Select Committee on Transport, Local Government and the Regions Second Report


LIST OF CONCLUSIONS AND RECOMMENDATIONS

    (a)  It is inconceivable that the Treasury did not take a meaningful and material role in such a significant financing commitment that will have ramifications for public finances over a 30 year period. Consequently, we are appalled that neither Treasury Ministers nor officials would appear before the Sub-Committee. That refusal threatens to undermine the Departmental Select Committee system. Those Ministers who make decisions must be accountable to Parliament for them (paragraph 64).

    (b)  We conclude that it is inevitable that the PPP will lead to significant and expensive disputes over the contracts and between staff and employers (paragraph 74).

    (c)  The Government must provide the funds to meet the target of a 15 per cent increase in capacity by Year 20 of the 30-year programme. The potentially vast cost to London and the nation's economy of failing to meet that target justifies a considerable increase in Government subsidy (paragraph 75).

    (d)  Our considerations show that the shortage of funds has already constrained capacity improvements and it is likely, therefore, that risk transfer has also been limited. If little risk can be transferred to the private sector then the rationale for the PPP is seriously undermined (paragraph 76).

    (e)  A number of key factors in the assessment of value for money are subjective and difficult or impossible to quantify. There are clear differences in opinion between experts in the engineering, management and finance fields involved in the process about these factors. There is also considerable risk that the cost of the project will be inflated after the first review period where prices are not fixed. This risk has been amplified by decisions to delay significant amounts of capital spending to these later periods when they will be more 'affordable'. We note that the Secretary of State accepted that it will not be possible to provide a definitive answer regarding the value for money of the bids and we therefore recommend that the Government does not approve the PPP deal (paragraph 77).

    (f)  We recommend that the Government should develop alternatives to the PPP in conjunction with the Mayor and Transport for London (paragraph 78).

    (g)  Investment decisions to upgrade the network should be undertaken in parallel with the handover of the Underground to the Mayor (paragraph 79).

    (h)  We recommend that, whatever scheme is chosen, the Government provides the same type of long-term funding commitment to the Underground as was envisaged under the PPP (paragraph 80).

    (i)  It is essential that the Government and the Mayor of London revise their estimates of the contribution of fares to the investment programme. The Government must commit to funding any resultant financial shortfall and by doing so ensure that it neither compromises the investment plan nor creates pressure for above inflationary fare increases (paragraph 81).

    (j)  We welcome the Strategic Rail Authority's decision to fund completion of the East London Line extension by 2006. We recommend that the Government continues to support Cross Rail and the Hackney-SouthWest Line as part of the Mayor's transport strategy (paragraph 82).

    (k)  We therefore recommend that the Health and Safety Executive give themselves more time to establish whether Version 3.0 of the Safety Case produces safe working practices, to allow operational difficulties to be more clearly identified, before considering approval of Version 3.1. We find it disgraceful that the Health and Safety Executive has only been given one month to reach such important conclusions (paragraph 83).

    (l)  We recommend that the Government fund the increased monitoring costs to ensure that the public sector has sufficient control over safety and performance monitoring of the Infraco operations (paragraph 83).

    (m)  The establishment and maintenance of a complete register of all assets is a priority for the Underground network and should have preceded the PPP contract negotiations (paragraph 83).

    (n)  We recommend that the arbiter's office be established early in the PPP contract and well resourced to ensure that the dispute resolution mechanism is genuinely independent of the parties involved (paragraph 83).

    (o)  We recommend that London Underground and the Infracos enter into an agreement to develop combined training programmes to minimise the potential divergence of working practices and standards (paragraph 83).

    (p)  We recommend that London Underground and the Infracos work closely with the Trade Unions and Professional Institutions and the Strategic Rail Authority to develop a National Rail Academy (paragraph 83).

    (q)  We recommend that Transport for London be given lead responsibility for the co-ordination of major upgrades on the Underground to reduce disruption to the travelling public (paragraph 83).

    (r)  We recommend that the Government should not pursue a mixture of public and private Infraco operations if one of the bids fails. The benefits of retaining all of the three Infrastructure companies in the public sector as a single integrated operation must be re-examined (paragraph 84).

    (s)  The initial forecasts that the PPP would provide a saving of £4.5 billion over public sector management were inadequate and flawed (paragraph 85).

    (t)  The Government should follow the National Audit Office's advice to address the affordability and funding provision for infrastructure projects before deciding on the financing mechanism (paragraph 85).

    (u)  Greater effort must be made to divulge those elements of such contracts that do not directly affect the Government's negotiating position to the public at an earlier stage (paragraph 85).

    (v)  A principal cause of the atrocious state of the London Underground has been the failure of the Treasury to provide adequate long-term funding over a number of decades. The Treasury is also, according to the evidence which we received, one of the principal instigators of the PPP scheme. We were therefore appalled that despite its leading role it refused to make itself accountable to Parliament by giving evidence to the Sub-Committee during the inquiry. This refusal threatens to undermine the Departmental Select Committee system. Those Ministers who make decisions must be accountable to Parliament for them (paragraph 86).


 
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Prepared 5 February 2002