London Underground (Hansard, 8 May 2002)

§ Lord Falconer of Thoroton

We have been advised by the board of London Regional Transport that London Underground Limited has today signed public/private partnership contracts to modernise and maintain London Underground's infrastructure.

There are three contracts, which will each run for 30 years. Those for two of the infrastructure companies will go to Metronet, and the third to the Tube Lines Group.

In a statement to the House on 7 February we set out why the Government supported London Transport's decision that it was minded to proceed with the Tube modernisation plans. The Government have consistently set out three key tests that the plans must pass if they are to proceed: that they are not a privatisation; that they should offer value for money; and that they should be safe for both passengers and staff.

We are satisfied that the modernisation plans are not a privatisation. The ownership of the assets, and the operation of the public service, stay in the public sector. It is also likely that the assets will continue to be scored on London Underground's balance sheet, in the public sector.

We are also satisfied that the arrangements offer value for money, when judged against alternative proposals. At our request, Ernst & Young reviewed London Underground's original value for money assessment and confirmed that, overall, London Underground's methodology for assessing value for money was robust, and that London Underground's recommendation that the PPP proposals deliver value for money, while subjective, was supported by its analysis. Since then, Ernst & Young has reviewed the work done by London Underground to update the value for money assessment in respect of material changes to the contracts. It confirmed that London Underground's approach was consistent with that used for the previous report. We have placed a copy of its update in the Library of the House.

The Health and Safety Executive has still to reach a final judgment on London Underground's revised railway safety case. The position therefore remains that the Tube modernisation plans will only proceed if the independent regulator accepts the safety arrangements for both passengers and staff.

Subject to approval of the safety case, we share London Regional Transport's belief that the modernisation plans are the right solution and offer significant benefits for Londoners.

Fares will continue to be set by the Mayor of London. The modernisation plans do not require fares to rise faster than inflation.

185WA

The three contracts are intended to take effect by the summer. We notified Parliament on 20 March that we were considering issuing a comfort letter in support of each of the contracts. Our intention is that such comfort letters should be issued shortly before the transactions are completed.

London Regional Transport's decision has been taken in the light of an extensive consultation with Transport for London. London Regional Transport has accepted some of the points Transport for London has made, and made changes to the contracts accordingly.

We fully support the decision taken today by the board of London Regional Transport and look forward to the modernisation plans coming into operation.

It remains my intention that the ownership of London Underground will be transferred to Transport for London as soon as possible.