Mayor and Tube Lines clash over upgrade funding

PPP contractor Tube Lines has dismissed calls by London Mayor Boris Johnson and Transport for London for the company to raise cash to meet a funding shortfall for Tube upgrade works.

Last month PPP Arbiter Chris Bolt ruled that the next stage of works to be carried out by Tube Lines should cost £4.6bn, more than half a billion pounds higher than TfL priced the works but significantly below the £6.8 billion originally wanted by Tube Lines.

Later this month Bolt is due to announce his final ruling on how the works, which form the second ‘review period’ of the PPP contracts, is to be funded.

TfL and London Underground have called on the Arbiter to “direct” Tube Lines to raise the shortfall through “private finance”, a move the company says would ultimately cost Londoners “£1.3 billion”.

Mayor Johnson has already called on Ministers to make good any funding shortfall and is now calling on the company to prove its credit worthiness by raising the money without recourse to public funds. In recent days the Mayor has also called for Tube Lines to “step aside” so that LU could take over the work, effectively nationalising Tube Lines, a prospect opposed by business leaders in the capital.

In a statement issued on Friday the Mayor claimed Transport for London was “being asked to write a blank cheque in order to prop up Tube Lines, and to guarantee massive payments totalling hundreds of millions to its shareholders, Ferrovial and Bechtel.”

Repeating past claims that the PPP “is letting London down”, the Mayor said: “we will fight this to the last. It is clear to me that unless the Arbiter reviews his original decisions on how the PPP should be financed, TfL may have no alternative but to seek a Judicial Review.”

Andrew Cleaves, Tube Lines Acting Chief Executive, said the for it to raise funds “gives the appearance of LU and TfL improperly trying to influence the Arbiter’s process.”

Cleaves called on the Mayor and TfL to “see sense” and support the Arbiter’s rulings “in the interest of the travelling public and tax-payer”.

Despite his threats to seek Judicial Review of the PPP Arbiter’s ruling and support for bringing all aspects of the work in-house, the Mayor has previously agreed with London’s boroughs to give up his ‘reserve power’ to determine the funding level of the Freedom Pass in favour of an arbitration system. City Hall has not yet confirmed whether, in light of his determination not to accept the PPP Arbiter’s ruling, the Mayor stands by that undertaking.

Last month a report by MPs on the House of Commons Transport Select Committee branded the PPP scheme “flawed” and said Ministers had failed “to demonstrate that the PPP provides value for money for the taxpayer.”

The same report also found that London Underground’s costs for work carried out under the nationalised Metronet’s contracts “is up to one third more expensive than similar work undertaken by Tube Lines.”