Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

MPs call for all tube maintenance be brought in-house, as Metronet failure tops £2bn

MPs were told that the costs for Metronet's failure had reached £2bn last night, as they debated the Transport Select Committee's damning report into the tube upgrade contractor's collapse in July last year.

Louise Ellman, standing in for the ill transport committee chairman Gwyneth Dunwoody, reported that, "the service delivery failure has come with a £2bn financial tag—a tag reported tonight in the estimates' request for additional funding—which takes three forms.

"First, there is a £1.7bn grant to Transport for London to cover Metronet's debts; and, secondly, a £158M grant for Transport for London, which is understood to be the first instalment of the costs caused by Metronet's going into administration—and it is believed that the total cost of that is about £630M. The third part is £150M of further grant to Transport for London in recognition of the increased costs."

Labour's David Taylor said that Tube Lines, the company which manages the upgrades of the Piccadilly, Jubillee and Northern lines, should also be brought under public ownership, a suggestion rejected by Labour's Nick Raynsford, saying, "I hope that my hon. Friend the Member for Liverpool, Riverside will give a more reasoned appraisal of the respective performances of the different PPP contractors, bearing in mind that although Metronet failed, it is not a basis for criticising the performance of Tube Lines."

Ellman agreed that a parallel had not been made between Metronet and Tube Lines in their report. However, several MPs pointed out that the public purse takes 95% of Tube Lines' risk, and so would pick-up the costs should it also fall into difficulty.

Liberal Democrat shadow transport minister Norman Baker said the Private-public partnership (PPP) was pushed-through, and may not have been an appropriate vehicle for upgrading the London Underground system. "The Chancellor at the time, now Prime Minister, talked about the PPP in glowing terms, saying that it would remove the need for public subsidy entirely, which reminded me of the suggestion that nuclear power might be too cheap to meter."

Baker went on to say that Metronet's structure was simply inadequate the handle the work. "What kind of PPP was this? We have heard about the tied supply chain. It is a disgrace that Metronet should give business to its parent companies without any defence, ensuring neither value for money nor the exposure of those companies in the event of a problem. How could that have got past the Government when the project was set up?

"On 17 October, Chris Bolt, the rail regulator but also the arbitrator in this case, told the Committee that Metronet saw this as “a cost-plus contract”. That was his assessment: Metronet was there to bump up the price. It wanted to add bits and pieces, and to charge London Underground for the privilege of doing so," he said.

Taylor, an accountant, went further, blaming Metronet's shareholders for the collapse. Addressed Labour's Harry Cohen, another accountant, he said, "Does he agree that when PPP is at last laid in an unmarked grave somewhere in the City of London, its pallbearers will include Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water, whose avarice and arrogance have broken all previous financial records?"

Cohen agreed, and went on to say that the PPP was not flawed, but the Metronet structure was: "I am not opposed to a public-private approach provided that the public have control of the situation. That certainly did not happen here. This model was a catastrophe.

"Metronet shareholders' risk is far less than that of the taxpayers; it is limited to £70M for each of its five corporate shareholders. It has in any case already made £130M over its four years in pre-tax profits. The individual corporations get away virtually scot-free, because they are still able to secure, and make profits from, all sorts of other Government contracts. The failure is not held against them in any way."

Transport committee member, Labour's Graham Stringer said Metronet's shareholders were guilty of corruption. "I attend many Select Committees and have been doing so for a long time. Sometimes they can be tedious, but the hearings that we had in the Transport Committee on 17 October and 9 November were shocking, startling and in some ways exciting.

"It was like listening to a case involving embezzlers and fraudsters being described and knowing that they had got away with it. It was an extraordinary process. If Tony Soprano or his ilk in New Jersey knew what was going on with Metronet, they would have left New Jersey and come over to London, where they could have given advice and got hundreds of millions of pounds, risk free. It is an amazing story."

Minister for transport Rosie Winterton summed-up the debate, saying that the PPP system was sound, but the contracting arrangements in Metronet were not. Ms Winterton could not give a date for when Metronet would emerge from PPP administration, saying that was a matter for the administrator.

She also said that the transfer of risk would be an issue in any future PPP. "At least three of Metronet's shareholding companies have already written off more than £300M due to the failure of Metronet. Those losses are significant, but I do not dispute the fact that ... they failed to motivate Metronet's shareholders to address the company's failings sufficiently early, earnestly or effectively. I assure the House that we will want to ensure that risk transfer is appropriate, meaningful and effective in future contracting arrangements."

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Please note comments made online may also be published in the print edition of New Civil Engineer. Links may be included in your comments but HTML is not permitted.