Memorandum by TSSA (LU 02)
The TSSA once again welcomes the opportunity
to contribute to the Sub-Committee's work.
We set out our evidence as per the headings
(reproduced in bold type) in the Committee's press notice (04/2001-01,
25th September 2001).
1. The desirability of an independent audit
prior to signing the contracts to ensure value for money
The TSSA has consistently argued for an independent
audit prior to signing the 30-year PPP contracts for the following
Best valueseveral erudite
and independent reports
have revealed that the financial desirability and the assumptions
used regarding the relative advantages of the public and private
sector are very questionable.
Public Interest necessityGiven
the controversy of the PPP and the indisputable public interest
nature of LUL it is vital that there is conducted, in the public
domain, an independent audit prior to signing. A public utility
must be publicly accountable and this can only be achieved through
public scrutiny. If the government are so confident about the
merits of the PPP why the continuing need for secrecy? Without
full disclosure of the financial details of the PPP, including
the assumptions concerning the public sector comparator the PPP
will lack democratic legitimacy.
2. How much information about the precise
nature of the contracts should be made public before they are
It has been a regrettable fact that the vital
public debate on the PPP has been impoverished because the Government
has suppressed the information needed for informed evaluation.
It is salient to note that Lord Cullen's second
Ladbroke Grove report published this month concluded that during
the mainline Refranchising process the HSE should receive full
details of the proposed bids.
TSSA safety reps have consistently commented to us that because
so much information is deemed as "commercially sensitive"
they have been denied the information they need to contribute
to the PPP evaluation process. Because of the potentially adverse
consequences of inadequately informing front-line staff in their
safety consultations we believe there is an overwhelming argument
for full and candid disclosure of contract details without prejudicing
legitimate commercial confidentiality. Restricting information
only to the HSE, despite their professionalism and integrity will
be insufficient to allay the justifiable concerns of trade union
Health and Safety representatives.
3. The allocation of risk between the public
and private sectors
The Funding London Underground (Financial
Myths and Economic Realities) report
concluded that financial risk transfer was incomplete and the
GLA/Mayor will have responsibility for meeting the majority of
the outstanding debt if a PPP company has its contract terminatedie
the bank debt.
The public sector and the taxpayer are still
ultimately financially liable because it is not credible that
a government will permit a vital public utility to fail. This
reality compromises the market disciplines that the private sector
can allegedly introduce.
4. The opportunities to adjust the contracts
after they have been signed; and the role of arbitration in the
event of dispute over the contracts
Obviously it is vital with 30-year contracts
that they possess the flexibility to allow for changing circumstances
and priorities, though we note that the mainline experience has
demonstrated that "contract culture" has resulted in
cost inflation, operational rigidity and continuous disputes over
responsibilities and jurisdictions.
It is also essential that LUL, perhaps via the
Secretary of State has sovereignty and possesses the power to
settle disputes in the public interest.
5. Regulation following the signing of the
contracts and the expected relationship between Transport for
London and the infrastructure companies, and how to ensure proper
accountability for the Underground system
For LUL to be satisfied that the work that is
needed to maintain, renew and enhance the network is being done
to the correct standards they will have to monitor and audit Infraco
activities thoroughly. This will be bureaucratic and costly, but
because the PPP necessitates contractual relationships rather
than managerial control, regrettably this will be imperative.
However, effective regulation will be problematic. We suspect
that this process will divert funds from maintenance, renewal
or enhancement into an excessively bureaucratic processif
LUL management have devolved responsibility to the Infraco will
they have the engineering and technical expertise in the future
to effectively assess an Infraco's plans or it's work? Will LUL
have to duplicate this expertise to enable them to supervise the
Infraco's, if not how can they realistically "control"
It remains to be seen if the Infraco's will
be flexible and allow TfL the discretion and power to direct
the work as they see fit.
TfL/LUL must formulate medium term strategies
for service delivery and agree the programmes of work with the
Infracos. Achieving these service delivery strategies will determine
Infraco performance and ensure their accountability only if these
plans and their progress are also publicly advisable.
6. Setting and enforcing performance targets
for London Underground
In the long-term LUL must provide sufficient
services to the growing patronage and passenger demands (punctuality,
frequency, reliability and comfort). This is very challenging
and obviously requires expanding capacity.
Therefore in the medium term LUL should state
how they intend to meet provide present levels of optimum services
(in consultation with TfL/passenger and employee representatives)
and what resources will be needed to deliver this. The strategy
will direct the work that the Infraco's must provide. LUL will
then be judged on how well the system provides the services that
LUL calculated where necessary (see above).
One of the problems will be that LUL's performance
is ultimately dependent on the Infracos but their control will
be indirect. Mainline fragmentation has proved the dangers of
splitting the vertical integration of a railway and we support
Mr Kiley's contention that PPP will compromise "unified management
control" which is a prerequisite for the most efficient and
7. Increasing capacity within the existing
network, extending the network and integration within and between
transport modes in London
We believe that PPP will not increase the capacity
of the network sufficiently to satisfy London's commuters and
According to the Government the PPP will commit
£13 billion over 15 years, and to put this into historical
context official past investment expenditure investment figures
are reproduced below.
5.16 London Underground: investment
expenditure/(£) millions: 1989-90 to 1999-2000
||Total investment expenditure|
Source Transport for London (1999-2000 prices).
Four issues emerge. Firstly £13 billion over 15-years
appears only to replicate recent spending levels and this seems
an inadequate figure to enhance a system given that recent spending
cannot even maintain it. Secondly, the government's own analysis
reveal that just 55 per cent, or £7.15 billion, of that will
actually be spent on maintaining and enhancing the infrastructurethe
balance being diverted to the Infracos and their shareholders.
