PracticePeople In PracticeHurtling towards a deepening financial crisis.

Hurtling towards a deepening financial crisis.

Overcrowded, rusting and in the grip of a funding crisis, the London Underground is in a mess. And if you thought it couldn't get worse, think again.

Next time you are surfing the internet, you could do worse than visit the site.

This is a site dedicated to the misery endured by three million people each day who travel on that rusting and ramshackle transport system known as the London Underground.

Set up by fed up commuters, at least lets the weary traveller know they are not alone in feeling the daily frustration of getting from A to B via Z.

Not that there is, in truth, much chance of that.

The daily routine of being crammed into an ageing carriage and enduring an ever slower journey while pressed up against a complete stranger is so familiar a routine, it is surprising it is not yet in any tourist guide book.

The site also has a competition to get John Prescott to travel for a whole week on the Tube. If the deputy prime minister does – don’t hold your breath, the offer has been running for some time – Pounds 5,000 will be donated to charity.

Tubehell is one the few things that can raise a weary smile from increasingly frustrated Underground commuters or tourists.

A terrible mess
But this can only ever be a black comedy, the sort that relies on the stoical nature of the ever put-upon traveller. ‘It’s a terrible mess,’ says Stephen Glaister, professor of transport and infrastructure at Imperial College.

Behind the frustration of travelling lies the tale of investment. Earlier this month the papers reported the European Investment Bank was willing to dig deep into its pockets and commit Pounds 5bn to the London Underground.

Though the bank’s offer was by not meant to fully fund the Tube – much more would be needed for that – it was the latest figure in a battle over money that has become more complex than trying to navigate a quick route across the capital at rush hour.

And as the confusion grows over just how much money would be needed to renovate the Underground, so the political fallout also increases. By the time you read this, the government could be defending the legality of its proposals for a modified public private partnership in the courts.

If so, it will have been taken there by one of its own political creations, the mayor of London. Almost a year after Ken Livingstone became the first democratically elected leader of the capital he still has yet to take control of the Tube, the most important issue on his agenda.

The problem of funding
That he has not been able to do so is because of funding. And the arguments continue to rage over the level of funding needed.

A critical Industrial Society report into the Tube published just before Christmas, stated that ‘there is now a universal consensus that London Underground needs a long-term and stable financing regime and that the efficiency with which the system is operated must be sharply improved’.

Hard to argue with that, but the trouble for the commuter is which set of figures should they believe? The government’s preferred option to put much-needed funds into the system is the now-controversial public private partnership.

Revamped though it may have been over the last few months, the government’s own figures are probably the most accurate as they are among the few sets of people to have seen all the papers necessary to make a full judgement.

Over the next 15 years the government predicts approximately Pounds 15bn could be spent. Just over half of this would go on improvements and the rest on routine maintenance.

Although they may be accurate, is that enough? The Industrial Society criticised this as ‘underestimating what may be needed’.

The PPP option
PPP would see three private consortia (or infracos as they have become commonly known) run and manage three separate sets of Underground lines, signalling, tunnels and stations for the next 30 years.

London Underground Ltd would continue in public ownership and set the companies performance targets and renegotiate contracts with the infracos every seven-and-a-half years.

Ministers had hoped the PPP would mean no further obligations on the state in funding terms. The comprehensive spending review had originally claimed that the PPP would be taken out of public accounts in 2000/01.

This was just fanciful thinking. Some estimates now claim that up to Pounds 700m a year will now have to be put in by the government each year.

Crucially the government says the PPP can only go ahead if it passes two tests, one on safety and the other on cost, known as the public sector comparator. This is a value-for-money test that will show whether or not the PPP is the best system. Unfortunately, no PSC has been carried out.

Professor Glaister has just written to the National Audit Office urging it to carry out a PSC but usually the audit office gets involved only after the event.

An independent review
‘They are our best hope of an independent review on this,’ says Glaister.

‘It has got so highly political that I wouldn’t take it as official from elsewhere.’

Getting to a figure of just how much is needed is difficult. What would make things clearer is if the Underground was properly audited. But no such audit has taken place.

Probably the nearest to that was a Monopoly and Mergers Commission review in 1992 in the quaint old days when there used to be state-run industries to be analysed. The commission’s review was part of an annual examination it used to take of industries owned by the state.

There is no asset register to find out just what the Underground owns.

This makes a watertight estimate of how much money is needed to fund the Tube almost impossible.

It is not known to what extent the private sector bidders have been able to calculate an asset register but Glaister says ‘they know very little about the state of the assets’.

The government’s bond scheme
The London government’s preferred method for funding has been the use of a bond scheme.

It needs, it says, Pounds 700m a year, Pounds 250m from central government, to reduce what it calls the backlog of under-investment in the Tube. But, in the latest discussions the mayor and his transport chief, Bob Kiley, have subtly dropped their call for a bond scheme, at least in the short-term.

However, with the political argument over who eventually gets control of the scheme, bonds could return to the agenda.

The issue of compensation could complicate the financial situation. If the government pulls out of the PPP it could end up owing around Pounds 120m in compensation to the companies who have been bidding to run the Infracos.

Besides that, already the PPP is thought to have left the government with around Pounds 150m in costs such as consultant fees.

Sources of funding
Where funding could ultimately come from is the passenger. Of London Underground’s annual income, 82% comes from fare revenue. In New York it is 77%. In Paris it is just 63%.

The average trip in London last year was almost Pounds 1.20. In New York it was about 70p. In Paris it was less than 60p. Crucially New York and Paris both get substantial government funding – central and local – to help keep costs down.

The government’s choice is to either push the cost onto the commuter or to use a combination of the public and the private sectors.

But the battle over the figures is an argument that will be lost on most users of the Tube.

What they will worry about most is how quickly their train will take to carry them to their destination. The forecast for the short-term is that each journey will take even longer than usual.

It’s likely to get worse
All the signs are the service will get worse before it gets better. The mayor has warned journeys will, in the near future, take longer and the misery increase, even if funding is soon sorted out.

Transport for London, the body that has taken over responsibility for running of the Tube has started to release figures on how bad the service is getting. The first set appeared in February. It showed that, on average, all Tube journeys in the two months prior to Christmas took eight minutes longer than normal.

More than 1,000 peak trains were cancelled during December because of staff shortages. And even when commuters could get to their destination, their misery was not over. Around 10% of all escalators on the Underground network were out of service.

These grisly figures will be made publicly available 13 times a year, unluckily for some.


Report says Tube PPP case ‘not proven’

London Underground

Industrial Society report

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