House of Commons Transport Committee The Performance of the London Underground Sixth Report of Session 2004–05 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 9 March 2005 HC 94 Published on 18 March 2005 by authority of the House of Commons London: The Stationery Office Limited £14.50 The Transport Committee The Transport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Transport and its associated public bodies. Current membership Mrs Gwyneth Dunwoody MP (Labour, Crewe) (Chairman) Mr Jeffrey M Donaldson MP (Democratic Unionist, Lagan Valley) Mr Brian H. Donohoe MP (Labour, Cunninghame South) Clive Efford MP (Labour, Eltham) Mrs Louise Ellman MP (Labour/Co-operative, Liverpool Riverside) Ian Lucas MP (Labour, Wrexham) Miss Anne McIntosh MP (Conservative, Vale of York) Mr Paul Marsden MP (Liberal Democrat, Shrewsbury and Atcham) Mr John Randall MP (Conservative, Uxbridge) Mr George Stevenson MP (Labour, Stoke-on-Trent South)- Mr Graham Stringer MP (Labour, Manchester Blackley) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/transcom. A list of Reports of the Committee in the present Parliament is at the back of this volume. Committee staff The current staff of the Committee are Eve Samson (Clerk), David Bates (Second Clerk), Clare Maltby (Committee Specialist), Philippa Carling (Inquiry Manager), Miss Frances Allingham (Committee Assistant), Miss Michelle Edney (Secretary), Henry Ayi-Hyde (Senior Office Clerk) and James O’Sullivan (Sandwich Student). All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected] 1 Contents Report Page 1 Introduction 3 2 Major works 4 3 Performance 6 Day to day experience 6 4 Safety 10 5 London Underground’s powers 12 6 Ownership 14 7 Conclusion 16 Conclusions and recommendations 17 Formal minutes 19 Witnesses 21 List of written evidence 21 Reports from the Transport Committee since 2002 22 3 1 Introduction 1. The Public Private Partnership (PPP) for London Underground was completed some two years ago. The contract with Tube Lines was signed on 31 December 2002, and those with Metronet BCV and Metronet SSL on 4 April 2003. Responsibility for running the Tube remains with London Underground Limited; the three infrastructure companies (“infracos”) are responsible for the maintenance and renewal of the infrastructure. Their contract runs for 30 years, but the contract is reviewed each 7½ years, when adjustments can be made to the performance required or the pricing of the contracts. 2. Tube Lines, a consortium consisting of Bechtel, Jarvis and Amey assumed responsibility for the Jubilee, Northern and Piccadilly lines on 31 December 2002; on 4 April 2003, Metronet, a consortium consisting of Balfour Beatty, W. S. Atkins, Thames Water, Bombardier Transportation and Seeboard assumed responsibility for the remainder of the network. Metronet has two entities – Metronet Rail BCV looks after the Bakerloo, Central Victoria and Waterloo and City lines, and Metronet Rail SSL (Sub-Surface Lines) deals with the District, Circle, Metropolitan, Hammersmith and City and East London Lines. 3. On 8 December 2004 we took evidence on the performance of London Underground. We heard from Mr Bob Crow and Mr Tony Donaghey, the General Secretary and President of the Rail, Maritime and Transport Union (RMT); Mr Gerry Doherty and Mr Mike Katz, the General Secretary and Head of Communications at the Transport Salaried Staffs’ Association (TSSA); Mr Tim O’Toole the Managing Director of London Underground Ltd (LUL), and Mr John Weight and Mr Terry Morgan, the Chief Executives of Metronet and Tube Lines respectively. We are grateful to our witnesses for their help. 4. Our predecessor Committees closely followed the lengthy process which led to the PPP. We, too, have monitored progress, both on the PPP itself and on the state of the network, taking evidence in 2002 and 2003.1 In 2002, the Select Committee on Transport, Environment and the Regions considered that “it was not possible to establish that the PPP offered value for money”.2 We agree. Nonetheless, the PPP has now been established. The Report from the NAO London Underground PPP: Were they good deals?3 sets out the bidding process comprehensively. Our concern now is to monitor how the deals are working in practice. This report and the evidence printed with it are part of that process. We regret to say that on the evidence we received, improvements in facilities and performance are not in proportion to the huge sums of money flowing through the PPP . 