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Lord Whitty: My Lords, I thank the noble Lord and the noble Baroness for not entirely rejecting this proposition. They gave it a slightly cool welcome. Nevertheless, I believe that the noble Lord, Lord Dixon-Smith, is wrong to say that this is incomplete. It extends the whole concept of public transport within London. We are not merely talking about who owns, manages and invests in the London transport system as we have known it; we are talking about a new interface between the tube line and rail services in London. which will focus on the strategic development of that network and, in particular, provide a means of transfer through London, including from London's airports, terminals and the main Underground interchanges. It is a different and wholly more imaginative concept than one of straightforward privatisation; or, indeed, of going on running London Transport in the way that it has been run previously.

The noble Lord, Lord Dixon-Smith, accused us of inconsistency in our attitude to Railtrack. We are not inconsistent. We have a consistency of purpose here; namely, to make Railtrack perform. As the noble Baroness, Lady Thomas, said, there have been problems in its performance on the rail network. There are serious inadequacies under the regime that we inherited in terms of enforcing performance standards on the railway side, both for Railtrack and for the operating companies that we are intent on addressing.

If we conclude a successful contract with Railtrack, as I believe we shall, it will be important for that contract to be tight and for it to hold Railtrack to performance standards. That will obviously be a matter of the most intense negotiations over the coming weeks. I cannot be absolutely precise on the questions about the final outcome of that contract which the noble Baroness asked towards the end of her remarks, but it will be a tight contract and it will be performance oriented. There is no inconsistency here; we are consistent in our aim of making Railtrack, and the other contributors to the public transport system of London, perform.

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The noble Lord asked why we had ducked the issue of privatisation. The PPP is a much more imaginative and flexible system of financing public transport. It will provide not only the mobilisation of private capital but also the mobilisation of private sector expertise, together with a degree of stability in the investment pattern for London Transport, which it has long since missed.

In response to the question from the noble Baroness as to whether that means that the cost will be higher, the PFI projects that we have pursued indicate that the benefits in terms of both time-scale in meeting performance criteria and in improved management and productivity gains will be substantially higher to offset any additional cost of borrowing which the private sector may incur. Indeed, the ability to raise capital may make it easier in the private sector than in the public sector. I believe that we are right to choose the public/private partnership road here.

The noble Lord and the noble Baroness both asked about the timetable on the Railtrack element and with regard to other parts of the Underground network. As far as concerns Railtrack, we shall engage in negotiations immediately and we hope to conclude them as rapidly as possible. In regard to the other parts, we have now set up the structure for bidding. We have made it clear in the past that we shall not be rushed into giving specific dates and thereby being hamstrung by them. I believe that that was a problem encountered by the previous government with the rather tight political deadline that they managed to follow in order to rush through rail privatisation. We are not making the same mistake. I do not believe that it will be long before we can also make a decision on the other parts of the Underground network.

The noble Baroness asked whether the cost of this would be loaded on to fares and about the implications for fares. It is not expected that the cost of investment would be loaded on to fares; indeed, no decisions have been made so far on the actual fare levels in the immediate future. But the modelling on which decisions took place was based on the assumption that fares would increase by no more RPI plus 1 per cent in January 2000 and January 2001. Beyond that, I believe that the position will be stable.

London Transport is currently responsible for setting fares. Under the legislation which we considered earlier this week, the mayor will eventually assume that responsibility once elected. While talking about the mayor, and in response to the noble Baroness, I should point out that the mayor will be involved in the decisions about the running of London Transport, once he or she is elected, in the interim period before the PPP contracts are signed and before the Underground is passed to Transport for London and to the mayor. Railtrack will be working under contract to the London Underground which, via TfL, will be accountable to the mayor. It is therefore very important that the mayor should play a positive role in the later stages of the PPP competition. Amendments which the Government intend to bring forward on the GLA Bill will put London Transport and TfL under a duty to consult and co-operate during the interim period.

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I believe that this is an important step forward and one which, it is to be hoped, will involve a detailed and tight contract to ensure the performance of Railtrack; but it will also extend the nature of the urban transport system within London in a very significant and important way to the benefit both of its inhabitants and the travellers to and from London.

