Memorandum by the London Transport Users
Committee (LU 06)
I am writing to submit the London Transport
Users Committee's (LTUC's) response to the questions listed in
your sub-committee's press notice of 25 September.
(a) The desirability of an independent audit
prior to signing the contracts to ensure value for money
The government has repeatedly stated that the
public-private partnership (PPP) will not proceed unless it is
shown to offer better value than a public sector comparator (PSC).
We would expect the government to honour this undertaking. The
National Audit Office (NAO) has already reported (at your sub-committee's
urging) on the approach taken by the government in formulating
the PSC. Given the extreme political sensitivity of the issue,
we would regard it as prudent for the government to invite the
NAO to revisit the PPP and PSC before finalising any contracts,
in order to offer the most credible assurances possible thatwhichever
route the government finally selectsthe choice has been
made on the best available advice and the most plausible estimates
of cost and benefit.
(b) How much information about the precise
nature of the contracts should be made public before they are
We accept that the government may wish to withhold
some financial particulars until any contracts are signed, in
order to protect its negotiating position. But it is not apparent
to us why the general nature of the contracts should not be made
known, including in particular the outputs which the infracos
will be required to deliver and the mechanisms for incentivising
them to do so. Indeed, if the government wishes to rebut the welter
of criticism now being directed at its proposals by critics of
the PPP approach, it would appear prudent for it to publicise
as much of this information as possible.
At present, the propaganda war is being won
by the opponents of PPP merely because its proponents do not seem
able and/or willing to mount any sustained campaign in its favour.
The LTUC has taken no collective position on the merits or demerits
of the PPP proposal, simply because it does not consider itself
to be in possession of sufficient information to enable it to
do so. The case against has been made volubly, while the case
in favour has gone largely unheard. If this causes concern to
the government, the remedy lies in its own hands.
(c) The allocation of risk between the public
and private sectors.
This is clearly a delicate issue. Some of the
possible risks are difficult to estimate, simply because the true
condition of the assets and therefore the cost of bringing them
up to an acceptable state of repair is not fully known. If the
private sector is required to bear too high a proportion of risk,
this will be reflected in the costs which it requires the public
sector to meet. If too little risk is transferred, there will
be no incentive for the private sector to operate more efficiently.
But it is impossible for any body not directly involved in the
PPP negotiations, or in a close scrutiny of their outcome, to
say with any certainty whether the optimal allocation has been
(d) The opportunities to adjust the contracts
after they have been signed, and the role of arbitration in the
event of dispute over the contracts.
Self-evidently, these will be crucial elements
in the contracts. But only those who are parties to them can demonstrate
that proper arrangements will be (or have been) put in place.
(e) 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.
It is not immediately clear what form of regulation
the sub-committee has in mind here. Our understanding is that
London Underground and the infrastructure companies (infracos)
will be bound (if PPP goes ahead) by detailed mutual obligations,
set out in legal contracts. Either party could have recourse to
law, if it believed that the other was in default. But a system
of financial incentives will be put in place to encourage them
to meet their obligations and, in extremis, London Underground
will have power to terminate the agreement.
London Underground (LUL) will become a wholly-owned
subsidiary of Transport for London (TfL). LUL's relationship
with the infracos will be set out in detail in the PPP contracts.
On a day-to-day basis, LUL (as the operating entity) will have
direct interaction with the infracos. TfL's involvement
will be at one remove, as the body responsible for setting LUL's
objectives and for controlling its finances.
Political accountability for the Underground
system will rest with the elected Mayor of London, who appoints
the Board of TfL (and is currently its chair). TfL,
in turn, will appoint the management of LUL. Both the London Assembly
and LTUC have (and will continue to have) a role in monitoring
the Underground's service performance, and the Assembly may well
choose to interest itself in the organisation's financial performance
too. Safety regulation is the responsibility of the Health &
Safety Executive (HSE). Normal local government audit procedures
will apply, including the "Best Value" regime.
(f) Setting and enforcing performance targets
for London Underground.
Financial performance targets will be a matter
for the Greater London Authority, ie the Mayor, scrutinised by
Service performance targets have been set annually
for London Underground for the past decade, as part of the previous
government's Citizen's Charter initiative (now known as Service
First). Some are based on objective measures of service delivery
(such as escalator availability or ticket queueing times) and
others on the findings of attitudinal research amongst passengers
(such as cleanliness of trains and stations or staff helpfulness
Until now, these targets have been formally
promulgated by the Secretary of State for Transport, following
quadrilateral consultations between the Government Office for
London, the Service First unit (part of the Cabinet Office), London
Transport and LTUC. In recent years, there has been a tendency
for this process to be subject to considerable delay (mainly as
a result of uncertainties about the short-term funding of the
system, which clearly impacts on its performance aspirations),
and rather perfunctory, but it has not been formally discontinued.
