01 April 2005
The deal to bring the private sector in to rebuild the London Underground has cost the taxpayer 'the best part' of £1bn.
Figures in a Public Accounts Committee report, published on March 31, reveal that the bill for the partial privatisation of the Tube included £180m set-up costs for the public-private partnership and £275m worth of bidder costs.
Between them, the two bidders chosen for the PPP contract – Metronet and Tube Lines – received £90m 'success fees' to compensate for the use of staff and equipment employed on the Underground which may have been used elsewhere. Unsuccessful bidders were paid £25m.
There is also the cost of repaying banks, which lent some £3.8bn to finance the PPP. The government is committed to repaying 95% of this debt in the event of termination and project risks.
Despite this government assurance, the debt was given a BBB rating by the City, which means the lenders are charging £450m more in interest on the amount borrowed than they would claim on £3.8bn of direct government loans.
The report, London Underground public-private partnerships, concluded that a public sector bond could finance future infrastructure projects.
'The PPP deals for maintenance and upgrading of London Underground are inherently complex given the approach taken and have led to enormous costs for the taxpayer,' said committee chair Edward Leigh. 'It appears to have cost the public purse the best part of £1bn to set up and finance the deals in this way.'
A spokesman for Metronet said the company was investing £1bn a year in the Underground. 'We are now two years into the PPP and some very real improvements are starting to come through.'
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