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

Examination of Witnesses (Questions 88 - 99)




  88. Good afternoon, gentlemen, I am sorry to have kept you waiting. Would you like to identify yourselves for the record?
  (Mr Appleton) Thank you Chairman. May I first present the apologies of my Chairman, Sir Malcolm Bates, he is abroad on business. I am the Deputy Chairman of London Transport; I have been a member of that Board for over six years. To my immediate left is Martin Callaghan, who is the Director of the PPP project. To his left, Mr Tony Poulter, who is a partner at PricewaterhouseCooper, who has been our Financial Advisor since the inception of this scheme. On my right is Mr Paul Godier, who is the Managing Director of the London Underground.

  89. Thank you very much. Did you want to make any opening remarks, Mr Appleton?
  (Mr Appleton) Thank you, Chairman. All I want to do is update the Committee since London Underground last appeared before you in November 2001. On 7th February, the London Transport Board unanimously decided that it would proceed with the PPP. That was after an extremely rigorous assessment, and, as you would expect, two particular concerns that we had and paid great attention to was safety and value for money. What is happening now is that we are formally consulting the Mayor and Transport for London, and we are expecting their submissions quite shortly, and we will give them full and detailed consideration. In parallel, the Health & Safety Executive is reaching the close of its very exhaustive review of PPP, and we are working with them. The final thing to say is the LT Board's commitment to delivering a PPP for the tube is unanimous. In our view, it remains the most effective solution to London Underground's long term investment problems. We are delighted to have the opportunity to respond to your questions.

  90. Mr Appleton, you and your peers told the Committee in November, "The private sector companies would be more efficient than the public sector to the provision of a steady flow of investment". Is that correct?
  (Mr Appleton) Yes, it is, Chairman.

  91. Would it be fair to say the reason you have been seen to perform badly over the last decades is because money from the Treasury has been insufficient and inconsistent?
  (Mr Appleton) That is one of the key reasons. We have not been able to forecast forward, even just a few years, how much money we will have available to spend to improve the tube.

  92. So, when you tell the Committee it was a lack of commitment to funding public infastructure that led to a new way forward being sought, you were actually only reflecting, not your inefficiency, but your inability to raise the cash that you needed for the services that you provided?
  (Mr Appleton) We started this process because we recognised that we would never fix the tube on the method of it being run for maybe four decades. We opened the debate with Government, and our opening was welcomed by Government who said, "Yes, indeed, we too would like to find a better way forward".

  93. You started it, and you brought it to the attention of Government: I rather thought, from some of the evidence taken by this Committee from the previous Chairman, that that was not necessarily the case?
  (Mr Appleton) Well, my memory may be at fault, Chairman, I thought we flagged it up, and it was welcomed particularly by the—

  Chairman: I have no doubt it was welcomed by the Treasury. That was not quite the question we were asking you. Miss McIntosh.

Miss McIntosh

  94. Could I ask what assessment have you made of the announcement that the Government plans to guarantee the borrowings that will be made by the contracting companies?
  (Mr Appleton) I think my colleague, Mr Callaghan, is best able to answer that.
  (Mr Callaghan) I am not aware there has been such an announcement. Our understanding is that the Government are not guaranteeing the money that is being raised by the private sector. As a technical matter, what the Government has done, or says it intends to do, is to issue what is described as a "letter of comfort". The Government cannot, as a technical matter, guarantee these loans because the money to be made available to the GLA and Transport for London is obviously a matter for the Government and ministers at the time. The guarantee would amount to a commitment which would override the minister's discretion. So it is not a guarantee at all, it is is a statement about how the Government thinks that future Secretaries of State would view the funding requirement of TFL and the circumstances that the money needed to be repaid.

  95. If the newspaper reports are correct, and if, at some future stage, that was to happen, would it not remove the whole basis of the PPP, where the risk is meant to transfer from the public sector to the private sector?
  (Mr Callaghan) The different parts of the private sector take different risks. The principal risk in any structure of this kind is being taken by the owners of the private sector entity, in this case, the infastructure companies who are putting their investment money in. And like any other private sector company that raises money from banks, it is not the bank's money that is at risk, it is the investors' money.

  96. To London Underground, could I ask, in Section 5 of your final report, you list the Mayor's policies for the underground and you note that the Mayor and Transport for London believe that the PPP sets the role priorities and takes too long to deliver improvements in services. Is meeting the objectives of the Mayor of London not of fundamental importance as to whether this is a good way to spend taxpayers' money?
  (Mr Appleton) Of course we have taken all account of what the Mayor and his team have said. We disagree with the Mayor; we think this is an excellent way forward for London and the tube. If I may quote, I think the phrase "fatally flawed" is referred to repeatedly; I think "finally fixed" is a better description.

  97. Finally, if congestion charging is introduced as of next year, are you confident that there will be room on the Underground for any more passengers than are currently being carried?
  (Mr Appleton) Mr Godier is the Managing Director of the Underground, he will deal with the problem.
  (Mr Godier) Yes, of course. We ourselves have looked carefully at the likely transfer of road traffic to the underground in the event of congestion charges being introduced, and the percentage diversion that we predict is less than 1 per cent. Bearing in mind, of course, the sort of radial journeys that the tube is there for, the market share of rail and bus is already extremely high; therefore, the potential diversion from cars is already very, very small. So we are not expecting anything significant.


  98. Did you look at the reports that were done after the imposition of charges on something like the Severn Bridge?
  (Mr Godier) We did not, but we have looked at the forecast that had been done by independent consultants.

  99. Even more independent consultants. And you are still sticking by your 1 per cent?
  (Mr Godier) Yes.

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