London Underground

Experience shows that my hon. Friend is right. That was the experience of Railtrack and of Metronet. I am a broad-minded person and I think all issues and processes should be looked at, but it would be surprising to find a vehicle with a major national asset where the risk could be transferred. I attend many Select Committees and have been doing so for a long time. Sometimes they can be tedious, but the hearings that we had in the Transport Committee on 17 October and 9 November were shocking, startling and in some ways exciting. It was like listening to a case involving embezzlers and fraudsters being described and knowing that they had got away with it. It was an extraordinary process. If Tony Soprano or his ilk in New Jersey knew what was going on with Metronet, they would have left New Jersey and come over to London, where they could have given advice and got hundreds of millions of pounds, risk free. It is an amazing story. Tube Lines has been mentioned as being better than Metronet. It is undoubtedly better than Metronet, but it is far from perfect. There were problems with the improvements on the Northern Line. There is good management there, but when we look at the basic assessment of the financing, even of Tube Lines, and then look at the public sector comparator and read what the National Audit Office said about public sector comparators, which is the basis that shows that these schemes would be more profitable, we find that the NAO backs away and says, ““These comparators are so subject to the assessment of risk that you can't really judge them””. That is a way of saying, ““ There is a fiddle factor in there that we cannot assess, and the experience is that they probably won't save the money that you expect.”” With reference to the financing of Tube Lines, where much of the finance was guaranteed because it could not be obtained from the markets, what happened as soon as Tube Lines got the contract? They refinanced on the open market, which was an indication that they could have been financed at a better rate and that what was driving the process, as a number of my hon. Friends said, is ideology. Tube Lines also had a much higher materiality threshold. We heard that no risk was transferred, and that 95 per cent. of the money was secured; not only 95 per cent. but an extra £500 million—I am talking about the consultants—on the cost of borrowing, so there was no risk to the lenders. Those who would normally be expected to exert pressure were exerting no pressure at all. The results on the ground—my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) referred to some of these—were that on the Metronet surface lines, 10 out of 18 stations were done. Instead of costing £2 million each, they cost £7.5 million each. On the other Metronet contract, four stations out of 17 were done. Effectively, between two and four stations were paid for and only one was delivered. That is the story that we heard. Although it is difficult to know exactly how much money was overspent, it looks as though it was £1 billion. Nobody can assess it because the funding was available and it is not yet known what the cost was. As I said, there was no pressure from the bankers because they had the money. Either it was secured or they got extra money for what they were doing. They did not put any extra pressure on. One would normally expect the owners of equity to want to know what was happening with their money, but this is where the real corruption in the Metronet contract comes. The people who were the equity owners and who had £350 million at risk were effectively paying themselves to do the work at those extraordinary prices. It is easy, isn't it? One of the companies—Bombardier, for example—says, ““There's my £70 million. I will overprice this contract at twice the rate. I'm already expecting 20 per cent. return on the capital, so I'll get my money back very quickly indeed.”” When the Secretary of State gave evidence to the Select Committee, I told her that"““real corruption has gone on.””" She said:"““I have no evidence to suggest there was corruption.””" There is direct evidence of corruption. Those people paid themselves out of public money to do less work than they should have done while taking no risk whatsoever. The other pressure that normally applies to people who are building things comes from clients, but London Underground was kept out of the matter. Metronet would not tell London Underground what was going on, and the contractors would not tell it what was going on, which was an extraordinary situation. We asked Mr. Pimlott, who was chairman of Metronet for a period, why he did not stop paying the contractors, who were effectively his fellow members on the board, ridiculous sums of money. He said that when he made that suggestion he was threatened with legal action by other members of the board. The story is extraordinary. If the scheme were publicly funded, there would be direct lines of accountability, and if it were a private sector scheme, the private sector would take the risk and the loss, but we have neither public accountability nor risk. The Mayor is not responsible—he was against the scheme from the beginning. The Government say that they are not responsible in a direct sense, although pressure from the Treasury undoubtedly caused the situation. The companies have walked away with a great deal of money, so they are not responsible. When the Secretary of State was asked what she thought, who was responsible and what should happen, which might have involved an inquiry or someone having to go, she said this about the infracos:"““I do not think that anyone should underestimate the impact on their reputations.””" On 6 March, The Guardian stated that Balfour Beatty, which was one of the bad five in this case, had reported a 48 per cent. rise in profits and that it was on the verge of signing a new deal on the underground to carry on doing the work for which it has already ripped off the public sector. If that is not a scandal and corruption, I do not know what is and words have lost their meaning. What should we do? There should clearly be a public inquiry, because there is no accountability. Who has suffered? We do not know exactly because we do not know the cost. In the end, however, the fare payer will pay and passengers will suffer. For example, Transport for London has indicated that it may not be able to fit cooling systems on the tube. The taxpayer will pay. Finally—I care about this a lot—when huge expenditure achieves a fraction of what it should produce, it is not only the taxpayer who is affected, because in relative terms there has been a bigger increase in expenditure on transport in the south-east and London than in the regions, so the regions have suffered. The deal has been bad for everybody, and the lessons should have been learned 10 years ago. I hope that we never go into another opaque scheme in which no risk is transferred. The scheme has been bad for the Government's reputation. Ken Livingstone was right and the then Chancellor of the Exchequer was wrong.