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Taxpayer exposed by Metronet

Department for Transport (DfT) officials failed to identify major risks to taxpayers when awarding PPP contracts to Metronet, an official report on the Tube upgrade contractor’s collapse revealed last week.

Public spending watchdog the National Audit Office blamed the DfT for leaving itself “few formal levers” to manage the risk to taxpayers posed by Metronet’s flawed structure.

Metronet awarded work to upgrade the Bakerloo, Central, Victoria, Metropolitan, District and Circle Lines to its shareholders Atkins, Balfour Beatty, EDF Energy and Thames Water.

Fifth shareholder Bombardier was to upgrade rolling stock.

No effective means of protection

Metronet made payments to shareholders without checking that work had been done correctly or that it had even been finished.

“The Metronet PPP contracts to upgrade the Tube left the DfT without effective means of protecting the taxpayer,” said the Comptroller and Auditor General.

“The Metronet PPP contracts to upgrade the Tube left the DfT without effective means of protecting the taxpayer.”

Comptroller and Auditor General

“Strategic and investment responsibility for London Underground was devolved to Transport for London [TfL] and the mayor of London… DfT was obliged to rely on other parties …which management strategy commensurate with the risks DfT faced.”

The collapse resulted in direct costs to the taxpayer of up to £410M and delays to the infrastructure upgrade and to passengers. Costs arose when the DfT was forced to buy 95% of Metronet’s debts to private sector lenders for £1.7bn in February 2008 to avoid compromising the ongoing Tube upgrade.

When Metronet went into administration, the number of stations being modernised had to be cut.

Twelve modernisations were cancelled and a further 47 postponed until the second seven and a half year period of the PPP contract.

Negotiating a long-term solution

Two subsidiaries of TfL are currently in control of Metronet’s assets but the transport secretaty and mayor of London are negotiating a long-term solution.

The watchdog confirmed that these arrangements will be revisited when a permanent solution for upgrading the Metronet lines has been established.

“The DfT’s work with the mayor of London, TfL and London Underground on a long-term solution will need to improve governance and risk management in the new arrangements they are intending to put in place to protect the taxpayer,” said the Comptroller and Auditor General.

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