§ Mr. HowardTo ask the Secretary of State for Transport, Local Government and the Regions (1) what estimate he has made of the total potential liabilities to the Exchequer which will arise from underwriting the contingent liabilities of the public-private partnerships for London Underground, as proposed in the letters of comfort and Minute from the Secretary of State for Transport, Local Government and the Regions to the partners in the PPP presented to Parliament on 21 March 2002; and how those liabilities will be treated and presented in the national accounts; [47961]
(2) if he will publish the calculations and underlying assumptions which he has made to calculate the potential liabilities to the Exchequer which will arise from underwriting the contingent liabilities of the public-private partnerships for London Underground, as proposed in the letters of comfort and Minute from the Secretary of State for Transport, Local Government and the Regions to the partners in the PPP presented to Parliament on 21 March 2002. [47960]
§ Mr. Spellar[holding answer 10 April 20021: My right hon. Friend the Secretary of State's Minute to Parliament explained that the proposed comfort letters would cover a wide range of obligations on London Underground under the PPP contracts. In normal circumstances, the letter recognises the annual payments that will be made by London Underground to the infrastructure companies for the successful delivery of the required services, However, it also recognises that, in the unlikely event of an infrastructure company persistently and materially defaulting on its obligations in a way which leads to a termination of the PPP, then any funds put up by shareholders in the infrastructure company would be wholly at risk. In addition, an 'underpinned amount' would become payable to the lenders to the infrastructure 1106W company concerned. This is capped at the total value of the third party debt and has a floor of 95 per cent. of that amount.
The contingent liability will be to repay some or all of the debt that has already been invested in the improvement of the Tube. The potential size of the payment will therefore depend on the amount of debt that has been invested at the time the underpinned amount becomes payable.
The Department's Resource Accounts are drawn in accordance with the Treasury Resource Accounting Manual, which takes account of all financial reporting standards pronounced by the Accounting Standards Board. The contingent liability arising from any letters of comfort would therefore be recorded as a Note to the Department's Resource Accounts.
My right hon. Friend the Secretary of State has now decided to extend the consultation period for the comfort letters to provide the customary notification period.