PPP rigged - official!
The publication of the report commissioned from accountants Deloitte and Touche on the privatisation of London Underground should be the last nail in the coffin of Public Private Partnership.
Described by Will Hutton in The Observer as "the most devastating condemnation of PPP"… "exposing a mendacious gerrymander that sets out unfairly to rig the rules", the report actually sets out little that had not already been claimed by the RMT, Hutton himself in his own report and London Transport Commissioner Bob Kiley in his.
But what the government could previously denounce as ill informed speculation n this time has the official stamp of accountants able to examine the books for real!
Confirming these previous reports, it is obvious why the government and LUL went to such great lengths to try to keep its findings secret.
First they tried to buy Kiley off over the election period, then they sacked him after the election was over, then they used the courts to try to protect "commercial confidentialities".
The only commercial secrets being protected were just what a good deal the private contractors were being offered!
Blair, Brown and co. have argued that the Underground PPP will only go forward if it is shown to bring value for money. The Deloitte and Touche report shows how at every stage it has been necessary to assume the worst possible public sector performance and compare it with the best possible of the private sector to even get close to meeting this requirement.
Indeed, it is clear that far from being merely biased the assumptions made wildly exaggerate public failure and private success.
Because, up until now, LUL funding has always been on a short-term basis, set from Budget to Budget by the Treasury, investment has been piecemeal and inefficient.
It is clear that given stable long-term commitments a more efficient regime would ensue. This is the prospect facing the privatisers – but not LUL it seems – who are assumed to be £700 million less efficient.
Reality on its head
This turns reality on its head. Given a long-term commitment LUL could raise money cheaper than the private sector through Livingstone and Kiley’s bond issue proposals.
It would be even more cost effective if the government were prepared to raise the funds itself through direct taxation.
Add to this another assumption – that LUL performance will disrupt services – the government decided to build in a £1.2 billion "performance adjustment". And then because it is well known that LUL cannot manage its investment and is bound to have major cost overruns another £1.6 billion is assumed as the extra cost that LUL would bear. No mind that in every occasion that LUL has "overrun" in the past the actual offenders were the very contractors being asked to come in and run the privatised LUL.
For it is assumed that the private sector will run to perfect efficiency, delivering everything they promise on time and to budget. And of course if things do go wrong they will bear the burden and not the public. Or so they claim.
But again here the report accuses the government of a sleight of hand. Whilst the PPP will last 30 years the private sector figures only hold up, at best, for the first seven and a half years. After that, with all the cards in their hands, the privatisers will be free to renegotiate far better deals.
The sum total then is that the comparison of private to public costs starts from a false basis, with the full cost of the private sector bids not accounted for, and then assumes £3.5 billion extra costs for the public sector.
Despite this the private sector bids are still not competitive. And the government still claims that value for money is their sole criterion!
Of course, all this is simply based on financial tests under current economic and political frameworks. It says nothing of the other social costs – the effect on staff, jobs and conditions, the effect on public safety and the environment. We have seen what that has meant on the mainline railways.
Kiley and Livingstone now have the option to use this report to launch a new legal challenge – a judicial review of the government’s decisions.
But rather than relying on the courts what we need is Livingstone to mobilise the mass of Londoners who voted for him precisely to express their concern at Tube privatisation.
In the run up to the TUC and Labour Party conferences trade union leaders have been trying to find forms of words to defuse the anger their members feel at the prospect of the broadening scope of the privatisation process.
What is happening to LUL should be a warning. There is no level playing field, no honest broker.
The government is acting out of deliberate ideological motives – to reward its supporters in big business – and will do whatever it takes to make sure that happens – value for money has never been its concern.