LTUC assumes that, if and when TfL inherits
ownership of London Underground, similar arrangements will be
put in place. We believe that it is important that all relevant
parties should participate fully in this process, not least ourselves
as the official watchdog body representing the interests of Underground
users. We have to say, however, that we have received no indication
that it is TfL's intention to do so, and we must register
our disquiet at the fact that performance targets for London's
buses appear to have been put in place by TfL without any
such consultation or, indeed, any formal notification to this
committee. This is not an encouraging precedent.
It is difficult to know quite what your sub-committee
may mean by the expression "enforcing" performance targets.
As matters currently stand, the targets represent aspirations.
Managers may be incentivised to achieve them by including a performance-related
element in their remuneration, but there are no sanctions applied
to the organisation for failing to achieve its targetsan
outcome which has frequently occurred. In the case of those which
are based on user satisfaction polling, it is not immediately
clear what form of sanctions would be relevant.
But the situation is quite different on the
national rail network, where a system of financial rewards and
penalties is in place to incentivise train operators to (eg) run
punctually, not cancel trains, and operate them at their planned
length. Fares control includes a performance-related element,
so that increases are moderated (or prevented) when service quality
has deteriorated. No such linkage exists with Underground fares,
though we would be happy to see one put in place. The only material
redress currently available to Underground users is a refund of
their fare (in the form of a voucher) if they suffer a delay exceeding
15 minutes for reasons attributable to LUL. But oddly, minimising
such delays is not one of the performance targets set for the
The question refers to London Underground, a
term which we understand to refer to the future operating company
(opsco), rather than to the infracos under the PPP. It is not
clear to us what performance targets are to be set for the latter,
or how delivery against these is to be demonstrated. But this
is immaterial to users, who will continue to be customers of LUL.
From the passenger perspective, what matters is the ultimate outputs
of the organisation, not the internal attribution of responsibility
for any shortcomings experienced.
(g) Increasing capacity within the existing
network, extending the network and integration within and between
transport modes in London.
The capacity of the existing network is determined
by such factors as the spacing and reliability of signals, the
length and internal capacity of trains, the spacing of stations,
dwell times at platforms, the ability of the controllers to recover
the service after interruptions, the frequency of unplanned incidents
(such as train or signal or power supply failures, suicides and
"passenger actions"), the availability of traincrew
and other key personnel, platform dimensions, permitted line speeds,
and the capacity of access routes (including passages, staircases,
escalators and lifts).
Some of these are matters which would, under
the PPP, fall within the sphere of responsibility of the infracos.
Others would be reserved to LUL. We would expect the infracos'
contracts with LT/LUL to commit them to achieving a specified
level of enhancement, as part of their overall investment programmes,
where it is practicable to do so. But in the absence of published
details of the obligations which each infraco is to assume, it
is not possible for us to express an informed view as to the extent
to which the PPP approach (as distinct from any alternative, represented
by the PSC) is likely to achieve this more efficiently, more speedily,
or with less disruption to the network. Such disruption, and the
manner in which it is planned and managed, itself has significant
short-term capacity implications.
It is our understanding that proposals for extending
the network (as opposed to enhancing the capacity of the existing
system) are excluded from the PPP arrangements.
Improving integration is central to the Mayor's
transport strategy, and is an objective to which we would expect
the Underground to make a full contributioneg through improved
interchanges, and integrated ticketing and information systems.
We see no immediate reason why this should be affected by the
PPP arrangements, if they go ahead.
(h) Industrial relations
In the recent past, industrial relations on
the Underground have not been good, partly arising from concerns
about the possible effects for staff of the PPP proposals. Similar
difficulties affected the London bus network prior to the privatisation
of London Transport's bus operating subsidiaries (which involved
a much larger proportion of the workforce than would LUL's PPP).
Since London's bus companies were privatised, there have been
far fewer disputes. It is our belief that the industrial relations
climate on the national rail network is now generally better than
was the case in the era of British Rail, and that if and when
disputes do arise, they tend to be confined to more limited areas
of the system.
(i) Passenger and staff safety
In common with all passenger railways, LUL is
required to operate in accordance with a safety case approved
by the Health & Safety Executive (HSE). Failure to do so is
an offence. Its compliance is subject to regular HSE audit, and
the safety case is subject to regular review and amendment. The
safety case regime, and the HSE's role in regulating it, has recently
been reviewed and endorsed by the Ladbroke Grove Rail Inquiry
(the Cullen report, part 2).
This situation would not be affected by PPP,
and LUL would remain the safety case holder. The government has
given repeated assurances that PPP would not proceed if the HSE
is not fully satisfied that all foreseeable risks have been identified
and appropriate controls put in place.
LUL has one of the most sophisticated risk assessment
models of any railway operator in the world, as a basis for prioritising
action and identifying trends. Its safety record stands comparison
with any other metro system of similar scale and complexity. LTUC
would oppose any scheme which jeopardised this situation. But
we are aware of no firm evidence (as distinct from claim and counter-claim
based on loose generalisations about the national rail network)
which supports the suggestion that the PPP arrangements must adversely
affect the safety of either passengers or staff.