1 London Underground PPP: New Developments ,Minutes of Evidence and Appendices, Wednesday 18 December 2002 HC(2002-03)200-i, Crisis on the Central Line, Minutes of Evidence, Tuesday 1 April 2003, HC (2002-03)592-i 2 Second Report from the Transport, Local Government and the Regions Committee, London Underground (HC (2001- 02) 387-I) 3 Report by the Comptroller and Auditor General, HC (2003-04)645, 17 June 2004 4 2 Major works 5. As the National Audit Office says, “Whether the PPPs will deliver real benefits to passengers, and provide appropriate returns on investment, will be determined over the 30 year life of the contracts”.4 Affordability constraints mean that many of the major improvements sought from the PPP have been deferred until after the first 7½ year contract period, when pricing and terms will need to be renegotiated. 5 Mr O’Toole told us that this delay meant there was a risk that future funding from Government would be withheld. What I do not want to happen is for people to get to the seven and a half year period and say, just when we are about to get all this rehabilitated kit delivered, “You know, it actually did not get that much better. Why would we want to put more money into that?” I want to make sure people are bought into the schedule that we have all agreed to. 6 6. The Government set an affordability threshold for the London Underground PPP which meant that work had to be delayed until after the first seven and a half year contract period. The Transport, Local Government and the Regions Committee warned that there was a real prospect that this would recur at future reviews: it must not happen. 7. Ensuring that the Tube gets the major upgrades it needs is not the same as paying any price that the private sector demands. There is potentially a problem in securing a fair price for upgrades: many of the major infrastructure companies which could undertake them are currently involved in the PPPs. There has already been some experience of this circular relationship. Under the current contract, London Underground has the right to specify extra works, which can be undertaken either by the relevant infraco, at a price negotiated between the parties, or by a third party. Transport for London has published a Report on the first year of the PPP which makes it clear that there have been delays in securing additional services and works through the infracos, and that some of the costs have been considered excessive by London Underground.7 8. We discussed the contract for improvements to Wembley Park Station which had been carried out by Tube Lines. Although the high cost of this project was caused in part by the need to complete the work in time for the opening of the National Stadium,8 Mr O’Toole was clear that he had effectively had a choice of one supplier and that he did not wish to be in that position again.9 To prevent it, London Underground is putting in place framework agreements with alternative suppliers, to ensure competition in future.10 4 National Audit Office; London Underground: Are the Public Private Partnerships likely to work successfully?, HC (2003-04) 644, 17 June 2004, p 8 5 HC(2003-04) 645, paras 2.14-18 6 Q 108 7 London Underground and the PPP: The first Year 2003/4, TfL, June 2004, p21 8 Q 75, Q109, Ev 58 9 Q77 10 Qq 71, 77 5 9. A further complexity is that there was too little knowledge about the state of some of the Underground’s assets to price their maintenance. Although this is a risk for the private sector, the periodic reviews provide a mechanism for the contract to be adjusted as more becomes known about the risks involved.11 The PPP contract provides for an Arbiter to set a price for the work specified in a particular review period if the two parties to the contract cannot agree. The Committee on the Environment, Transport and Regional Affairs noted: We are concerned that the incumbent infrastructure companies will be in a strong negotiating position to press for more favourable terms when performance requirements are reviewed at 7½ year intervals. The operating company and the arbiter must be given sufficient powers to prevent the infrastructure companies from exploiting their positions and to ensure that their charges are fair and reasonable.12 The National Audit Office has also commented that “the lack of competition in the Tube PPPs – two companies running three Infracos – may reduce the Arbiter’s ability to collect comparative data.”13 We strongly support London Underground Ltd’s initiatives to establish alternative suppliers to the infracos for infrastructure improvements.