If £13 billion appears to be an inadequate sum, in terms
of meeting passenger expectations and London's economic needs
what will be a real spend of £7.15 billion achive? Thirdly,
according to one recent independent academic report, LUL "is
currently faced with a backlog of £1.2 billion, representing
infrastructure assets (track, signalling, rolling stock etc.)
which are being used beyond their design life".
This analysis is borne out from the latest official figures regarding
the condition of Tubes infrastructure: "Just 12 days ago,
it was revealed that breakdowns on the Tube involving signal points
and track failures reached a record 4,738 during the last 12 months,
according to LU's own figures. The rise of 35 per cent masks the
fact that some lines have seen breakdowns double in the space
of a year." Finally,
with the multiple interfaces created by PPP/fragmentation how
confident are the Sub-Committee that all of this money will actually
be spent on improving LUL's assets rather than increased administration
and bureaucracy? A recent "Rail Business Intelligence"
study concluded that "railway electrification and upgrade
costs which remained constant under British Rail have increased
by two to three times since privatisation" and that the "separation
of responsibilities within London Underground PPP could also introduce
similar cost escalators".
The Government's much welcome 10-year Transport Plan envisages
significant expenditure and enhancement for the mainline. Unfortunately
since its privatisation in July 2000 the privatised railway has
been buffeted by continuing crisis and the financial collapse
of Railtrack and the scepticism of the City mean it is unrealistic
that the private sector will contribute as planned to rebuilding
the railway. The lesson for LUL and the Government is that for
the Underground public funds must be spent on increasing capacity
significantly over the coming years because the private sector,
for all it's virtues lacks the ability to commit to such huge
long-term projects that are vital for national prosperity.
8. Industrial relations
The TSSA is highly concerned over the current state of industrial
relations but believes we can engage seriously and constructively
with LUL on the vital issue of improved human resource strategies
that must be aligned to clear corporate objectives based on customer
This means serious investment in training and developing
all its staff, including the further implementation of equality
policies. This process must be audited and not simply be about
achieving IiP status. If the investment in training and development
is genuine and effective it will result in changed staff behaviour
throughout all the levels of the organisation. This changed behaviour
will manifest itself in improved managerial and supervisory skills
combined with enhanced competencies and the framework for achieving
this will be the training, development and equality policies that
LUL must devise and implement in consultation with the trade unions.
The TSSA could facilitate this process because whilst our
duty is to promote our members interests we recognise that our
members will prosper best within an LUL that is truly customer
focused and that invests properly in its most important asset,
There seems to have been a deteriorating relationship between
LUL, ASLEF and the RMT which have resulted in industrial action
which is not in the best interests of either the passengers or
staff. We believe it is imperative that the Capital, its people
and its economy can operate without damaging disruption.
9. Passenger and staff safety
Firstly we believe that passenger and staff safety is indivisible.
Secondly, our health and safety representatives passionately believe
that PPP will be less safe than the current vertically integrated
system. We state this because:
We believe that the PPP potentially repeats the problems
experienced by the discredited national rail system of increased
bureaucracy, fragmentation and poorer communication. Many commentators
are sceptical that such a system is in the best interests of either:
Efficiency (maintenance and renewal costs
will probably rise due to increased interfaces, bureaucracy and
"diseconomies of scale")
Fragmented responsibilities and new organisational
arrangements with the potential for inconsistent messages about
safety priorities and for divergence in working practices
Companies that will have sharper conflicting
commercial and operational interests and fewer incentives to co-operate
together voluntarilygreater interfaces that are more difficult
than under a single unified structure
Increasing resilience on sub-contractors,
particularly for maintenance
Contractual relationships rather than a command
structureif it is not written down it may not be done
Lord Cullen's second report has highlighted the concerns
over separating infrastructure control from maintenance and renewal.
TSSA members are deeply concerned how contractors will be effectively
managed. LUL is rightly proud of their safety management system,
but the question that needs to be answered is, will PPP provide
a better structure for that system to operate in?
Legally we do not dispute that quite rightly, safety responsibility
remains with LUL under the PPP. However, that illustrates the
basic deficiency of PPPit confuses "responsibility"
and "control". If responsibility stays with LUL this
implies that the Infraco's are not responsible, but if there is
an accident, incident or problem there is therefore scope for
the very "territorial dispute" that LUL claim is not
possible. The fundamental question is, does LUL have real safety
responsibility and control under PPPsimply, will PPP be
safer and more efficient than a non-fragmented unified system?
Funding London Underground (Financial Myths and Economic Realities)
Gaffney et al-February 2000, Evening Standard article ("Experts
say Tube PPP won't work")-13 July 2001 and Rail Business
Intelligence ("Historic Cost shows `privatisation inflation'
"), 28 June 2001, Deloitte and Touche Report (24 August 2001). Back
The Ladbroke Grove Rail Inquiry Part 2 Report, paragraph 9.102. Back
Funding London Underground (Financial Myths and Economic Realities)
Gaffney et al-February 2000. Back
Guardian-"Railtrack collapsed because of PPP. So
why is the government still forcing it on the tube" (12 October
Funding London Underground-Financial Myths and Economic Realities
(Gaffney, Shaoul & Pollock) February 2000. Back
Evening Standard-"PPP protest as court battle starts"
(23 July 2001). Back
Rail Business Intelligence ("Historic Cost shows `privatisation
inflation' "), 28 June 2001. Back