The Subterranean Railway (38 page)

In the face of governmental obduracy, Tunnicliffe, who had been against the PPP, changed his mind and became its number one cheerleader. John Prescott, the Transport Secretary, also succumbed despite his antipathy, having agreed a compromise with the Treasury, which had wanted the outright privatization of the whole system, a measure that would have infuriated most Labour party supporters and was probably unworkable anyway. Effectively, Prescott was presented with an ultimatum by Gordon Brown, then Chancellor of the Exchequor: the PPP or no investment. Unsurprisingly, he chose the money.

Prescott, who had wanted to keep the entire system in the public sector, managed to wring a few other concessions not related to
the railways out of Brown and that was enough to persuade him to acquiesce. At a late stage, Ken Livingstone who was elected as the first Mayor of London in 2000, and his transport commissioner, Bob Kiley recruited from the US where he had run New York’s transport system, suggested to Gordon Brown that Transport for London should be allowed to buy bonds rather than sign the PPP but he turned them down.

Under the PPP, the infrastructure was to be broken up into three parts – covering respectively the Jubilee, Northern and Piccadilly; the Bakerloo, Central and Victoria; and the sub surface lines, the Metropolitan, District, Circle and Metropolitan & City – and contracts for its refurbishment and maintenance would be handed over to private sector ‘infrastructure companies’ (infracos) under thirty year deals but with breakpoints every seven and a half years. The day-to-day operations – the running of the network – would remain in public hands, controlled, after the creation of the Mayoralty and the London Assembly in 2000, by Transport for London. This split was both unprecedented and incredibly complex, as illustrated by the fact that the trains were the responsibility of London Underground during the day and of the infracos at night when they were being maintained in the depots. Nowhere else in the world had such a bizarre arrangement been used on a metro, or indeed a surface railway. To do it on such a busy and complex system as the Tube was a brave, indeed foolhardy experiment.

While it may have been the wrong plan, the PPP was well-funded. Prescott had been bought off at a good price. At last there was an agreed plan to refurbish the Underground by government with guaranteed funding which was, in fact, the most ambitious programme in its history, dwarfing the investment programmes of the 1930s promoted by Ashfield and Pick. Most stations would be refurbished and hundreds of kilometres of track would be renewed; there would be new trains for the Victoria Line (in the first period, and other lines in subsequent ones) and a new signalling system for the Jubilee; many
escalators and lifts would be replaced and the contractors would be required to improve the reliability of the whole system through a very complex series of measures of performance.

The sums of money involved were gargantuan. The PPP, which was put forward as a £30bn programme to refurbish the Tube over thirty years, was an unprecedented amount of money, if it could be delivered and that was a big If. The ramifications of a contract that was, in reality, impossible to police were unclear. The cost of creating the PPP was also staggering, with £455m spent on lawyers and consultants preparing the contracts and bidders’ costs which were reimbursed. There were many other expenses borne by the taxpayer, and some estimates suggest that the overall extra cost, compared with a simpler conventional procurement exercise, was at least £1bn. Ironically, the PPP had originally been presented by Labour ministers as a way of funding the improvements to the system by way of the the private sector. But this was always a fantasy, and became apparent long before the contracts were allocated and the infracos were paid around £1bn per year for their work.

The idea of passing on the risk of maintaining the assets which in some parts of the network were approaching 150 years-old to the private sector was great in theory but unrealistic in practice. The PPP contracts, oddly, were signed off by the Department for Transport before the management of the system was handed over to London Underground under the auspices of the newly created Transport for London. This was done deliberately because ministers did not trust the Underground management, but it meant the contracts were inherently flawed. They gave far too much power to the infracos to determine how money was spent, and very little control to the public sector managers who were supposed to oversee the work. Despite their complexity, the contract documents failed to define very basic terms such as how to ascertain the existing condition of the assets and what improvements were required. As a result, there were constant disputes, with expensive lawyers being called upon which wasted yet more money still.

