The failure of London Underground PPP

The final winding up of London Undergroundâ s PPP maintenance agreements signals th

e end of perhaps the biggest and disappointingly underreported transport fiasco
of our time. Its demise on the 7 May was certainly a good day to bury bad news f
rom both Labour and Conservative perspectives.
Transport for London (TfL) was established in 2000 but control over the London U
nderground was not transferred to it until 2003. In the interim £455m (accordin
g to the NAO) was spent on setting up a 30-year PPP contract whereby three infra
structure companies (infracos) were to take over responsibility for the maintena
nce and renewal of London Undergroundâ s rolling stock, stations, tracks, tunnels a
nd signals. This was the brainchild of The Treasury and Gordon Brown, the then C
hancellor, who foisted the unwanted contract on TfL and the then Mayor Ken Livin
gstone despite legal challenges.
Under the contract the Metronet consortium won two of the concessions and Tube L
ines the third. It was not long before Metronet went into Administration, in Jul
y 2007, as costs spiralled out of control. The cost to the taxpayer of its demis
e is estimated at £2bn. There then followed heated debates on the cost of works
to be undertaken between Tube Lines and London Underground which appeals to the
independent arbitrator failed to fully resolve. Eventually to bring the unhappy
saga to an end TfL bought Tube Lines for £310m and at last it is free of a con
tract that few understood.
PPP was a Conservative invention which the Labour Government continued with grea
t enthusiasm. It was a classic case of taking an inherently simple idea and appl
ying it to more and more complex situations without fully understanding its limi
tations. The NAO, in a 2004 report on the London Underground deal was unable to
say whether it offered value for money because it was just too complex. The idea
that risk can be fully transferred from the public to the private sector is fun
damentally flawed. The private sector is able to limit its liabilities and walk
away from a loss making contract. The taxpayer is unable to do so.
PPP saw a Labour Government privatise the maintenance of the Underground and a C
onservative Mayor finally renationalise it. The taxpayer has been saddled with a
lmost £3bn worth of costs with nothing to show for it. Well thatâ s not true we go
t slightly cleaner stations and a bit of paint splashed around as those were the
quick wins that gave the infracos the best return for the smallest outlay. The
biggest scandal is that no politician has been held to account for the disaster
and as usual the only winners are the lawyers.
See Colin Buchanan blog at http://colinbuchanan.wordpress.com/