[A-List] UK state: London mayoral election

["Michael Keaney" <michael.keaney@xxxxxx>]

Darling issues blank cheque to tube firms

David Walker
Thursday December 5, 2002
The Guardian

The government yesterday wrote a blank cheque for the private companies due
to take over the infrastructure of the London tube, to be cashed if the
capital's mayor, Ken Livingstone, wins a court case alleging contracts were
unfairly let by Whitehall.

The transport secretary, Alistair Darling, has promised to indemnify the
firms if such a case went against the government and they incurred costs
because of any extra delays.

If the Treasury had to find the money, which on some estimates could be as
much as £7bn, it would jeopardise the government's claim that the
controversial public private partnership for the underground transfers
commercial risk to the private sector.

The scheme was meant to generate £16bn of investment during the next 15
years, most of which was supposed to come from the private sector.

Mr Darling offered the indemnity in order to remove one of the last
obstacles to the long delayed part-privatisation. But the contracts still
cannot go ahead, Mr Darling ruled, until Mr Livingstone vows not to pursue
legal action or until any case he mounts is settled.

The promise of government money may have saved Tube Lines, the consortium
taking over the Jubilee, Northern and Piccadilly lines. One of its partners,
Amey, has been in dire straits for some time. Tube Lines acknowledged
yesterday that equity was being swapped by Jarvis and Bechtel with Amey as a
means of "support".

Bob Kiley, the mayor's transport commissioner, said Amey was being "bailed
out even before the contract starts. When the company responsible for
maintenance in their contract is teetering on the edge of financial
collapse, entering into a 30-year contract makes no sense whatsoever."

In Mr Darling's ideal world, Tube Lines' contract could start as soon as
next month. The contract for the rest of the system, to be run by Metronet,
would begin in the spring.

Mr Livingstone yesterday bemoaned the government's move, saying that all the
risk in the deal had now been transferred to Londoners.