Tube: PPP deal under fire

MPs have slammed London Underground's public private partnership as overly complex and unnecessarily expensive.

The Commons public accounts committee said in a report on Thursday that two 30-year deals to upgrade Tube infrastructure did not offer taxpayers good value for money.

The spending watchdog concluded that the scheme has already cost the public purse almost £1bn, and suggested that bond issues should be considered for the financing of future projects.

Committee chairman Edward Leigh said that while there are safeguards in the system, it would cost considerably more than conventional government borrowing.

"The PPP deals for maintenance and upgrading of London Underground are inherently complex, given the approach taken, and have led to enormous costs for the taxpayer," he said.

"It appears to have cost the public purse the best part of £1bn to set up and finance the deals in this way.

"The set-up costs to the public sector include London Underground's costs of £180m and the payment of £275m of bidders' costs.

"Whilst it is common for the public sector to reimburse bidders' costs it is vital that public bodies are absolutely clear up-front about what can be reclaimed, especially in relation to 'success fees' to compensate contractors for the profit they could have made elsewhere had their staff and resources not been tied up in the bidding process.

"Lenders are well protected but still see enough uncertainty in the deals to charge £450m more for the financing than it would cost to repay government loans for the same amount of borrowing."

Dispute

The PPPs finally got the go-ahead in 2003 after a protracted legal dispute between central and London government.

Mayor Ken Livingstone objected to the Department for Transport and Treasury scheme but has now been given control of the network and pledged to make it work.

A spokesman for his Transport for London agency said it was not surprised by the report.

"TfL has consistently said that the London Underground PPP deals are an expensive and over-complicated way to manage the maintenance and renewal of the Tube," he said. 

"Nothing has yet encouraged TfL to change that view."

A Department for Transport spokesperson said the deals with private consortia Metronet and Tubelines would produce results.

"We are in the third year of a 30-year contract which is making up for decades of under investment," they said.

"We have already seen cleaner stations and more trains available at peak hours."