Worse, once the preferred bidders had been selected, they played hardball, effectively reducing their risk and passing it back on to the Underground. The private sector involvement was not worth the extra cost incurred because the infracos had to pay more to borrow money than the government which can always get the cheapest interest rates, The infracos had been able to bargain away much of the risk because they knew that the government had no choice but to continue with the negotiations over the contracts as there was no plan b. The transport secretary at the time the deal was signed, Stephen Byers, later admitted that he had been under instructions to rubber stamp the contract whatever concessions were conceded to the private companies.

Moreover, two of the three contracts – for the sub-surface lines, and for the Bakerloo, Central, and Victoria lines – were won by a single company: Metronet, made up of a consortium of suppliers Atkins, Balfour Beatty, Bombardier, EDF Energy, and Thames Water. This was a mistake for two reasons: first, by giving two of the contracts to the same company, it meant that if they went under, the PPP was doomed to fail; secondly, it proved to be a way of giving them
carte blanche
to charge whatever they liked because Metronet was charged exorbitant rates for goods and services by its suppliers since they were intent on making their profits in the existing companies. Metronet signed a contract that gave very generous terms for Balfour Beatty to maintain the track and it proved very difficult for the arbiter or Transport for London to determine whether this was giving good value to taxpayers.

Indeed, it seemed unlikely that Londoners were getting their money’s worth. Metronet was in trouble right from the start, with the arbiter who issued a series of warnings that the company was not being ‘economic and efficient’, the crucial benchmark under which the infracos were judged. There were, too, criticisms, that the PPP encouraged more resources to be spent on station upgrades, which passengers did not much care about, rather than on improving the train service, which was more difficult to do. Matters came to a head with the arbiter’s report in 2006. Metronet had asked for an extra £1bn to
carry out the work, arguing that it had proved more expensive than expected, but the arbiter decided Metronet had not been ‘economic and efficient’, and therefore the extra funding which it sought was not forthcoming. As a result, the following year the company threw in the towel, costing the five owners at total of £540m but which they judged was far less than the liabilities they would have incurred had the contracts continued. A subsequent National Audit Office report calculated that the failure had cost taxpayers a further £410m.

The other contractor, Tube Lines, owned by a consortium of engineering companies which ran the Jubilee, Northern and Piccadilly contract was more successful and did seem to have greater control over its costs. However, it ran into trouble on the resignalling project for the Jubilee. This, like the Metronet contract, was the subject of a prolonged dispute, with the arbiter again determining that much of the extra cost sought by Tube Lines should not be paid. Tube Lines could have stuttered on but once Metronet collapsed, its days were effectively numbered and, again after prolonged negotiations, it was taken back in-house by London Underground in 2010, thereby ending the Tube’s experiment with privatization. However, its shareholders were more fortunate as, because of the unclear wording of the contract and the need to terminate the agreement at the end of the first seven and a half year period, Transport for London bought the company for what was seen as a generous £310m. The PPP, which was supposed to be a thirty year contract, had lasted just a quarter of that time bringing to an end the experiment with partial privatization of the Tube.

Given the weight of evidence against the notion of imposing a PPP on the Underground, it is not surprising that the scheme collapsed so quickly. Virtually every expert who had examined the idea was united in opposition against it, and they were backed up by a series of parliamentary and independent reports that concurred with their view. A report by a parliamentary committee, for example, predicted in early 2002 that they ‘conclude[d] that it is inevitable that the PPP will lead to significant and expensive disputes over the contracts’ and that
forecasts that the PPP would save money compared with a public sector alternative ‘were inadequate and flawed’. The concept had been pushed through on the basis of extremely dubious evidence that suggested that the PPP would be cheaper than an entirely public-sector option, but in the event proved precisely the opposite. It is no exaggeration to say that billions of pounds were wasted in pursuing this ideological concept when the money could have been invested in simpler and more cost-effective ways of improving the Underground.

