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To compound that shortcoming, we also learned from the report that the public and private sector comparators will cost the same amount of cash. The only difference is an accounting nicety, apparently designed to reflect a social cost saving of taking the private rather than the public route. That is not used in any other PPP or private financial initiative scheme; it is a nebulous counting concept used by London Underground. We did not even have direct factual information on which to base an assessment of the Government's judgment that one route was better value than the other. It was an accounting trick.
Mr. Gardiner: The hon. Gentleman claims that no substantive checking of the figures took place. I know that he must be aware of the National Audit Office report delivered on 15 December 2000 to his Committee, because his Committee commissioned it. Is the hon. Gentleman saying that appendix 2, which clearly sets out the methodology that the National Audit Office followed in establishing exactly what he claims has not been gone into is false, or will he accept that substantive investigations were carried out?
This scheme does not deliver real solutions to the congestion problems on the London underground. It delivers station improvements ahead of new trains and track improvements. It is financially questionable and does not enjoy the support of the public in London, the vast majority of London Members of Parliament, the democratically elected Mayor of London or any political party apart from the governing party, yet the Government are still determined to press ahead. All I can say to them is that it is not too late to change their mind; in Mr. Kiley, we have an impressive witness, with a track record, who came to the Select Committee with a clear action plan that, in our judgment, offered an attractive alternative. The Committee has seen no evidence that the Government have given full consideration to that option.
Mr. Kiley has a track record. He has delivered real improvements in other cities. He is the commissioner for transport in London, appointed by the democratically elected Mayor of London. At the very least, in the view of the Committee and in my view, we and the Government should be giving serious consideration to the options that he proposed. The Government constantly say that there is no alternative, yet we have heard strong evidence for one. It is not too late for the Government to take that alternative; I fear that the route that they are taking will not deliver the solutions for which they are hoping. I appeal to the Minister at the very least to think again.
I doubt whether the total amount of private money promised for the system will come through; it certainly has not yet done so for the main line railways. The timing is likely to delay important infrastructure improvements; and the money will be repaid at a high cost to the public pocket.
When I asked a parliamentary question about the cost of underground projects undertaken by the private sector, the reply was given in terms of the value to LUL. Actual spending is very different from the assumed value to an organisation, when that value has been set by the organisation. As an accountant, I call that bad accounting practiceexactly like the WorldCom case.
The Treasury's alleged £2 billion saving from the PPP, based on that WorldCom approach and a comparator skewed against the public sector, must be deemed unreliable. Will the Minister tell us where the independent audit arrangements are for the PPP finances?
I hope that the Health and Safety Executive will not be complicit in the project. It has yet to report on the tube safety plans, but I was told in another parliamentary answer that the contracts were likely to take effect this summer. That could mean that the Minister takes a decision with no informed parliamentary debate on the safety issues. Will the HSE report be available before the recess, and will there be a parliamentary debate before the contracts go ahead?
A recently published report from the former Department of Transport, Local Government and the Regionsits 2002 reportstates that the 10-year planned investment for Londonbuses and tubewill be made up of £7.8 billion from the public sector and £10.4 billion from the private sector, making a total of £18.2 billion. A further £7.4 billiondescribed as public resource, but really a public revenue subsidyis envisaged over the period, giving an overall total of £25.6 billion. Under the proposed system, much of the public money will not go directly into work on the tube but to company profits, dividends for shareholders and directors, and interest payments to City financiers.
Transport for London points out that there is a serious funding gap; it amounts to £1.473 billion for 200506 to 200910, including the sum of £771 million which is LUL's assessment of its funding needs in excess of the transport grant. TfL notes that an additional £170 million is necessary as a contingency reserve, for which nothing is provided in the current Government figures, despite the recommendation in the latest White Paper "Strong Local LeadershipQuality Public Services" that local authorities should have a duty to maintain adequate reserves. TfL also maintains that there is a £532 million gap over the period in provision for risks and other costs that need to be managed.
The negotiations started at the behest of the Government have moved that risk from the infracos to TfL, so the Government should recognise their responsibility and provide the necessary comfort. The credit assessment agency, Standard and Poors, has already given TfL a "negative outlook" status, so the Government should rectify that with a letter of comfort and a proper funding agreement; otherwise TfLand the tube with itcould go broke. Full-scale privatisation, which the Government say that they do not want and the public most certainly do not want, would inevitably follow.
The Treasury insists on unrealistic assumptions of wage growthonly 1 per cent. real wage growth. Public sector pay, London living costs, rail industry pay, higher national insurance costs from the recent Budget and extra management costs to cope with the complex PPP contracts all suggest that a higher figure will be necessary. The current assumptions are a formula for a showdown with the trade unions, which will be the Government's fault. The Government have also yet to agree, and pay towards, the administration arrangements of the London Transport pension fund.
Tube Lines, the infraco responsible for one of the three tube contracts, has submitted its draft financing documents. They show that lenders will have a panoply of powers to control or direct infraco activity in more than 100 decision areas. Bob Kiley said of that:
There would be large windfall profits for the infraco's sponsors, lenders, advisers and insurers. In the case of Tube Lines alone, the amount would be more than £100 millionmerely for getting the contracts, not for any aspect of its performance in improving the tube. Tube Lines' rate of return would be pushed up to 32 per cent.not the 15 to 20 per cent. that the Under-Secretary of State for Transport told Parliament was likely. Such pay-outs