London Underground Ltd. (Hansard, 14 July 1994)

§ Mr. Norris

London Underground Ltd. is today publishing its three-year response to the Monopolies and Mergers Commission report, detailing the progress which has been made in implementing the report's recommendations, and the benefits which the implementation of the report has produced since it was published three years ago. This is London Underground's final response on the implementation of the report.

The programme of work set out by the MMC in 1991 was an extremely wide-ranging one, touching on all aspects of the LUL organisation. Implementation of 101 of the report's 114 recommendations is now complete—an increase of 33 since their previous progress report two years ago. Two of the recommendations will not now be completed in the manner recommended by the MMC. Work on the rest, which are of a longer-term nature, will continue.

A number of the developments which have taken place since 1991 are worthy of particular mention. In November 1991, London Underground responded to a number of the MMC's key concerns with the publication of its company plan. This set out ambitious proposals for improving the efficiency and effectiveness of the business. Three years on, this initiative has delivered a reduction in staff numbers of more than 20 per cent. At the same time, the quality of London Underground's services has continued to improve, with consistently strong performance against the testing service quality targets which have been set by the Secretary of State and embodied in successive customer charters.

Nine of the recommendations in the MMC report were directed wholly or partly towards the Government. Three of these—101, 105 and 111—were about performance indicators, three—70, 71 and 77—about fares, and three—10, 97 and 98—about the financial regime under which London Underground operates.

Overall, the position on the first six of these has not altered substantively since the Government's own response of September 1991. Since 1991 we have set for London Underground three successive sets of performance indicators, increasingly based, in accordance with MMC recommendation 101, on measured customer satisfaction and on outputs rather than inputs. For the very latest set of objectives, which I announced in May this year, six out of the 10 objectives set are assessed on the basis of customer satisfaction.

On fares, we remain unconvinced of the case for a formal fares contract between the Government and a nationalised industry. However, in general terms, the Government do not dissent from London Underground's view that there should continue to be some real fare increases over the next few years.

There have, however, been two important developments on the financial side. The first has been introduction in the last few months, and consistent with the recommendation 10, of a greater degree of flexibility allowing nationalised industries such as London Transport to carry forward from one financial year to the next, any underspend, up to 5 per cent. of their external financing limit, provided that the amount carried forward is sent on investment. The second, 722W connected with recommendation 98, has been the opening up, through the Government's private finance initiative, of a greater range of opportunities for LUL to work with the private sector. The Government welcome the fact that London Underground is currently working up a range of PFI projects, and commend London Underground for the enthusiasm and commitment with which it has responded to this important initiative.

The MMC made a number of recommendations about long-term planning for the network. The Government are continuing to work with LUL in developing a framework for strategic planning. Any such planning framework needs to be sufficiently flexible to adapt to changes in demand and other external developments, including the level of funding available. As the Government's original response made clear, it is not possible to commit public funding years in advance, because of the need for the Government to retain sufficient flexibility to deal with changes in the macroeconomic environment, and competing calls elsewhere in the public sector.

Within these constraints, London Underground is developing a more flexible approach to strategic planning, including—as recommended by the MMC—the development of a range of scenarios involving different levels of service and funding. It is also working to establish a greater understanding of the relationships between asset health, investment, and service performance. The Government welcome these steps, which will continue to be important building blocks in the evolution of future plans for the Underground.

London has the world's oldest and most complex underground network. The task of modernising and upgrading it will be a difficult and costly one, and we need to be realistic about how quickly it can be achieved. But we believe that during the three years since the MMC report, the management and staff of London Ungerground have made a worthwhile start on this process.

London Underground in 1994 is an organisation very different from that on which the MMC reported in 1991. While the Government have played their part by providing record levels of funding, the past three years have also seen substantial reforms and improvements in London Underground's own management, financial, and service performance. I would like to pay tribute to the MMC for the role which its comprehensive report played in initiating and directing this important process.

Copies of LUL's response have been placed in the Library.