Lord Dixon-Smith: My Lords, before the Minister sits down, perhaps I may point out that he did not cover one question that I asked about the duration of the possible arrangement with Railtrack.

Lord Whitty: My Lords, I beg the noble Lord's pardon. My eyes strayed passed that question in my notes. As with the other public/private partnerships on the three different elements of the Underground, we have talked about a period of 25 to 30 years. Obviously, the precise period may well be subject to some degree of negotiation, depending on assessments of the funding. However, it is of the order of 30 years.

5.55 p.m.

Lord Berkeley: My Lords, the intervention on the sub-surface routes as regards London Underground and Railtrack is long overdue. I congratulate my noble friend the Minister on coming forward with this proposal. It will be of enormous benefit to Londoners. However, perhaps I may ask my noble friend something about the proposed investment and the £7 billion figure. Can he tell us whether it is a Railtrack-type definition of "investment"? On the national network it was said to be £27 billion over 10 years, but, when we looked at the smallprint, it turned out to be £6 billion of its investment, £4 billion from other people and the rest was put down to maintenance. How much of that sum will be actual new investment from Railtrack in this proposal for the sub-surface routes?

Lord Whitty: My Lords, the sub-surface mileage and the investment requirements amount to something slightly over one-third of the total network. Therefore, one could conclude that it is something over a third of the total £7 billion. Railtrack will raise some of that money itself, while some of it will be covered by the normal income on those routes which eventually come to Railtrack. It is of the order of about £2 billion of that £7 billion.

Lord Archer of Weston-Super-Mare: My Lords, I have two questions for the Minister, both of which, strangely enough, came from both Front Benches on this side of the House but which I do not believe were fully answered. First, can the Minister say why, despite the fact that there has been a sustained attack on Railtrack for the past two years, it is suddenly the acceptable and only body which should have this initial contract? We should know why Railtrack is suddenly all right.

Secondly, the Minister very kindly said--and I did not get this when I heard the Statement in the other place--that the mayor would be brought in for consultations in the second part of the agreement.

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Everyone knows that it is the second part of the agreement that really matters; everyone is waiting to see what PPP actually means and what this Government will suggest. Can the Minister say how the Government will react if the mayor says, "This simply isn't a good enough deal for Londoners"?

Lord Whitty: My Lords, before I respond to the noble Lord, perhaps I may make a slight correction to my last comment to my noble friend Lord Berkeley. I believe that the figure is nearer £3 billion than £2 billion; in other words, it is between the two, but nearer £3 billion.

As to Railtrack's credibility in this area, there have clearly been problems about its performance on the infrastructure of the national rail network. It has been important both that the Government have drawn attention to that publicly--indeed, it does not take the Government alone to draw attention to that--and that we have taken steps to try to improve its performance. We have to deal with a rail network which we inherited. Therefore, in practice, Railtrack is the main infrastructure owner of the national rail network. It is, of course, a clear front-runner for any interface between that network and a contract from London Underground to run the parts of the Underground system which would most easily be integrated with that network.

As I said earlier, the contract which London Underground will have with Railtrack will ensure adherence to the performance criteria which we shall set in the new regime. It is important to recognise that although Railtrack has failed in certain respects, it has a wealth of expertise which, if given its head, could deliver a modern, up-to-date and effective new rail system not just for London but for the country as a whole. There have been problems with project management within Railtrack which must now be dealt with.

I now turn to the question of the mayor. I realise that the noble Lord, Lord Archer of Weston-Super-Mare, may be straining at the leash here as the mayor will not be involved in this matter in the early stages; I referred to the latter stages. We intend to put the PPP in place before we hand the Underground part of the system over to the mayor. In the latter stages, we shall consult closely with the mayor on PPP. I consider it unlikely that the mayor would disagree that the PPP is a major step forward for London in terms of the mobilisation of resources and expertise. I am sure that any mayoral candidate, and any actual mayor, would recognise that that process is a major advantage for London. I think it unlikely that the mayor would wish to dissociate himself from what I believe is a favourable step.

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