Tube PPP offers low liability for private firms

10 Apr 03
Rail unions have reacted with dismay to revelations that firms involved in the controversial part-privatisation of the London Underground will be fined just £4m for major disruption on the network under the 30-year deal. The RMT and Aslef unions, whic

11 April 2003

Rail unions have reacted with dismay to revelations that firms involved in the controversial part-privatisation of the London Underground will be fined just £4m for major disruption on the network under the 30-year deal.

The RMT and Aslef unions, which represent thousands of staff on the Tube network, claimed the public-private partnership deal could further compromise passenger safety because it does not provide firms with sufficient incentives to improve standards.

After finally signing the deal on April 4, Metronet, the private consortium that will manage two of the three infrastructure companies involved, revealed it will be liable for a £4m fine in the event of an accident similar to the recent Chancery Lane derailment.

That incident put the busy Central Line out of action for more than two months. But, under a system of fines hammered out between the infracos and London Underground, Metronet's liability would be limited to the 48 hours following a similar incident.

The anti-PPP RMT union, led by Bob Crow, claimed such 'paltry' fines would be 'more than compensated for' by the guaranteed income private contractors will receive from the government cash underpinning the contract.

A spokesman told Public Finance: 'This deal is despicable. There is nothing in the contracts that will act as an incentive to improve safety. A fine of £4m is a drop in the ocean to Metronet.'

But Metronet claimed that safety considerations were given 'high priority' across its £17bn spending plans for the contract.

The consortium, led by troubled Canadian engineering firm Bombardier, Balfour Beatty and WS Atkins, also revealed it will make a 14-18% return each year on its £350m equity investment – around £12m for each of the five firms involved.

Unveiling his spending plans on April 7, Metronet's chief executive, Rod Hoare, said the firms would spend £7bn over the first seven years of the PPP, after which it could renegotiate parts of the deal with London Underground. Tube Lines Group, which will manage the third infraco, has the same rights.

Hoare said: 'This contract is not an overnight remedy for the long-term underinvestment on the Tube network. We're in for the long haul.'

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