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

Examination of Witnesses (Questions 280 - 298)



  280. What about the social costs involved? You lay out there the three principles involved but social costs, as you pointed out earlier, are a very important factor also. Are they built into the value for money exercise?
  (Mr Byers) That is part of the value for money exercise.

Dr Pugh

  281. Can I press you on the subject of commitment to London Underground and Transport for London. Is this a commitment in any sense which could be reversed? If it was reversed or changed or modified, could it be the subject of legal action by Transport for London?
  (Mr Byers) I think we want to enter into an agreement which is as secure as possible. We always have a difficulty in terms of binding governments in the future.

  282. But if the Treasury changed its mind, the Mayor would have no redress?
  (Mr Byers) We want to have a situation where it is contractually watertight as far as both parties are concerned. What I also want to do as part of this funding arrangement is to secure real improvements in terms of London Underground and there will need to be targets which London Underground sign up to, which Transport for London sign up to, as a result of this funding arrangement.

  283. At last week's Select Committee several members had an interest in what kind of guarantee was being put to PPP lenders, and the answer came back that by and large there was not a guarantee, there was a comfort letter in prospect from the DTLR. Is it true that in the PPP service contract if there is no comfort letter arising, they have to get a comfort letter equivalent to a guarantee from a bank? If that is the case, does that not mean a comfort letter is effectively the economic equivalent of a guarantee?
  (Mr Byers) We get into the sort of legal niceties of that. A comfort letter would not be a guarantee; it would describe and clarify the role of the Secretary of State in relation to the Greater London Authority and Transport for London and the arrangements for paying grants to those bodies. The bidders and the backers have said they would welcome such clarification. We would want to be helpful, and we would then be prepared to issue such a comfort letter, should the decision be taken to go ahead with the modernisation proposals.

  284. But does the contract actually say that if there is no comfort letter than a bank letter of credit must be obtained?
  (Mr Byers) The important thing for me is whether or not I should issue a comfort letter clarifying my role, and that is what I would be prepared to do, subject to following the normal procedures.

  285. I have a second point which is basically relating to the contract. Schedule 1.9 of the contract addresses key risk transfer and pricing issues. That is quite fundamental to the whole deal. As I understand it, this as yet is not concluded or even finished or finalised?
  (Mr Byers) No. As I said to Mr Grayling, there are still issues which are still not resolved. If they lead to any material change—I said this very clearly, I think, in my statement to the House—in a change which adversely affects value for money, and the risk is clearly one of the key factors there, then we will not proceed with the modernisation proposals.

  286. I have a very quick question. £2 million savings you say are going to be made. Is that still your view—£2 million savings?
  (Mr Byers) That is based on the mid-point on the public sector comparator compared with what we expect to achieve through the PPP.

  287. Given that these are cash savings, not money in hand, what simple tests will be applied to ensure that these savings will be made?
  (Mr Byers) It will be a question of comparing what we do achieve with what we expect would have been achieved had we gone through the normal public sector route. That is the way it needs to be judged, because the £2 million savings are savings comparing the Public-Private Partnership with the mid-point of the public sector comparator.

  Chairman: In which we have already added in the social element which has not been in the other estimates.

Andrew Bennett

  288. Neither Ernst & Young nor London Underground actually supported that £2 million figure, did they?
  (Mr Byers) London Underground did not address it. As I say, the way in which it has been derived, the way—

  289. It is your hope, is that it, rather than that it is supported either by Ernst & Young or London Underground?
  (Mr Byers) It is based on the figures contained in the public sector comparator, the mid-point of the public sector comparator which London Underground had worked up, and the mid-point seemed to be a fair way, a reasonable way, of trying to judge the savings that would be achieved.

  290. If the Health and Safety Executive want to put a notice on requiring something to be done, or to stop something happening, on whom do they serve the notice—London Underground or these contractual companies?
  (Mr Byers) This is if the modernisation plans go ahead?

  291. Yes, it is.
  (Mr Byers) At the moment the Health and Safety Executive are looking at the safety case.

  292. I understand that, but who actually will own the various bits of the new operation if it were to go ahead?
  (Mr Byers) That is something which is part of the safety case. The important thing is, the infrastructure companies will be reporting to London Underground. London Underground will remain in control, but the safety case is still being considered by the Health and Safety Executive, and they will need to decide whether or not the safety case is one that they are prepared to sign up to or approve. If they do not do that, then once again we will not proceed with the PPP.

  293. So who takes the risk that the Health and Safety Executive will require something to be done? Is it the new contractors, or is that a risk that remains with London Underground?
  (Mr Byers) That depends on the safety case which is finally approved by the Health and Safety Executive.


  294. Secretary of State, I am going to let you go. I am going to ask you some more questions in writing, but I just want to say one thing to you. Are you prepared to let the House of Commons and the elected Members debate this on the floor of the House on a Substantive Motion, because many of the questions that you have answered today leave us with worries about the transfer of risk, the length of time, the health and safety, and frankly these are things which should be debated by elected Members. Will you give us that undertaking?
  (Mr Byers) Those are not issues for a Secretary of State, as you know, Chairman.

  295. Would your Department be prepared to ask the Leader of the House to find time on Substantive Motion to allow the elected Members to vote on this particular arrangement which, after all, is going to determine the future of transport in London for the next 100 years?
  (Mr Byers) As you know, Chairman, these are matters for the business managers, not for a Secretary of State. What I can say is that I am not prepared to see anything stand in the way of £16 billion of investment going into the London Underground. This has been discussed endlessly, and I think we now have to get on with seeing the money going in.

  296. So even though at the moment the contracts are not signed, it is not clear what risk has been shifted, it is certainly not clear from some of these other very basic bits of information exactly what it is that has been handed over to Transport for London, you would still not be prepared to allow us to have a debate on a Substantive Motion?
  (Mr Byers) It is not a question for me, Chairman, it is a question for the business managers, as you know.

  297. You have the right, Secretary of State, to ask. I am asking, is it your view that before the contracts are signed, or immediately upon the signing of the contracts, you would come back to this House?
  (Mr Byers) I will be judged by the House and will be held accountable by the House.

  298. Secretary of State, you have been patient, and doubtless we shall meet again. Thank you for your attendance.

  (Mr Byers) Thank you very much, Chairman.

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