HC Deb 04 December 2002 vol 395 cc79-82WS
The Secretary of State for Transport (Mr. Alistair Darling)

On 8 May 2002 London Regional Transport signed contracts with the two preferred bidders for the London Underground Public Private Partnerships to modernise the Tube.

Completion of the contracts was dependent on the satisfaction of various conditions. These included securing approval by the Health & Safety Executive of London Underground's revised Railways Safety Case and the necessary regulatory clearances from the competition authorities.

With the relevant conditions now satisfied, the two bidding consortia have begun to put in place the necessary finance to enable the contracts to become effective. I expect the Infraco JNP contract (covering the Jubilee, Northern and Piccadilly lines) to come into force at the beginning of next year, and those for Infraco BCV and Infraco SSL (covering the Bakerloo, Central and Victoria lines and the Sub-Surface Lines, respectively) in the Spring.

One of the pre-conditions for the PPP contracts related to state aid clearance. This was achieved on 2 October when the European Commission adopted a Decision confirming that the notified PPP arrangements did not constitute state aid.

Commercial agreement between the preferred bidders and London Underground has now been reached.

The Mayor of London told me shortly after the European Commission announced its Decision that he would not be appealing against it. However, subsequently the Mayor sought and secured authority from the Board of Transport for London to launch an appeal of the Commission's Decision in the European Courts. This latest legal action follows two unsuccessful actions for judicial review in the English courts, the latest of which collapsed during the hearing itself.

I am not prepared to see this crucial investment delayed while the Mayor of London engages in further legal challenges. I have therefore agreed that London Regional Transport should offer the preferred bidders and their financial backers an indemnity against the material adverse consequences of any legal challenge in relation to the Commission's state aid Decision. I propose in turn to guarantee London Regional Transport's indemnities in accordance with my powers under the London Regional Transport Act 1984.

I have also agreed against this background that, while the full debt required to fund the bidders 1 obligations will be committed at financial close, London Underground will not require it to be drawn down in the early months of the contract. This will mean bringing forward direct payments by London Underground in the early months of the next financial year. It will not increase the sum of those payments next year, or in any subsequent year.

The PPP contracts also envisage a statutory Arbiter whose key role is to decide the fair price for work to be undertaken in future years. I can announce today the appointment of Chris Bolt, formerly a Director of Transco pic and of Lattice Group, and a former Rail Regulator, as the PPP Arbiter. He will take up post upon financial close of the JNP contract.

In the light of recent statements by the Mayor of London which indicate that he may be seeking to challenge the decision of the European Commission that the PPP arrangements do not constitute state aid, it is appropriate for me to set out my intentions regarding the transfer of London Underground to Transport for London under the provisions of the Greater London Authority Act 1999.

I do not consider that the transfer of London Underground Limited to Transport for London could take place against the background of threats of further legal challenge by the Mayor of London and/or Transport for London or while such proceedings were in progress.

When the Mayor withdrew his legal challenge to the PPP arrangements in July this year it was my intention that the transfer of London Underground to Transport for London should take place following the completion of the PPP Agreements. However, I do not think that it would be appropriate for the transfer to take place while the threat of a further legal challenge by the Mayor exists. As I result I do not propose to make any transfer under section 409 of the Greater London Authority Act 1999 of London Underground Limited to Transport for London, nor will I direct London Regional Transport to make any such transfer scheme until after the period for lodging any appeal against the Decision of the European Commission has expired without any such appeal being lodged; and if an appeal is lodged, the appeal having been finally determined.

The same position applies in relation to any legal challenge in the English Courts.

The Mayor of London's actions leave me no alternative but to take this course of action. The Tube needs investment— and the PPP means that £6 million a day, £16 billion over 15 years, will go into much needed improvements to the benefit of London.

In accordance with the guidance set out in Government Accounting, I am today notifying Parliament of the contingent liability arising from my decision to guarantee London Regional Transport's indemnity.