Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 760 - 779)

WEDNESDAY 16 JANUARY 2002

RT HON STEPHEN BYERS, MP AND SIR RICHARD MOTTRAM KCB

  760. We remember the details.
  (Sir Richard Mottram) Therefore, it is perfectly proper for that company to come to all of its shareholders, including the Government, and to discuss with them its situation.

Mr Donohoe

  761. Can I come back specifically to the building of the new centre in Scotland. You are talking about a delay of some two years. Is that the figure that you accept, or is it the case that it can slip even further beyond that? If you were to be cynical, is it possible that the centre at Prestwick will never be built, or is that impossible?
  (Mr Byers) All we have agreed to is a deferral. We have not agreed to a deferral for a particular time. The reason why we agreed to a deferral was to allow us to sort out the situation that we are facing at the moment.

  762. When do you see yourself, Secretary of State, in a position that you will be able to go to NATS and say "You have to start this building programme"? The basis of this is extremely worrying, and it takes it out from what is, on the face of the Act, a commitment by the Government that was given at the time of the Act passing through the House, which was a two-centre strategy, which was within the United Kingdom. Is that still the case? Is it still a two-centre strategy, as far as the Government is concerned, within the United Kingdom?
  (Mr Byers) I will repeat what I said earlier. All that we have agreed so far is a deferral to the Scottish centre being constructed. No more than that. There is a wide set of discussions going on about the financial situation of NATS in the light of the downturn, particularly since September 11, and it is part of those discussions, but no conclusions have yet been arrived at and when we reach an outcome to those discussions it will need to reflect the commitments that have been given during the passage of the legislation.

  763. What do you believe to be the time-scale?
  (Mr Byers) We will need to reach an agreement with the airline group and with other shareholders in NATS as soon as we can. I am not going to give away some of my negotiating strength by putting down a timetable in front of the Select Committee today.

Mr Wiggin

  764. Do you agree with the Heathrow Terminal 5 Inquiry that there is no case for widening the M4?
  (Mr Byers) I announced to Parliament the agreement that we had, the details of which are contained in the decision letter.

  765. Do you think the bus lane is on the wrong side of the road and, perhaps, it should go?
  (Mr Byers) I think we keep under review the way in which we manage the motorways.

Mrs Ellman

  766. What is your thinking on whether the PPP for the London Underground is value for money?
  (Mr Byers) We will know in a few weeks' time. The final bids came in on 4 January, they are now being clarified and evaluated, the London Transport Board will meet round about the second week in February to make an in-principle decision on whether value-for-money is achieved. I think when I last came before the Select Committee they had not agreed this but they have now agreed with me that they should publish very quickly after that board meeting the details and also the advice that they have received, and there should then be consultation, primarily with the Mayor and Transport for London but it will be a wider consultation as well, because these will be made publicly so people can see the comparator between what the PPP offers and, also, what the public sector comparison would offer as well. I would also make available the Ernst & Young report which is being made available to me—an independent report. I know this is a big issue which has caused a lot of debate, and there was an alternative means of funding identified by the Mayor which is through a bond issue. I think it would not have been a right consultation, or an effective consultation, if all that we had been comparing with the PPP had been the traditional form of public service comparator. So what I have done, and this will be made public as well, is make sure there will also be a comparison on value-for-money terms between the PPP and the bond issue as outlined by the Mayor and the Commissioner. So people will have a range of options around which they can consider. Then there will be a consultation period and then, probably round about the middle of March, a final decision will need to be taken on whether the value-of-money of the PPP has been achieved. It will be very open and it will be an opportunity for people to engage in the debate. I have ensured that there will not just be a comparison between the PPP and the public sector comparator, they will also be able to look between the PPP and the value-for-money of a bond issue.

Ms King

  767. How long will the actual evaluation period be?
  (Mr Byers) It will be about three weeks.

Mrs Ellman

  768. The Treasury has guaranteed funding for at least seven-and-a-half years. Would that still be there if the PPP did not go ahead?
  (Mr Byers) We will announce what Plan B is at the time of the final process.

  769. Is the Treasury trying to influence the outcome?
  (Mr Byers) No.

  770. There is no pressure from the Treasury?
  (Mr Byers) No.

  771. Are you quite sure about that?
  (Mr Byers) Yes.

  772. What about the London Underground Property Partnership deal? If that does not go ahead as envisaged, would that mean that the PPP will cost more?
  (Mr Byers) No, I think the important thing on the partnership project is that we get real value-for-money. I was not prepared to say that it should go ahead immediately because I was not convinced it was actually going to achieve real value-for-money. My approach to the whole of the London Underground modernisation has been very pragmatic; I am not coming at this from a dogmatic position; I want to deliver what is going to be best for passengers in London. If that means that we do not go ahead with the property partnership but we actually hand that over to the Mayor without making a decision—if that is the best thing to do on value-for-money terms—that is what I will do. It is the same with the three PPP contracts. If they do not achieve-value-for-money we will not go ahead with them.

