London Underground's Privatization Experiment Dead as Remaining PPP is Bought Out
» Mayor Boris Johnson instructs Transport for London to purchase controlling shares of Tube Lines, the PPP process’ remaining private infrastructure manager.
Former London Mayor Ken Livingstone
sued the government twice in the early 2000s to prevent the full-scale contracting out of maintenance and work on the London Underground, which then-Chancellor of the Exchequer and soon-to-be-former Prime Minister Gordon Brown imposed on to the city beginning in 2003. The U.K. government, which provides financial sponsorship for most of the reconstruction of this city’s huge transit network, forced a series of public-private partnership (PPP) agreements through, giving big contracts to private enterprises Tube Lines and Metronet in exchange for the city getting big bucks from the national government to rebuild its decaying subway.
To Livingstone, a Labour politician, the multi-billion-pound PPP deals were undermined by a “fatal flaw” that kept public sector ownership of the system but gave private entities control over it. As
a report to the Mayor put it in 2001, “
Implementation of the PPP would be unsafe, inefficient, and prohibitively expensive.” The PPP process
allegedly cost £500 million in consultancies and fees just to set up.
Livingstone must feel relieved in his vindication. In 2007, Metronet fell into administration (bankruptcy) and was subsequently absorbed by
Transport for London (TfL), the public authority that runs the region’s rail and bus system. This put two-thirds of the Underground maintenance and renovation contracts back in government hands. Now, in the shadow of the British national elections last week, Livingstone’s replacement, conservative Mayor Boris Johnson,
decided to buy out
Tube Lines, which held the remaining third of contracts, after a public conflict over whether the company was being reasonable in its cost estimates for work to be done.
One of the largest forays into re-privatization of a public transportation entity in the West has come to an end, less than a third of the way into what was supposed to be a thirty-year commitment.
I’ll be the first to admit that I’ve been a
repeated critic of significant private involvement in the creation of what is supposed to be public infrastructure, so I may come at this discussion with a bias.
But the facts here speak for themselves: The history of the London Underground’s journey in and out of private stewardship should put a damper on what is increasingly frequent talk from the United States to Uganda of expanding PPP models into the provision of a whole series of public services. That is — I say this with a degree of self-imposed moderation — at least until the reasons for London’s failures are understood and appropriate precautions are taken to prevent similar problems from occurring in the future.
Otherwise, we may see a whole lot of wasted spending.
It’s worth reviewing the way the London PPP process was set up: three contracts were written, each covering the renewal and maintenance of about a third of the system’s 250 miles of track for a period of thirty years. The government let the contracts out to bid, and two companies won: Metronet took the Bakerloo, Central, Victoria, Waterloo & City, Circle, District, East London, Hammersmith & City, and Metropolitan Lines while Tube Lines took the Jubliee, Northern, and Piccadilly Lines. TfL would continue running the trains, but these companies were to be paid to do the work keeping stations, trains, and track up to par — under the direction of TfL management. This went far further than the usual government agency/contractor relationship by giving almost complete control over the system to the private companies rather then just bits and pieces of work to be done, as is more typical.
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