Sir, Ruth Kelly states that the £1.7 billion she has just repaid to Metronet’s lenders “would have been paid back to the lenders over the course of the PPP contracts had Metronet stayed in business” (letter, Feb 9). But the London Underground Public Private Partnerships legislation contains some protection for the taxpayers’ value for money. A PPP company is paid its costs in full only if it provides infrastructure services to a minimum standard of “availability, capability and ambience” and in an “economic and efficient” manner.
Metronet collapsed because of the independent PPP arbiter’s interim determination that a part of its spending was not economic and efficient and therefore would not have been repaid — the shortfall was considerably more than the consortium’s own shareholder stake.
When committing itself to the contracts the Government discounted the possibility that after a number of years a PPP company might fail to deliver the performance it had been paid for in advance through the monthly service charge and escape its obligations through PPP administration. The lenders understood the risk — which has materialised — and insisted on the government guarantee of 95 per cent repayment come what may.
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Part of this money has been wasted: the PPP manifestly did not provide adequate incentives for this company. If the work on the Underground is to be done — as it must be — that money will have to be found again.
All this is additional to several hundred millions of pounds on abortive professional fees to set up the Metronet PPP and several hundred millions more on fees for PPP administration and clear-up.
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Soon after the contracts were signed the National Audit Office entitled one of its reports London Underground PPP: Were They Good Deals? What is the answer?
Stephen Glaister
Professor of Transport and Infrastructure
Department of Civil and Environmental Engineering
Imperial College, London