Hutton review slates PPP … but only tube workers can stop privatisation
The Hutton Review of London Under-ground funding has now reported. Set up by Ken Livingstone in a deal with Labour GLA members, the Review slates the government's Public Private Partnership (PPP) privatisation plans.
But in accepting that some form of contracting out is inevitable it offers little comfort to tube workers.
With the government prepared to face out any legal challenge from Livingstone, only action by tube workers can stop LUL privatisation. And with time running out it is vital that the labour movement across London now shows its support to give tube workers the confidence to fight back.
The tube is falling apart - as every passenger can testify. But the current Treasury-led system is unable to guarantee the long-term funding necessary to plan a proper investment programme.
New Labour's PPP solves this problem by giving the tube infrastructure over into private hands for thirty years.
Alternatively Livingstone proposes to raise capital through an LUL bond issue.
Both proposals dodge the option supported by the majority of Londoners, that the government directly fund the tube - the cheapest option by far, especially if instead of Treasury bonds the money was found through the seemingly unthinkable route of taxing the rich.
Hutton effectively rules out this option from the start. Instead he focuses on comparing PPP with LUL bonds. The government argues that PPP is better because business know-how will lead to improved efficiency, at a cheaper cost. This is shown to be utterly unfounded.
There is no evidence that the private sector can manage any better that LUL. Indeed it is clear that the main, if not only, road to improved "efficiency" is the erosion of workers' terms and conditions.
The only other improvement comes with the long-term stability given by a thirty-year contract. There is no reason why LUL, if given the same stability, could not be even more efficient in the public sector, without having to attack jobs and conditions.
As to cost , the government has only allowed some of its costing assumptions to be made public. But even from these it is clear that they have stacked the odds in favour of the privatisation plans - assuming high growth, low costs for the private sector against poor performance from LUL - the benchmark the contractors would have to meet is 5% below current performance levels! To justify this they point to LUL's mismanagement of the Jubilee Line Extension. Hutton counters with the private sector debacle of the Channel Tunnel. But even putting the Channel Tunnel aside, let's not forget that the problem with the JLE was that LUL failed to control its contractors - the very ones who are bidding for the PPP!
Once a fairer set of assumptions are made the bond issue comes out significantly cheaper than the PPP - even with the extra interest that LUL would have to pay compared to the Treasury. Direct government investment would be even cheaper.
The government counters this by saying that under PPP the contractors carry the risk if something goes wrong. As the report says, "this is a serious misunderstanding of risk allocation. No sensible private company will accept a risk without receiving full payment for it."
In fact many of the financial risks are being kept on the public side of the PPP. Those that are on the private side will be paid for in full.
And, as the Review makes clear, the possibility will also exist for the contractors to hold LUL up to ransom. The slightest necessary change to the PPP at some point in its thirty-year cycle will be enough to put LUL on the spot:
"The arguments about risk transfer are silly. London needs the Underground, otherwise it grinds to a halt, which is unthinkable. So in the final instance, the public sector will pick up the risk."
When BR was privatised the Tories put in a Rail Regulator to keep the private sector under control - everyone knows that this has been a joke. With LUL, Labour have watered even this down and will split regulation between a "PPP Arbiter" and LUL (under the control of the Mayor).
Even if Livingstone was serious about using his powers to make the contractors' lives as intolerable as possible, it is questionable about how much he would able to do so. Despite using his threats to push up their charges, it is apparent that the potential PPP contractors are not unduly worried by this system.
Having demolished the financial arguments Hutton turns to the small matter of safety. As he comments:
"the letter from the Inspector of Railways that was leaked during our review plainly reveals official unease at both the safety culture within LUL and some particular problems thrown up during the shadow running of the PPP...
"There is also some worry that LUL's powers in enforcing safety (under PPP) are more apparent than real."
Rail privatisation has shown that with a hundred and one different companies responsible for safety lines of communication get blurred and in the end no one is responsible.
Even if the contractors were the most safety conscious things would be unacceptable. And we all know that the construction companies bidding for the PPP have some of the worst safety records going!
So what is Hutton's answer? Having refused to countenance secure government funding, the Review ends with two unappealing options. That the government allows the GLA and Mayor to introduce bonds, on the understanding that such an option should include private sector management being contracted in at a much higher level than under traditional forms of contracting, what it calls a "win-win solution". Or that the PPP should go ahead - but only if it meets much more rigorous safety and value for money criteria.
Prescott and co. have latched on to this to claim endorsement for their general strategy, with only the details to quibble over, but of course, from Hutton's perspective he has delivered what Livingstone wanted - showing the PPP is unworkable and offering bonds as a viable alternative.
Just don't hold your breath if you are a tube worker. However bad PPP has been shown to be, the government calculates they can defeat any legal challenge, and the bond issue will still be a potential threat to jobs and conditions.
All of this is made worse because the PPP is already beginning to affect tube workers lives. LUL has been carved up into smaller sub-companies under "shadow running".
The effective transfer of staff from the protection of LUL into what will be the privatised contract companies has thus already taken place.
As with rail privatisation this transfer does not appear to make much difference at this stage, with LUL centrally still in control (though the Railway Inspector's letter on safety shows that he certainly is concerned).
But when it came time to hand over to the private rail franchises rail workers found that a number of their legal options to challenge their privatisation had already disappeared.
At the time we were sold this pup as a way for Knapp and co. to dodge the call for industrial action. Whilst this may not be quite the case here it does mean that the campaign to halt the PPP needs to hot up rapidly.
It is clear that only industrial action by tube workers can halt the PPP. But it is important that the workforce is not divided.
The infrastructure workers , being threatened with the private sector, left to fight for themselves, face an uphill struggle. But all tube workers will be affected by the PPP - whilst many workers will remain in the public half of LUL, if nothing else every worker's safety will be jeopardised.
However it is organised, all workers need to fight united - the RMT needs to be making clear at the earliest opportunity how essential unity will be campaigned for.
The Hutton Review provides some useful ammunition in the campaign against tube privatisation, but the key is now the actions of the London labour movement.
The LUL RMT have called for support for a demonstration on 21 October (11am Euston) and a lobby of the GLA on 24 October (6pm Marsham Street).
Both demonstrations need to be supported. Underground workers have got to be convinced that when the time comes any action they take will be supported.