can do to encourage Members of both Houses to come here by public transport would be desirable?

Lord Whitty

My Lords, I trust that Members of neither House need any additional encouragement to come here by public transport. The station at Westminster is being refurbished—that process has continued for some time—as part of the Jubilee Line extension. That will be completed by the end of the year. The station itself may be improved thereafter.

As I understand the position, it will be difficult for us to publish the whole of the Price Waterhouse study for reasons of confidentiality and so forth. We have already published a summary of the Price Waterhouse study. As regards the other two contracts for the Underground system, as I have indicated we are seeking bidders for both of those under a system of open competition.

Lord Clinton-Davis

My Lords, did my noble friend note the observation of the noble Lord, Lord Dixon-Smith, who said that he felt let down? However—this is much more relevant—is he aware that many Londoners feel let down by the failures and neglect of their transport system during virtually two decades of Tory government? Will my noble friend say something about the processes of integration that are to be undertaken between surface and underground transport systems, in particular with regard to the airports? Are the consultations to be dealt with on a comprehensive basis to enable the whole system to be seen as an integrated one? What form will those consultations take and when do the Government propose to embark on them?

Lord Whitty

My Lords, although I would not put it quite so bluntly, I associate myself with my noble friend's view that there was a long period when Londoners felt acutely that their public transport needs had been neglected. The previous government belatedly recognised some of the problems, but that was far too late. We have ended up with an infrastructure of the totality of London Transport which will take a long time to sort out. However, we are determined to do that.

The Government are considering this matter in a totally integrated fashion both in terms of awarding the contracts and in terms of the structure which we seek to establish in Transport for London which will cover both the Underground and the buses. It will cover the strategic road network, the river service and many other aspects of the London Transport infrastructure. For the first time, those services will be considered together in a strategic assessment. That will, of course, need to have an interface with the airport authorities and the authorities outside London in terms of strategic planning. That process will begin as soon as the new institutions are in place. In the meantime, plans and options are being developed within the department in consultation with the operators.

The Lord Bishop of Hereford

My Lords, I have two questions for the Minister. The first concerns the capacity of Railtrack to take on additional work. I think we are conscious that Railtrack has done some excellent work on track and stations. There are many good things to be said about what Railtrack has achieved. However, there is also a sense that Railtrack is struggling to fulfil its existing obligations. It is rightly under pressure to speed up the process of dealing with bottlenecks and pinch points and to provide additional capacity for freight traffic in particular. Is it reasonable or wise to add this additional burden? I think simply in terms of engineering capacity and managerial competence. Should a large amount of extra work be put on Railtrack at this stage? Is the Minister satisfied that it has the capacity to deal with it?

My second question concerns regulation. Can the Minister tell us whether the sub-surface track which is linked with the existing mainline system will be subject to the same kind of regulation, and, on this work, will Railtrack be subject to the strategic rail authority in the same way as the mainline system?

Lord Whitty

My Lords, in terms of Railtrack's capacity, we are confident that it can provide, develop and expand the necessary expertise to take over. It may have to acquire and demonstrate additional skills, particularly in the project management and overall strategic management areas. If there are deficiencies in those areas they will become apparent during the negotiating period. However, I do not believe that to be so. By the time we have concluded a firm agreement with Railtrack I believe those doubts will have been removed. However, I cannot give an absolute assurance at this point. I believe that Railtrack is working on those matters.

As to the regulations which will apply, although Railtrack is one company it will be responsible for two different parts of the system. It will manage the part of the national rail system which comes into London on the one hand, and it will be managing on behalf of London Transport, under contract to London Underground and TFL, the part of the Underground system it takes over on the other. There will therefore be regulation under the Strategic Rail Authority, taking over the responsibilities of the franchising director and others, on the national rail side; and it will be under the GLA regulations and the power of the mayor on the other side. Of course, we are also building into the GLA Bill a co-operative structure between the mayor and the Strategic Rail Authority for rail services within, into and affecting the London area. There will be a squaring of the circle. However, it is true that the Underground will be under the mayor and the rail network will be under the Strategic Rail Authority.

Lord Harris of Haringey

My Lords, I, too, am grateful to my noble friend for the Statement. Perhaps he can clarify two points. First, if there are to be any additional costs associated with the PPP arrangements, I understand from what my noble friend said that these would not be borne by passengers, subject to the ceiling of increases in fares of RPI plus 1 per cent. Can my noble friend give an assurance that the London taxpayers will not be asked to make up any difference, given that they already subsidise the rest of the country to the tune of many billions of pounds a year?

Secondly, I understand the desire not to give specific dates as to when certain things will happen—it would be improper to rush the negotiations—but can my noble friend give an assurance that the public will begin to see the benefit of the new arrangements before the end of the first term of the first mayor of London?

Lord Whitty

My Lords, as far as concerns the burden on the London taxpayer, there is no implication in these arrangements. The whole objective of the arrangements is to ensure that there will not be an additional burden on the London taxpayer, as there would have been had we put the whole of the London Underground network under the direct control of the GLA. I can therefore give my noble friend the first assurance that he seeks.

As to the time-scale for improvements, a significant number of improvements will be visible during the first period of office of the mayor of London—that is, within the next five years. However, I must caution my noble friend that some of the benefits of this investment will take some considerable time. There will be an investment allocation of £7 billion over a period of 15 years for the Underground network. This contract will run for 25 to 30 years. We have a long backlog to make up. We inherited a £1.2 billion backlog and it will take some time to make it up. However, I believe that we will see some improvement in the time-scale to which my noble friend referred.

Lord Marlesford

My Lords, does the Minister believe that the radical approach—on which I congratulate the Government—is the right approach? There is no doubt that the London Underground is in many ways archaic. One obvious example is the Northern Line; another is that even today stored value tickets are not being sold to ordinary people who do not have season tickets or weekly tickets. One cannot buy stored tickets, a system which has been available elsewhere for 20 years.

I have considerable sympathy with the right reverend Prelate about the decision to negotiate with Railtrack. I was involved for five unhappy years with British Rail, and Railtrack still employs a number of its managers, many of whom are second rate people. Did the Government consider handing the matter over to Hong Kong MTR, which is superb? After all, Felixstowe docks now belong to Hong Kong; they are extremely well run and serve Britain very well indeed. Did not the Government consider anything a little more imaginative than bringing in Railtrack?

Lord Whitty

My Lords, as far as concerns the ticketing system, if the noble Lord would care to go across to Westminster station—despite the unattractive report of the noble Baroness, Lady Ludford—he will see that, very recently, at the bottom of all the automatic machines there is one which says "Carnet". That provides for what I think the noble Lord means by "stored tickets". For decades it has been one of my main bugbears that London Underground has not provided that facility; at last we have it.

So far as concerns Railtrack, because of the benefits of integration with the national rail system the Government were right to explore fully the prospects of the sub-surface areas going to Railtrack and it being able to provide directly that degree of integration. We needed to explore those options first. I hope that we have very nearly come to an effective conclusion on that. Of course it is open to the Hong Kong railway and anyone else to bid for the other parts of the London Underground system.