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London Assembly: Government should plug Tube cash shortfalls

The London Assembly’s transport committee has warned of a looming funding “crisis” which will fail to meet spiralling costs in the London Underground PPP, and calls on the government to plug the shortfall.

The Committee says that costs on the tube are going up, with the PPP Arbiter recently saying that Tube upgrade contractor Tube Lines can charge £1bn-£1.4bn more for work on the tube between 2010 and 2017 than London Underground says it can afford.

Projects to cool the tube, providing congestion relief at stations, and step-free access will be the first to be axed, they say, with Tube Lines already indicating that new signalling for the Piccadilly Line could be at risk.

The Committee lists five recommendations it says are essential to give more clarity to the state of finances of London Underground.

Chair of the Transport Committee Val Shawcross AM said: “Our report provides a snapshot of a complex situation that will shape London Underground for many years to come.  Any delayed or cancelled projects will have a real impact on people using the network. 

“I urge Transport for London to take our recommendations about reviewing its Business Plan and publishing progress reports seriously – this information should be in the public domain.

“Maintaining and upgrading the Tube is absolutely vital to the capital and Londoners have a right to know how it is progressing,” she said.

Shawcross said the costs for Tube Lines have to be assumed to be legitimate, but increases at failed tube upgrade contractor Metronet are still unknown, and assumed to be significant.

She does estimate that some £2bn will have been saved by bringing Metronet back in-house, through: “The availability of cheaper finance,” and suggested that this model could be used to provide cheaper finance for Tube Lines.

However, “Metronet’s legacy is apparent in a station refurbishment programme that is now years behind schedule,” she said. Shawcross was also concerned that bringing Metronet back into Transport for London would decrease transparency, allowing true costs to be hidden.

Finally, the Committee were very concerned over the departure of London Underground’s managing director Tim O’Toole, who they say: “Replacing him will be difficult,” and the replacement must be prepared to meet the list of challenges the Tube faces.

Responding to the report, London Underground’s managing director Tim O’Toole, who will leave his post to return to the US at the end of April said: “We welcome the Assembly’s report. We must sustain investment in the renewal of London Underground and deliver the line upgrades, which will deliver the big improvements in capacity and reliability so vital to London’s future prosperity and growth.

“In particular, we welcome the Assembly’s recognition that, ‘The programme of reliability and capacity enhancements are fundamental to meeting London’s long-term transport requirements. They must go ahead as scheduled.’

“We also note the Assembly’s call on Government, ‘to honour its commitment to fund the renewal of the London Underground by meeting legitimate cost increases on Tube Lines programme.’

“London Underground has issued restated contract terms to Tube Lines for the second period of PPP maintenance and renewal works. We have made every effort to make the works as affordable as possible. Tube Lines now has until the end of June 2009 to respond,” he said.

A Tube Lines spokesperson said the report: “Rightly notes that we are a well managed business that is successfully delivering vital improvements to the Tube.  We can also demonstrate that we are delivering the work in a cost efficient manner, and in many instances are delivering at lower costs than many international metro systems.

“There is still so much more to do on the Tube, particularly with regards increasing capacity for passengers and we therefore hope that the funding that is needed to achieve this continues.”

London Underground Transport Committee Recommendations:

  1. There is a looming funding crisis on the Underground. Irrespective of efforts to attract additional funding and reduce costs, TfL should publish a revised business plan before its draft 2010/11 budget is submitted in December 2009. It should reflect the fact that the cost of the Underground upgrade is increasing, and that there will be a long-term impact to TfL’s finances.
  2. Now that they have been submitted to Tube Lines, a summary of the Restated Terms should be published, including a breakdown of projects that were due between 2010-2017 but have been deferred.
  3. If Metronet’s contracts are eventually taken in-house, the PPP Arbiter should retain a statutory role in relation to the Metronet work programme. At least, the Arbiter should be able to make independent assessments of London Underground’s progress in delivering the work programme and continue to undertake benchmarking of the different delivery arrangements through comparisons with Tube Lines. When the Arbiter’s role is redrawn, annual reporting to the London Assembly should be built in. London Underground should also be required to publish performance reports at specified points each year.
  4. We recommend that TfL should respond to the recommendations in this report by the end of June 2009. In its response, London Underground should explain the reasons behind its expectation that only ten stations will be completed each year.
  5. Liabilities in the event of further cost increases associated with the Underground upgrade or an overspend on Crossrail should be made more explicit in a revised TfL business plan, which should be published before its draft 2010/11 budget is submitted in December 2009.

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