Londoners are paying the price for would-be Prime Minister Gordon Brown’s insistence on a ‘crazy’ quasi-privatisation of the Underground system, argues CHRISTIAN WOLMAR.
AS Gordon Brown inches closer to the premiership, it’s worth taking a look at one of his least successful initiatives. It was the Chancellor who insisted that the London Underground should be refurbished through a complex 30-year contract rather than a conventional arrangement by allowing Transport for London to raise money through bonds.
In fact, the Public Private Partnership on the London Underground is, like railway privatisation, an enormous experiment foisted on to an industry for ideological reasons with little concern about the practicalities of such a revolution.
By dividing up a busy metro system into a publicly- owned operator and three private infrastructure companies, the PPP contracts were breaking new ground as a way of running a railway. And, just as with railway privatisation, the new system has been found wanting. Evidence of the first three years suggests that the PPP has produced few gains at enormous expense.
It’s difficult to escape this conclusion when reading the annual review published by Transport for London into the performance of the PPP (http://www.tfl.gov.uk/tube/downloads/pdf/reports/tfl-ppp-fi nancial-report-05-06.pdf). The contracts are now in their fourth year, which is more than halfway to the first break-point (when the price but not the contract will be reassessed), but still, London Underground’s managing director Tim O’Toole points out in the introduction, many of the teething problems remain.
Indeed, I was struck by this at a meeting held in early September by London TravelWatch (the new name for the old London Transport Users’ Committee) where Andrew Lezala and Terry Morgan, the two bosses of the infrastructure companies – Metronet which has two of the three contracts and Tube Lines – were questioned by the committee. Both said the problem which they found most difficult was planning the engineering work that takes place every night and, particularly now, at weekends.
Now I found that a very revealing admission. It seems to have come as a surprise to the infracos that good planning is required to operate within the tight time limits and restricted space of the London Underground. It might be all right if it was J Smith & Sons (Engineering) of Gerrard’s Cross who suddenly found themselves with contracts worth £1bn or so annually, but Metronet boasts of being made up of five ‘world-class companies’ including the likes of Balfour Beatty and Atkins. Yet it is taking years to learn that planning is the foundation of all efforts to work efficiently.
The most damning passage in the report is about the inconsistency of the work carried out by the infracos. Sure, some of what they do is good, which it damn well should be at the price being paid, but overall they are very inconsistent and less good than implied in the bids which won them the contracts: “For each Infraco performance is up in some areas and down in others, and achievements in one area provide no guarantee of achievements elsewhere. This lack of consistency in infraco performance is a source of great frustration. The key to running a successful railway is to get the basics right, consistently, day after day.” Again, the suggestion is that fundamental skills supposedly brought in by the private sector are lacking.
The TfL report praises some of the infracos’ achievements such as Tube Lines’ delivery of its station enhancement programme and Metronet’s handling of the refurbished District Line fleet.
Interestingly, it singles out two projects which are not within the PPP but were add-ons carried out by Tube Lines – the rebuilding of Wembley Park, which was on time and below budget (shame about the stadium!), and the lengthening of the Jubilee Line fleet from six to seven cars. However, the report stresses that the infracos “continue to disappoint in many respects”. Tube Lines has been served with a Corrective Action Notice – the contractual way of saying “get your finger out” – to improve performance on the Northern Line, while Metronet is well behind on its station improvement programme.
You can almost hear the weary sighs in Tim O’Toole’s assessment as he repeats points that he made in the previous year’s report: “So I am sorry to have to lay down the same challenges to the infracos as I did a year ago. Tube Lines: sort out the Northern line and bring performance up to an acceptable standard. Metronet: overcome the delays on your renewal programme, and competently and consistently deliver what was promised, without burdening us with delay or additional costs.”
That last point is crucial. O’Toole is worried that Metronet will accelerate its station improvement programme but will try to foist the cost on to London Underground. And that is the key point. Of course there will be improvements under the contract but can the PPP provide value for money? It’s almost impossible to assess whether the huge amount of taxpayers’ money – around £1bn a year – is being spent well. All the informed, independent experts on this (and they are thin on the ground since it is almost impossible to understand the PPP contract, one of its major disadvantages) suggest that this is not the case. Far from it. They suggest millions, probably tens of millions, are being wasted.
The whole adversarial structure created by the PPP, with the need for several levels of arbitration, is bound to be wasteful. Indeed, the fragmentation of the railway under the PPP model may differ from that imposed on the national rail network, but it has created similar problems.
As a regular user of the Underground especially at weekends (as my bicycle is generally adequate in the week), I am finding that more and more oft en my journey is disrupted or, indeed, impossible to make because of weekend closures. The Northern Line, for example, is in the middle of a year when, apart from at Christmas, a section of the route will be closed every weekend. There is an argument that such engineering closures, which used to be undertaken sparingly by London Transport, are a cheaper and more efficient way of making up for the years of neglect of the system. The work is, indeed, very tricky and – particularly in the deep Tube tunnels – a logistical nightmare. It’s easy to see why the infracos want to do as much work as possible in 52-hour closures at weekends rather than the five hours they have available every night. The added requirements of onerous health and safety rules make that equation weigh even more heavily in favour of weekend closures.
However, it’s difficult to measure who benefits most from these closures, and therein lies the weakness of breaking up a railway into artificially constructed parts of bastardised businesses. TfL has allowed some extra weekend closures in return for speedier investment but, as a Tube user, I definitely feel that the balance has gone too far in favour of the infracos. The Underground is becoming something of a no-go area at weekends, rather like the West Coast line has been since the upgrade started nearly a decade ago, and that is not acceptable for London, whose retail economy is dependent on being a seven-day city.
The problem is similar to that created by the separation of the wheel/rail interface on the national railways: there is no single organisation or management which is able to weight the various factors involved when making decisions on maintaining the railway – such as balancing the cost of a project with causing inconvenience to the passengers. The infracos, of course, are only interested in reducing cost while the operator, London Underground, wants to provide the best possible service.
The complex PPP contracts are not an adequate substitute for these management decisions, as demonstrated by the situation on the national railway where operators are trying to avoid having work done on the line because it causes disruption, even though ultimately the improvements benefit them. No one, not even Tom Winsor, is clever enough to write contracts which fit all the possible eventualities. So Londoners and, crucially, visitors to the capital, are left with a far-from-ideal situation.
Contrast the performance of the London Underground with the MTR railway in Hong Kong where reliability is so high that is measured in the range between 99% and 100%. Yet it is an intensively used railway whose equipment is imported from Europe, and thus has all the same maintenance difficulties as the London Underground.
MTR has been part of a consortium bidding for the contract to run the new, extended East London Line together with the parts of the London Lines being taken over by TfL, and therefore the company may have the opportunity of trying to transfer its expertise from Asia to the UK, which, of course, may prove difficult given that the company is used to working as an integrated railway.
Most worryingly for the future is that the report implies this is the easy part of the contract before the major line upgrades begin in a couple of years’ time. Then not only will the infracos have to deal with day-to-day maintenance and making up the backlog, but they will also have to project-manage the major task of completely refurbishing lines in order to improve performance quite radically.
O’Toole seems to doubt whether they are capable of doing so. He says: “Line upgrades are extremely complex projects that will tax the skills of the infracos, their suppliers and LU. If the existing network is failing at the same time as we are installing the new system and addressing the inevitable design deficiencies, we shall face even worse levels of disruption.”
Certainly that does not sound like an advertisement for the structure of the PPP. The experiment goes on but Londoners and taxpayers seem to be paying the price of Gordon Brown’s folly on insisting on this crazy arrangement.