[DEBATE] : (UK - Reaping Privatisation Benefits): London tube faces £3bn black hole

[Riaz K Tayob]

London tube faces £3bn black hole
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* Dan Milmo, transport correspondent
* guardian.co.uk,
* Tuesday September 09 2008 10:28 BST
* Article history

The London underground network is facing a funding gap of more than £3bn 
as the cost of repairing the tube system spirals out of control.

An assessment of the tube network's financial needs published this 
morning outlined a financial black hole of up to £1.4bn on a third of 
the capital's underground lines.

The latest figures create a severe financial headache for the government 
when they are added to the projected £2bn funding gap on the rest of the 
tube system. Transport for London, the London mayor's transport 
authority, this morning blamed the government and said the Treasury 
would have to step in.

London Underground boss Tim O'Toole said the government must pay because 
it had imposed the public private partnership programme that parcelled 
out the tube upgrade operation to private companies. O'Toole has 
consistently warned that any attempt to cut back on the £30bn upgrade 
programme would result in chaos because the network is struggling to 
cope with current levels of demand.

"Any funding required above TfL's budget should be met by continuing 
support by government, who imposed this PPP structure on the tube and 
Londoners," said O'Toole.

Gordon Brown, who brought in the PPP when he was chancellor, and his 
successor, Alistair Darling, must decide whether to bail out the 
Conservative mayor of London, Boris Johnson. The mayor's transport 
adviser, Kulveer Ranger, last week ruled out imposing massive fare rises 
to raise funds.

The scale of the funding gap emerged this morning in a report by the PPP 
contract referee, Chris Bolt. He said carrying out vital upgrade work on 
the Jubilee, Northern and Piccadilly lines up to 2017 would cost between 
£5.1bn and £5.5bn. TfL projected it would cost £4.1bn and therefore 
faces a gap of up to £1.4bn.

Metronet's funding needs

However, Tube Lines, the private company that owns the PPP contracts for 
the work, revealed this morning that it thinks the gap could be bigger. 
It believes the work will cost £7.2bn, implying that it faces an 
overspend of up to £2.1bn.

Metronet, the contractor charged with maintaining two-thirds of the 
tube, collapsed last year after building up a projected overspend of at 
least £2bn.

In an embarrassing reversal of one of Brown's signature policies as 
chancellor, Metronet is back in public ownership after it was taken over 
by TfL. TfL has yet to reveal the funding needs for Metronet up to 2017, 
amid speculation that it also faces a budget deficit up to 2017 on top 
of the existing £2bn funding hole — which covers the period 2003 to 2010.

Tube Lines, which is co-owned by a subsidiary of BAA owner Ferrovial, 
indicated that the government's role in funding would have to be 
clarified. In a carefully worded statement this morning, the company did 
not make a direct reference to the disparity between its cost estimates 
and TfL's.

Instead, it hinted that the government should put in place long-term 
financial backing for the network, rather than allocating cash every 
seven years.
"The question is not should the upgrade of the tube cost this much but 
how is this vital work to be funded? Funding for future tube 
improvements must be secured and maintained," said the company.

One of the staunchest critics of the PPP programme warned this morning 
that cutting back work investment in new trains, signalling systems and 
tracks would be disastrous for a tube network that carries more than 3 
million people on a typical weekday.

Professor Stephen Glaister, a former TfL board member and head of 
transport at Imperial College, said: "The PPP was claiming to deliver a 
programme of work over 30 years. That programme cannot be delivered for 
what the government thought it would cost originally. The work cannot be 
done, so the government will have to pay a lot more money. If the 
programme is not carried out, then we have got a serious problem with 
capacity on the tube in London."

http://www.guardian.co.uk/uk/2008/sep/09/london.london?gusrc=rss&feed=networkfront