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

Examination of Witness (Questions 200-214)



  200. Have you worked out the potential value of the contingent liability that the comfort letter has given the Government?
  (Mr Byers) For the reasons I explained in the letter I sent to the Chairman of the Public Accounts Committee, it is impossible to put a precise figure on that because we do not know when the liability might occur. The point about the liability is it will vary depending on what time within the 7½ year period of the contract that liability might fall.

  201. Mr Kiley estimated your liability would be at least £4.1 billion over the first 7½ years, do you think that is a realistic assessment?
  (Mr Byers) I would like to see the basis on which he brought forward those figures. As I say in my letter, because of the way in which the contracts are construed, it is impossible to give a precise figure because one does not know when the liability might fall.

  202. He was suggesting that if you included the new private interest termination right, it would put that figure up to £5.2 billion, but you are not able to give that estimate at the moment?
  (Mr Byers) Because one does not know when the liability might fall, if it falls at all.

  203. Do you think the issuing of comfort letters was a sensible thing to do? Is it not a rather unsatisfactory half-way house?
  (Mr Byers) Not really. It is not a guarantee but, on the other hand, it is quite clear that the Government is not going to walk away from London Underground.

  204. Surely the banks will regard it as a guarantee, otherwise they would not ask for it, would they?
  (Mr Byers) As I say, it is not a guarantee. That is the legal position. It is a comfort letter to say exactly what they expect the responsibilities of the Government will be.

  205. Does it underwrite the payments or does it not underwrite the payments?
  (Mr Byers) It outlines the situation in which the Government would underpin some of the debt which has been incurred.

  206. Not underwrite, but underpin?
  (Mr Byers) The distinction to be made is between the situation of shareholders in the infrastructure companies where all their equity is at risk. There is no government underpinning of that. As far as the financial arrangements for the bidders are concerned, though—so the third-party debt—then yes, the Government has indicated that we will take some of the responsibility for that.

  207. Originally, Secretary of State, you will remember, even before your Arrival, the Government's position was that the reason it had to go for a private finance deal was that it did not want this particular public finance to appear on their balance sheet. That was 1999. Has there been a major change in policy since then?
  (Mr Byers) I think I have said to this Committee on several occasions that there were three issues that I felt were very important in relation to our proposals for the Underground. One was that safety must not be compromised; two, the fares and value for money to achieve that; thirdly, that this was not going to be a privatisation. I have made sure, in the way in which the contracts have been drawn up, that this is not a privatisation. It is not for me to judge, but if that means that our proposals fall on the government balance sheet—

  208. So who takes that decision—the Chancellor?
  (Mr Byers) No, it is a decision taken by accountants.

  209. Yes, but somebody employs these accountants. I do not want to push you too hard, because I do not want to be rude.
  (Mr Byers) This will not be an issue which will be decided by the Chancellor or by myself. What I am very clear about is that we have accountants who will decide according to their proper procedures. However, I as Secretary of State for Transport am not motivated in this exercise by getting this off the government balance sheet. What I am motivated about is to ensure that this is not a privatisation, which is why London Underground will remain publicly owned and accountable. If the consequence of my insisting that this is not a privatisation results in this being on the government books, then so be it, that is a price that, as far as I am concerned, is worth paying.

  210. Which would in fact be a change in the policy which was originally enunciated? You are saying that that categorisation would not be taken by anybody other than an Audit Commission or an accountancy professional; it would not be a political decision?
  (Mr Byers) It would not be a political decision. The political decision is one that I have taken on behalf of the Government, which is that this is not a privatisation, that London Underground will remain publicly owned and accountable. If the consequence of that is that these modernisation proposals remain on the balance sheet, then so be it, but that is my position, my position as Secretary of State for Transport, it is the position of the Government.

  211. Now can I ask you, who gets the proceeds of the property vial the deal for the Underground? Does that go to Transport for London or does it go to the Treasury?
  (Mr Byers) My recollection is that as a result of representations made by the Mayor, we have put on hold the proposals that we were moving forward as far as property is concerned. I have to say, I need to refresh my memory about that.

  212. So that will be another note you will send us?
  (Mr Byers) It will be another note, yes. I am pretty sure, because we just took the decision two months ago, that because of the concerns expressed by the Mayor, we put all of that on hold to be determined after we have completed the transfer over to Transport for London.

  213. Minister, let me ask you once more, at the risk of being boring, are you going to allow a substantive debate in the House of Commons on the Underground public/private finance deal before the actual financial deal is closed? You have today said something very interesting.
  (Mr Byers) I hope I have said many things which are interesting!

  214. Of course, you always say everything which is interesting! Perhaps something which is slightly more interesting than the normal interesting things which you say is that you said today that you will at that point—meaning after you have gone through all the figures—decide whether or not to go through with the modernisation scheme. Now I ask you, why should you therefore not accept that the House of Commons should debate this on a substantive motion, either just before you take that decision or at some point at which we can influence the Government over such a massive and important political and financial decision?
  (Mr Byers) As you know, Chairman, the Select Committee has already made its views known to the Government on this issue. In terms of matters on the floor of the House, those are issues for the usual channels and not for myself as Secretary of State.

  Chairman: Well, Secretary of State, you have as always been interesting, and we are very grateful to you. Thank you very much for your attendance.

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