The collapse of Metronet , the consortium entrusted with upgrading the tube, spells the collapse of the whole notion of ‘Public Private Partnership', otherwise known as the Private Finance Initiative.
Metronet (corporate motto ‘Hallelujah, I'm a bum') is a consortium with a £17 billion contract to upgrade most of the system. They have come back with the begging bowl claiming costs have overrun. They wanted £551 million more (for the time being), they were ‘only' offered £121 million. So they've gone belly up, leaving the underground in a pickle. They are also leaving us a little present of £2 billion debt.
How did they get the job in the first place?
New Labour insisted the private sector get involved. They have an ideological belief that private is better than public. Their misguided ideology is in danger of costing us all £2 billion.
The government case for PPP is as follows:
- We haven't got the money. The private sector will be able to raise it on the money markets.
- The private sector is more efficient than public provision. They will deliver at the price and on time.
- Why are they efficient? Because they compete with one another. Because their managers are skilled entrepreneurs.
- The private sector will take all the risks. We can just sit back and let them get on with it.
The Metronet collapse shows:
- It's always our money that pays for infrastructure in the end. Does Gordon Brown think they just wave a magic wand at the money markets? We will have to pay the borrowing back - with interest.
- Metronet are greedy parasites, forever begging for government handouts. In the consortium are the usual suspects including Balfour Beatty - the firm in charge of rail maintenance whose negligence led to a train derailment at Hatfield in which four people died. Do they sound like the right people for the job?
- Another firm involved in the consortium is Thames Water. What do they know about running a railway? Come to that, what do they know about running a water supply? At Thames Water one gallon in three still leaks out of the system. They don't care about the waste - they just charge us more.
- They don't compete with each other. They are given a monopoly over the renovation of certain lines. How could it be done any other way? Competition could not possibly work. The whole point about the tube is that it needs to be an integrated system
- So Metronet got the maintenance contract. Who did they dish the work out to? They subcontracted it to Balfour Beatty, to Thames Water...to themselves. Competition indeed!
- In the end we take all the risk. A couple of weeks ago some tarpaulin fell down on the Central Line and trapped a train in the tunnel for a couple of hours, a nasty experience for the passengers, and risky. What was the tarpaulin doing there in the first place? Then the District Line had to be closed because a tree fell on the track near Earls Court. Metronet had been warned about it. Laurel and Hardy show more entrepreneurial skill than this shower!
- Now we're facing the risk of stumping up to pay for Metronet's incompetence. Even Gordon Brown knows we have to have a functioning public transport system in London. Metronet can walk away from the train crash, but we'll have to sort out the mess somehow.
We've already coughed up plenty for this government's mad addiction to bringing in the private sector. The contracts for the deal are believed to have cost £500 million! We paid for this, of course. What idiot set this up? Step forward, John Prescott, and make a bow to the grateful citizenry.
These contracts are not simple statements sealed by a handshake. They run to thousands of pages and are supposed to cover every eventuality. And guess what? The rumour is they're not water tight. Metronet are trying to dump their losses on us. They may not be able to run a railway, but they know how to pass the buck.
London Underground is a mess, no doubt about that. The question arose a few years ago how to modernise the network. Socialist Appeal has always argued for a publicly funded, publicly owned transport system.
Gordon Brown and the Treasury made it quite clear they would not let London Mayor Ken Livingstone borrow the money. Livingstone wanted to issue bonds. This is not our solution, but he was and is the elected mayor, and he had been elected by Londoners on a programme of opposition to PFI. If regional airports can issues bonds, then the elected London authority should be able to do the same. Livingstone didn't trust Metronet and wanted control of the operation. He was right.
When the scheme was launched, participants in the consortium were salivating at a 19% payback, far more than usual for running a public service which, as we now know, is entirely risk free for capitalism. Never the less Amey had to pull out of the deal later on. The writing was already on the wall.
Not surprisingly, Livingstone is spitting blood at the ‘breathtaking' incompetence of Metronet's ‘disastrous' management. He wants the shareholders to stump up the £2 billion. "As far as I am concerned," he says, "(the directors) are dead meat." In a just world they would be and, more to the point, so would PFI/PPP.