[A-List] UK infrastructure crisis: railways fiasco

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

By sheer coincidence, following Nick Allen's rather dubious analysis of
Russia's problems, here's the normally Tony-adoring Polly Toynbee. Of course
she's having a go at Gordon here, but things have come to a pretty pass
indeed when even Polly has to withhold her gratuitous barbs at Ken
Livingstone in order to make the blindingly obvious point that this
government's transport policy is a despicable mess. A useful bi-product of
this intervention is that it helps take the heat off Tony and Cherie over
their property dealings.


Brown's train will crash, but he refuses to apply the brake

New Labour's plans for the London Underground are scandalous

Polly Toynbee
Wednesday December 18, 2002
The Guardian

Transport is by far the worst of all Labour's problems: dropping impossible
numerical targets may be mildly embarrassing, but gridlocked roads and rail
stretching into the foreseeable future is frightening. Expect delays
forever, reads yesterday's transport statement.

Education and health targets will do well enough with billions still to
spend. Transport, though, is the nightmare that will not go away. For
decades it has been the first to take cuts in hard times: this cabinet will
be long in their political graves by the time there is much visible
improvement for money invested now. Transport is the sorry emblem of the
failure of British politics in the last half-century. Lack of political
courage failed to levy enough income tax, or to make drivers and rail-riders
pay the full cost of their historically elite modes of transport.

Labour inherited a transport system in ruins - then it did nothing about it.
Tony Blair breezily decided it was a "second-term issue": at the time it was
low on the public radar. Eventually a 10-year transport strategy was set
out, but it hit the buffers at Hatfield.

The rail catastrophe has not been Labour's fault: astonishingly the guilty
men who sold it off are not daily shamed and taunted for their
maladministration. The privatisation-induced Hatfield crash meant that
billions ear-marked for new transport had to be diverted to cracked rails.
Then the West Coast Main Line went £9bn over budget - Railtrack had no
register of assets revealing the true state of the line. Railtrack's
collapse ate up money and now train operators are demanding government cash.

One blindingly obvious lesson was that industries needing heavy government
subsidy cannot be privatised. Profitable utilities do well in the private
sector, but when a service needs subsidy with no chance of profit, then
money pours straight from taxpayers' pockets into shareholders' wallets. So
Labour was left to pick up the pieces from a Tory train crash.

How easy it should have been to make the great railway collapse the fault of
a Tory ideological fiasco. How easy to hold up rail as a permanent example
of why some things must stay in the public sector. Alas, Labour did no such
thing. In a classic New Labour third way fudge, they tried to have it both
ways. Afraid of seeming old Labour, they never breathed the word
"renationalise". True, to buy it back would have been too expensive, but
they could still have strongly regretted its privatisation and warned of
trouble ahead.

Instead they wanted to prove New Labour had no ideological objection to
privatising, so they sold off Nats (national air traffic control), which
came unstuck within a few months, requiring a bail out and recently more
again. Worst of all, they pursued the public-private partnership for the
London Underground even as it became ever more obvious that it would drain
money out of the service. The companies due to start taking over the tube
after Christmas are already collapsing, even before the handover documents
have been signed, a fiasco already unfolding. Yet still the government will
not think again. With apologies to non-Londoners, this is a national issue
as it will be the national purse that pays.

Almost all the companies due to take over the tube are in crisis. Jarvis is
wobbly, with the cost of its Hatfield broken rail hanging over it.
Bombardier, the rolling stock provider, has a credit rating fallen so far it
has been put on to credit watch. So has one of Metronet's contractors, WS
Atkins, whose shares stood at 705p in February and are now worth 99p. Amey,
virtually bankrupt and on its third finance director in months, is now so
shaky that it cannot put up its share of the cash for TubeLines, so the
other two companies in the consortium have loaned it the money. Why? Because
as soon as the contract is signed, they will all get such a colossal golden
hello with guaranteed cash every month that tube money will bail out the
entire company. That is a shocking state of affairs and the Commons select
committee has summoned Alistair Darling today to answer new alarming
questions about the tube's finances.

At the start, Gordon Brown had three winning arguments for the PPP. Any risk
in cost overruns would be transferred from the public purse to private
companies: that has now gone, as he has agreed in "comfort letters" to
underwrite 95% of all future risk. Second, he promised not a penny from the
national public purse would flow to the underground: now the Treasury will
pay the companies over £1bn a year to run it. Third, there would be a great
gain by raising the money via private companies: now new official figures
show the rising cost has made private finance almost certain to be worse
value for money. Yet still the chancellor drives on, his hand gripping the
dead man's handle, whatever lies at the end of the tunnel.

Ken Livingstone has accepted that the tube PPP is now unstoppable: it would
take too long to reconfigure. But he is challenging it in court in
Luxembourg to prove it has broken EU rules by subsidising private companies.
He is doing this as a bargaining ploy, because the Treasury refuses to pay
the estimated £1.5bn cost London will be left with when the tube is handed
over to his administration. Instead of guaranteeing to pay London that
shortfall, the chancellor has guaranteed to underwrite an open-ended sum to
the private companies if Livingstone wins his case. That will need an act of
parliament, but because of Amey's financial straits the first contracts will
be signed on December 31 before any such act has passed. Has ever a
government knowingly signed over a huge national asset to near-broke
companies? There is no plan B if these companies go bust after
privatisation. Plan B is the same as ever: the taxpayer will fork out for
the shareholders.

Got all that? The government hopes this arcane row between the obdurate
Livingstone and the obstinate Brown will pass beyond understanding. In the
heat of rage, the Treasury throws more and more money at failing companies
rather than admit Livingstone might be right. In their fury the government
is now smearing Livingstone's congestion charging scheme which is petty and
short-sighted since eight other cities are waiting to see if London's plan
works. If Labour joins the Tories in a general rubbishing of it - there are
bound to be glitches - then they will destroy one of the few hopes of
reducing traffic just to be avenged on Ken. The government yesterday
predicted up to a 20% traffic increase so they would do well to hope that
London is a success.

So far Labour's transport record has been an unmitigated disaster, driven by
short-term politics and political posturing. But Londoners can be happy -
the companies running the tube PPP have promised all of 12 new trains by
2008.