If coping with the PPP and its implications was not enough, the Underground also suffered the worst day in its history on July 7 2005, the day after London had been awarded the 2012 Olympics, when suicide three bombers detonated explosions almost simultaneously and a fourth, possibly thwarted in his attempts to get on the Tube, blew up a bus in Tavistock Square half an hour later. The bombs went off on the Piccadilly line between King’s Cross and Russell Square, and on Circle Line trains at Edgware Road and Aldgate. The total death toll was fifty two – not including the four bombers – and there were more than 700 injuries – many severe. Not surprisingly, the deadliest incident, with a death toll of twenty-six, was the explosion on the Piccadilly where, because it is a deep-level line, there is nowhere for the blast to go but along the train. The blast wreaked havoc. Nevertheless, the resilience of the infrastructure was demonstrated by the lack of structural damage to the tunnel which meant there was no collapse. The scenes of carnage were terrible and, unsurprisingly, it was for several days the biggest news story in the world. The immediate consequences to London’s transport system were devastating. The bombs were detonated during the morning rush hour and the system was closed down for the rest of the day, with thousands of people having to make their way home on foot. But a kind of Blitz spirit emerged and Londoners proved yet again to be very sanguine. Sections of the system remained closed during the following weeks but despite the extensive damage to tunnels and electrical equipment, within a month most services had been restored. Two weeks later, a similar attack was prevented when the bombs failed to go off.

The attacks, which became known as 7/7, demonstrated that any metro system in the world is vulnerable to such attacks. In the aftermath of 7/7, there were calls for greater security checks but common sense prevailed. They cannot be prevented by security measures or checks to passengers going into the system, as these would cause disproportionate delays, threatening the very effectiveness of what is a marvellous public transport system.

Oddly, despite its failings and its failure, in some respects the PPP may have proved to be a blessing in disguise. Because Labour had invested so much political capital into the idea, the concept had to be shown to work. The Chancellor at the time, Gordon Brown, in particular, needed to show that it worked, having pushed the scheme through in the face of overwhelming evidence that it was not the best option. Therefore, he could not starve the system of funds and the Underground benefitted from an unprecedented amount of investment. Government contracts with the private sector are difficult to break and the money kept on flowing even as the inadequacies of the contracts became all too obvious, even when the economic situation deteriorated after 2008.

This renaissance of the Tube has been part of an amazing revival of the railways in London in which the Underground has played a central, but by no means the only role. While it is difficult to date specifically a point at which the true importance of the railways to the capital became conventional wisdom among policy makers and politicians, it is now common ground for all political parties that investment in the railways, much of which inevitably goes to the Underground, is vital for the economic future of the city. While perhaps it was possible to recognize a change in the 1990s, the very fact that it took so long – and an ill-conceived scheme – to bring investment into the Underground, showed that the importance of the railways had not been universally acknowledged. Certainly, since the first edition of this book was published in 2004, there has been a shift in political attitude with a
broad consensus emerging about the importance of railways to the economy of the capital, as demonstrated by the unprecedented level of investment.

In that relatively short period of time, we have seen the creation of the London Overground Network, incorporating a mishmash of national railway lines together with the Underground’s old East London Line, that strange stub of railway which was a seldom-used shuttle between Shoreditch and New Cross. With new trains, and the creation of a route between Highbury & Islington and West Croydon, through the reopening of an abandoned section of the North London Railway, together with a few minor additions, the eastern part of the London Overground, opened in 2010, has rapidly become a frequently used route. A relatively cheap development, at around £1bn, it is the epitome of the process described time and again throughout this book as the refurbished railway is already showing signs of helping the regeneration of a vast swathe of East London thanks to the improved travel opportunities and accessibility it affords. The London Overground Newtork, which also incorporates the rest of the North London Line, the West London Line between Willesden Junction and Clapham Junction, and a new south London service between Clapham Junction and Dalston, effectively recreates the old outer circle – a kind of railway M25 – though sadly for train spotters no timetabled train will actually operate on the whole circular route.