London mayor Boris Johnson this week escalated the row between London Underground (LU) and Tube Lines by calling on the government to break the PPP agreement between the two.
Johnson told transport secretary Lord Adonis that there was “evident failure” of Tube Lines’ PPP deal and that the government should step in to resolve a potential £400M shortfall in funding for Tube upgrade work
The shortfall will arise if the PPP Arbiter’s final ruling on what Tube Lines can charge for its contract follows its draft pricing of £4.4bn - £400M more than LU argued the work should cost.
Johnson insisted that this should be recovered from central government or Tube Lines rather than LU parent Transport for London (TfL).
“There can be no question of further reducing the scope of the improvements to be made to the Tube,” Johnson told Adonis in a letter dated 2 February.
It’s time to bring an end to this demented system. I don’t have some Trotskyite ambition to take back the track. The private sector will do the job — but we cannot allow them to do it on these terms.”
““One of two things must happen. Your government must now engage with [the PPP’s] evident failure to deliver the promised benefits and must make good the proposed shortfall. Alternatively, you should ensure that Tube Lines’ shareholders, Ferrovial and Bechtel, forego in the second [7.5 year review] period the huge sums they receive under so-called ‘secondment agreements’.”
Tube Lines pays its shareholders Ferrovial and Bechtel secondment fees for the staff it needs to do its contracted work. TfL and Johnson estimate that the shareholders will profit by £400M from these over the next review period.
Adonis rejected Johnson’s suggestions. In a written reply dated the same day he described TfL’s budget as “generous” and said it was for TfL to resolve its dispute with Tube Lines.
“It is for you and TfL to determine your spending priorities and it is not acceptable for you to ask government to bail you out if you cannot balance your accounts,” Adonis said.
In a statement accompanying the letter Adonis further slammed Johnson’s management of TfL.
If Boris wants me to take charge of TfL [he should] start with more sensible priorities like not cancelling the Western congestion charge zone and not replacing a modern bus fleet needlessly.”
“If Boris [ Johnson] wants me to take charge of TfL then he should say, and I would start with more sensible priorities like not cancelling the Western congestion charge zone and not replacing a modern bus fleet needlessly - both of which are costing Londoners hundreds of millions of pounds which could be spent on upgrading the Tube,” he said.
Johnson made the row more public by using his occasional column in London’s Evening Standard to rail against the PPP.
“It is time to bring an end to this demented system,” he said. “I don’t have some Trotskyite ambition to take back the track. Whatever happens, the private sector will do the job — but we cannot allow them to do it on these terms.”
Tube Lines added its own defence of secondment fees, describing Johnson’s suggestion as “bizarre”. A spokesman said its fees were agreed by LU when the contract was negotiated, and that they stood at 4.5% of project costs in comparison to the 19% that LU pays to its contractors for project management.