  773. Will you be taking that decision on your own or are you being leaned on by others?
  (Mr Byers) I will take the decision on value-for-money on behalf of the Government, but it will be my decision.

Mr Betts

  774. Does the Treasury have any role in looking at comparisons?
  (Mr Byers) The Treasury has been involved in how the public sector comparator has been compiled, as one would expect.

Chris Grayling

  775. The date of the board meeting, you said, was?
  (Mr Byers) It is the first or second week in February, but the London Transport Board will no doubt let the Committee know exactly what date it is. I have got a provisional date, but it would probably be wrong.
  (Sir Richard Mottram) I will send you a letter that includes the date.

  Chairman: Thank you very much.

Chris Grayling

  776. The question I wanted to raise in relation to the underground is that there is a rumour circulating at the moment, which I am sure is completely scurrilous—but you might take the opportunity today to lay those rumours to rest—that Plan B involves handing the underground to the Mayor, carrying with it debts of some £1 billion to encompass the hangover from the Jubilee Line spend and the cost of managing the PPP process. Can you rule that out?
  (Mr Byers) It is an interesting rumour, and rumours are even more interesting if they are scurrilous. I have never known a rumour that was not scurrilous. I can rule it out. No decisions have been taken on what Plan B might be or the terms under which Plan B would operate.

Miss McIntosh

  777. The decision to introduce Renewco should have been taken by 1 October, and Sir Alastair Morton wrote to Sir Richard just to get confirmation—which he got from Sir Richard—that the fact that it had not come into effect on 1 October was no fault of the SRA. I understand it was not until 5 November that the independent Office for National Statistics ruled that the amount of money in question—£162 million—that would have passed to Railtrack had Renewco come into effect under the April agreement, would have been treated and classified as being in the public sector. My first question is why was the ONS decision so made and why were you not in a position to introduce Renewco on 1 October?
  (Mr Byers) The dates are correct because they have been disclosed in parliamentary replies before Christmas, so, yes, those dates are correct. The ONS is an independent body and it will obviously take its time in reaching any decisions on classification.

  778. Can you help the Committee, Secretary of State, because I have some difficulty understanding why the ONS has described that the £162 million which was due to Railtrack on 1 October would have been classified as being in the public sector, whereas we heard from Mr Spellar, who told the Transport Sub-Committee, that £1.2 billion of loans was being passed to Railtrack's administrator, and I understand that the Chancellor told the Treasury Select Committee that there would be no impact on public sector net borrowing from such short-term loans. Why does one count as public spending, in the case of Renewco, the £162 million, but not the short-term loan?
  (Mr Byers) Just to say that the £162 million was not legally due to be paid on October 1; the April agreement was to use best endeavours, and it was a clear condition of that that it would not count against public spending. Why the ONS classifies one thing against public spending and other things as not is, really, an issue for the ONS. They are an independent body, they are not influenced by politicians and they make these decisions. And we have to abide by them.
  (Sir Richard Mottram) If I can just add one small thing. It was not a question about the money it was: could we have a vehicle which was 50 per cent private sector, 50 per cent government and how would such a vehicle be classified. That was the question that ONS were being asked, and the conclusion they came to was it could not be off the Government's balance sheet and off all private sector balance sheets as well.

  779. Would it not have been advisable to have got that advice before the April agreement was signed?
  (Sir Richard Mottram) No, because when we were involved in negotiating the April agreement (and that was, obviously, before the Secretary of State took office) the April agreement was negotiated with Railtrack and they were quite comfortable that what we were doing was we were going to use our best endeavours to create this vehicle. We set out to use our best endeavours to create that vehicle. The correspondence that I had with Sir Alastair Morton was designed to ensure—on my part, anyway—if there was a subsequent inquiry by Parliament, in particular by the Public Accounts Committee, I was giving an assurance that no one would argue that the SRA had been at fault in the way in which they had gone about the technical issue of seeing if Renewco could be established on this basis. That is what that correspondence was about. Railtrack were perfectly happy at the beginning of April on the basis on which we proposed to proceed in relation to Renewco. I was personally involved in the discussions with them.


 
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