London Underground: Financing Structure (Hansard, 1 February 2001)

§ The Minister of State, Department of the Environment, Transport and the Regions (Lord Macdonald of Tradeston)
My Lords, yes. The Government remain committed to securing the best option for the Tube that combines value for money with maintaining and improving safety. We believe that our proposal for a public private partnership is the right one. We are also in discussion with the Commissioner for Transport of London, Bob Kiley, on his proposals. Building on the work already done, we aim together to work out how best to accommodate his thinking within the PPP framework.

§ Lord Ezra
My Lords, I have carefully noted what the noble Lord has just said. I am glad that discussions are still going on with Mr Bob Kiley. However, in view of the difficulties which have arisen on the railways as a result of divided responsibilities, is it not important to see whether private sector participation, with which many of us agree, could be obtained on the Underground without dividing responsibility between operations and the infrastructure?

§ Lord Macdonald of Tradeston
My Lords, safety is paramount and has been at the forefront of thinking on the PPP. I should make clear, however, that the Underground is not a fragmented system like the railways. The PPP is much more unified in its structure than anything that is involved in the national railway. The public sector London Underground will retain primary statutory responsibility for the whole network and the unified structure that we propose avoids separation between train maintenance and track maintenance.

§ Lord Brabazon of Tara
My Lords, is the Minister aware that Mr Kiley has described the public private partnership as "fundamentally flawed" and a "prescription for potential disaster"? Does the noble Lord not recognise that Mr Kiley has a good deal more experience in running an underground railway than many other people in this country?

§ Lord Macdonald of Tradeston
My Lords, it is worth emphasising that there is a great deal of experience in running London Underground in its present management. Indeed, it is that management which is carrying on the negotiation at the moment. But I do stress that we have had a series of constructive meetings with Mr Kiley. We are both looking for the best management system. We understand that Mr 795 Kiley accepts that the private sector has an important role to play. Despite the statements that we read, I emphasise again that discussions continue.

§ Lord Marsh
My Lords, but is not Mr Kiley still committed to financing the new situation on the basis of direct access to the bond market? Is there a compromise between that and the PPP?

§ Lord Macdonald of Tradeston
My Lords, I stress again that in our discussions we have made it clear that we are trying to seek as much common ground as possible. I am not aware that the question of bond finance would in the end frustrate an agreement were that agreement to be possible.

§ Lord Harris of Haringey
My Lords, does my noble friend agree with the views of the Labour group on the Greater London Assembly—I declare an interest as its leader—that any scheme for the funding of the Tube should deliver money quickly to deal with the under-investment over many years but should also be capable of external validation as to safety and value for money for Londoners? Does he also share the widespread amazement at the Mayor of London's stance in supporting the proposed strikes on London Underground?

§ Lord Macdonald of Tradeston
My Lords, we look both to the Health and Safety Executive to ensure that the safety regimes put in place are as rigorous as they should be and to the National Audit Office to ensure that whatever deal we do produces best value. I stress that we have said that the PPP must show itself to be the best value for London.
On the question of the dispute, I am aware of the judge's decision but I am not aware of the full details of the judgment. However, it is worth pointing out that, although safety has been one of the points made by the rail unions in the dispute, the other areas are no compulsory redundancies, established staff levels to be maintained and all employees employed at the date of the present dispute to remain on their existing terms and conditions of employment. It is a concern about change that the unions are expressing—in a way, I think, we would all believe is of great inconvenience to the travelling public. But change is, I believe, inevitably in prospect if we want to get into the railway the kind of investment to which the noble Lord referred.

§ Viscount Cranborne
My Lords, can the Minister satisfy what may be a rather selfish question? Did the Government welcome unequivocally the appointment of Mr Kiley and are they now happy to see him in place?

§ Lord Macdonald of Tradeston
My Lords, we were not consulted on that appointment and we did not expect to be consulted. However, I have met Mr Kiley on a number of occasions, most recently half an hour ago. I explained to him that I had to leave our meeting to come to the House and answer a Question about 796 whether I would be meeting him. We have found Mr Kiley to be extremely able. He has engaged with us in constructive discussions.

§ Baroness Hamwee
My Lords, the House will glad to hear those comments. The Minister has pointed out that the Government are doing what they can best to accommodate Mr Kiley's thinking within the PPP framework. Does that not suggest that the Government's willingness to be flexible in their thinking is very limited? What further assurances can the Minister offer noble Lords that he is prepared to consider the framework so that ultimately we achieve the best outcome?

§ Lord Macdonald of Tradeston
My Lords. I stress again that our primary objective is to secure the best value for money for Londoners and to ensure that investment is put into the Tube as quickly as possible. We believe that the PPP is the best system for achieving that. However, we have been open in our discussions with Mr Kiley and have made it clear to him that we are prepared to discuss all of his objectives for the railway, for the Underground—I apologise to noble Lords for using American terms—and that we shall be happy to try to accommodate them where they do not threaten our core intention of providing best value.

Lord Berkeley
My Lords, can my noble friend assist me on a matter regarding the performance of the London Underground? He stated that the objective of the PPP is to improve performance. Can he confirm that recent press reports stating that the PPP will not require the contractors to improve on their performance are totally incorrect?

§ Lord Macdonald of Tradeston
My Lords, I can do so.

§ Lord Lawson of Blaby
My Lords, does the Minister recall that a few moments ago his noble friend asked him whether he would condemn the Mayor of London's explicit support for the proposed strike? Does he also recall that inadvertently he forgot to answer that question? Perhaps I may give him an opportunity to do so now.

§ Lord Macdonald of Tradeston
My Lords, I do believe that the Mayor of London is wrong to say that he will support the strike and take part in picketing. I think that it is also regrettable that, although the strike has been described as a one-day strike, it appears that it will be conducted in such a way that it will hit travellers over two days. That seems inherently unfair on the travelling public. As I have said, I think that the Mayor's actions are regrettable.

§ Baroness Gardner of Parkes
My Lords, is the Minister aware that a statement was made in a news broadcast to the effect that the Mayor intends to borrow a considerable number of millions of pounds from the fire brigade pension fund to commence immediately and without further delay the transport 797 work? Can the Minister tell the House what are the implications of that action? How will it fit in with the other proposed financial arrangements for the Tube? Furthermore, is there any risk that ultimately the people of London will need to pay the money back through a higher levy?

§ Lord Macdonald of Tradeston
My Lords, many noble Lords will be aware that one of the underlying intentions of the PPP is to transfer risk to the private sector. We believe that if the intended PPP is disrupted in any way it would take one to two years to put in place alternative financing systems. However, I am not aware of any intention to use fire brigade pension fund money for that purpose.

§ Earl Attlee
My Lords, can the Minister tell the House what is the size of the public subsidy to London Underground and what is the capital requirement?

§ Lord Macdonald of Tradeston
My Lords, those questions will be covered by the rules governing commercial confidentiality. The noble Earl will understand that at this time that must influence many of our public statements as regards capital needs. As to past funding, in recent years that funding has been running at an average of around £500 million per year. By the end of 2001, I believe that, since the Government came to power, we will have put in around £3.4 billion. That figure contrasts with the previous government's spending plans, which included the elimination of any kind of grant to the Underground.