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Will Howie Prescott's 'convoluted promise'

Toward the end of last month, a deluge of policy documents poured out from Whitehall outlining the Government's plans for an integrated transport system and for the trunk roads of the future. Although much of the trunk road proposals consisted of cuts in the last Government's plans, little should be made of that since these were unlikely to come to fruition even in the distant future.

Publicity surrounding the release of these documents obscured the publication of a report on London Transport by the Commons Transport sub-committee (NCE 16 July). The committee was concerned with John Prescott's earlier announcement of his scheme to re-organise London Transport. Briefly, he intends to involve London Transport in what he calls a Public Private Partnership.

The revised London Transport will comprise a publicly owned operating company working in harmony with an as yet unspecified number of private sector contractors, which will finance, maintain and modernise the Underground infrastructure. This partnership is expected to bring in around £7bn of investment to the system in the next 15 years.

These plans were described by Prescott as 'an entirely new approach ... a third way, it is not a privatisation or even partial privatisation; nor is it an old-style, publicly funded nationalisation. It is a publicly owned, publicly accountable model to get the best from both the public and private sector.'

It will be interesting to see how this works. The old nationalised utilities were run with a sense of social purpose and not merely to enrich the senior managers and the shareholders, which was no bad thing. Their weakness was that they lacked the imperatives which the market, at its best, brings.

The closest comparison in the past to Prescott's 'third-way' would be British Petroleum, which was taken into public ownership during the First World War by Winston Churchill. Most of the shares were publicly owned but the company was managed as a private concern. This was a perfectly sound model and it is a great pity that it was not followed by the Attlee Government's nationalisation programme. More recently, in the late 1950's, Hugh Gaitskell hoped to fund a national scheme through the Government taking shares in private firms while leaving their management in private hands. So Prescott's scheme has a respectable pedigree. But is it the right answer?

The sub-committee gives cautious approval but it falls short of ecstasy, and it is interesting to note that the ICE has its doubts as well. Though ICE did not comment on the question of ownership, its evidence on the split between operation and infrastructure was that such a division would 'not help to achieve such objectives as service reliability and safety, and could well compromise them'. The experience of the surface railways hints that the Institution is right.

The committee is similarly sceptical and fears that the split 'between the public and private sectors in this partnership makes the infrastructure and line particularly susceptible to management outside its control'. It sees the Government's proposals as a 'convoluted promise' and thinks that other financial solutions might have been more cost-effective. Among these, the committee flirts with hypothecated taxes for the new London authority and taxes on employers, but makes no firm demands.

So, despite the committee's misgivings, Prescott's scheme will go ahead, perhaps slowly. Last week, I rode in one of the new carriages on the dreaded Northern Line. It was excellent.

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