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Tube plans 'fundamentally flawed'


LONDON TRANSPORT commissioner Bob Kiley's criticism of the part-privatisation of London's Underground system last week drew the biggest crowd to the Institution for 10 years.

Four hundred people packed into two separate theatres to hear the Railway Civil Engineer's Association lecture 'Rebuilding the Capital's Transport System' on why Kiley sees the government's plans as 'fundamentally flawed.'

The Public Private Partnership (PPP) scheme is the government's strategy for providing stable funding for the Tube's upgrade, by handing responsibility for infrastructure maintenance and renewals over to private contractors in 30 year contracts.

Responsibility for Tube operations remains with the public sector via Transport for London (TfL), for which Kiley is head.

The scheme would see £16bn put into the Tube for the first 15 years, £4bn of which would be from the private sector. The remainder would come from £1bn annual government grants and fares.

However, Kiley said last week that he fundamentally disagreed with separating management of operations and maintenance.

Such a move, he claimed, would cause confusion and be potentially dangerous - as demonstrated by the national railways.

Kiley also argued that PPP's original purpose of protecting the taxpayer from construction risk had disappeared due to the 'massive' changes the contracts have gone through during negotiations.

He explained that 15 months ago, contractors would have been forced to pay up to £200M in construction cost overruns, but that this has been slashed to £50M.

He added that much of the essential upgrade work was being pushed back later into the 30 year programme because government has discovered that it cannot afford to front-load payments to the private sector.

As a result, Kiley said, the Tube would not reach the 'steady state' of maintenance balanced with renewals for another 22 years - seven years later than originally planned.

'An extended and glorified maintenance programme' is what the PPP has become, he said.

While Kiley admitted that using the private sector to upgrade the Tube is a sensible solution, he maintained that keeping maintenance in-house and tendering out separate contracts to the private sector was a safer and more cost-effective alternative.

Kiley's method of matching the government's £16bn of private investment would involve the majority of funding - £10.25bn - coming from bonds issued by TfL. This, he explained, would keep both infrastructure and operations in TfL's hands. The bonds would be repaid by passenger revenues and would not require underwriting by the government.

Remaining funds would come from an annual government grant and £100M annually from Greater London Authority revenues. A further £150M investment would come from the private sector, but this would amount to only 10% of the asset cost.

Kiley held up £3bn in backing already pledged by four banks to support his plan.

'Common sense dictates a change. You will yield a big influence on this debate, ' he urged.

'It's your profession that is at the heart of this issue.'

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