Kiley attacks cashback for PPP contractor

7 Nov 02
Transport commissioner Bob Kiley has attacked London Regional Transport for giving 'illegal' financial guarantees to one of the consortiums involved in the controversial part-privatisation of the Tube.

08 November 2002

The capital's transport supremo, who heads Transport for London, hit out at London Underground's parent company after he learned that it had promised to pay back Tube Lines £35.8m it spent on bidding for the public-private partnership.

He accused LRT of making the promise, which he says will apply 'irrespective of whether financial close of the PPP contracts is ever achieved', without his knowledge. Previously, bid costs would only be paid once deals had been closed.

According to Kiley, consortium member Amey Plc, whose financial difficulties have been well documented in recent weeks, has since used this guarantee to raise an £11.4m loan from the Bank of Scotland.

In a letter to LRT's chair Sir Malcolm Bates, given to Public Finance, dated November 4, Kiley accused the body of making the promise to prop up ailing companies involved in PPP deals.

'These actions seem to amount to public sector support being given to a private sector company,' he wrote. 'It is clearly not LRT's role to provide any form of bail-out assistance to private sector companies. Certainly bail-outs should not be shrouded in secrecy.'

An Amey spokeswoman declined to comment on the issue, saying: 'This is a matter for the Tube Lines consortium.'

A spokesman for Tube Lines confirmed to PF that the consortium had been told it would receive the £35.8m refund.

He said: 'It is true that we have received an assurance from London Underground that the additional bid costs that we have incurred as a result of delays to this process will be covered.'

Kiley and London Mayor Ken Livingstone believe such assistance could contravene European Commission rules.

Livingstone's policy director, Neale Coleman, told PF: 'We will take advice about what TfL believes to be illegal state aid. If there has been, then hopefully it could be resolved with the government.'

On November 5 Livingstone told the budget committee of the London Assembly that ministers and officials involved in the PPP were guilty of double standards.

'This is effectively state aid for Amey plc,' he said. 'There is one standard for big corporations and another one for Londoners.'

Livingstone also said that he would challenge the European Commission's recent decision that the government had not broken state aid rules in procuring the PPP. He said he had sought 'legal advice about the earliest time an appeal could be heard'.

PFnov2002

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