Taxpayers may pay Metronet bill
Updated on 18 July 2007
The collapse of the company behind Britain's biggest private finance initiative scheme could cost the taxpayer hundreds of millions of pounds.
Metronet, tasked with maintaining three-quarters of London's Tube network, said it had run out of cash and could no longer continue with its lucrative contracts.
Transport bosses have promised to keep the tube running efficiently - but there are questions over what will happen to Metronet's debts, which could run into billions of pounds.
London Mayor Ken Livingstone said: "My message to all Tube users is that they should be assured that this will not undermine services and that all trains will continue to run and all stations will remain open."
London Underground (LU) managing director Tim O'Toole pledged to work with Mr Livingstone, the Government and the administrators "to ensure that the renewal of the Tube is delayed as little as possible".
Metronet said its staff should continue to undertake all their responsibilities and would be paid in the normal way.
Unions expressed dismay that Metronet managers will remain in place despite today's dramatic events and warned of industrial action if jobs or pay are cut.
Bob Crow, general secretary of the Rail, Maritime and Transport union, said the threat of hundreds of job cuts had been suspended after the union warned of industrial action.
Brian Harris of the Unite union said: "We believe the administrator is putting its faith in a moribund management who have been responsible for running Metronet into the ground. It is gravely disappointing that Metronet's management will remain responsible for running the business.
"Unite raised its concerns regarding pensions, redundancies and staff transfers but received little or no response, which spells bad news for Metronet's employees."
A Transport for London (TfL) spokesman said the main priority was to ensure the continued safe and efficient running of the Tube, adding: "We are confident that with the assistance of Metronet's staff, we will be able to deliver that."
It emerged that LU had been working on how to deal with Metronet going into administration for months after setting up a working group called Project Rocket.
Administrator Alan Bloom said day-to-day running of the Tube had been handed back to the Metronet team, which would now work "arm in arm" with LU.
He added: "Safety remains absolutely paramount here. My job is not to dwell on the past but to take things forward."
He had arranged funding facilities of hundreds of millions of pounds for TfL that would be adequate to move forward.
Metronet is one of two private companies - the other is Tube Lines - contracted to maintain and renew the Underground in a 30-year public-private partnership (PPP) plan that was bitterly opposed by Mr Livingstone and many others.
Metronet's two contracts cover the Bakerloo, Central, Victoria, Waterloo & City, Circle, District, Hammersmith & City, Metropolitan and East London lines.
Metronet had wanted LU to pay an extra £551 million over the next year to cover some of its cost overruns but Tube PPP arbiter Chris Bolt ruled earlier this week that Metronet should receive only £121 million.
Metronet argued that LU had asked it to do more work than was specified in its contract and that LU should pick up the cost overrun bill which was likely, eventually, to be about £2 billion.
Mr O'Toole said: "London Underground routinely carries out business continuity planning and treats failure of any of its key suppliers as a key business risk that it keeps under continuous review.
"Our priority is the delivery of a safe and reliable Tube service for passengers and therefore we had no option but to undertake considerable planning for the possibility that Metronet's financial difficulties would require it to enter administration."
He added: "It is also important that this issue does not distract from the ultimate objective here and that is the renewal of London Underground.
"We will be working with the mayor, Government and the PPP administrator to ensure that the renewal of the Tube is delayed as little as possible. The capacity enhancements that will be delivered by the upgrade of the Tube are absolutely essential for London's future prosperity and growth."
The Metronet administration is a blow to Prime Minister Gordon Brown who, as Chancellor, oversaw the Tube PPP in the face of stiff opposition.
Liberal Democrat transport spokeswoman Susan Kramer said: "This is a disaster for Gordon Brown's policy of part-privatisation of the Tube.
"The Government needs to step in and now return control of the Metronet lines to Transport for London. The process of administration could last for months. The last group that Londoners want to see running the Tube is an accountancy firm."
The Prime Minister defended the scheme in the House of Commons after Liberal Democrat Treasury spokesman Vince Cable said Metronet's collapse left "considerable uncertainty" over the future of the network.
Gordon Brown told Prime Minister's Questions: "If Metronet goes out, another company will be found to take its place.
"We are engaged in one of the biggest civil engineering projects that has ever happened in London, and increasing the number of people using the Tube from a billion a year to one and a half billion a year."
The Transport Salaried Staffs Association called for 500 job cuts planned by Metronet to be scrapped.
General secretary Gerry Doherty said: "We will not only be seeking assurances about future job security but will be demanding that the cutbacks aimed at cutting Metronet's huge losses are scrapped."
A spokeswoman for passenger watchdog London TravelWatch said: "Our thoughts are with the Metronet staff who have worked hard but have been let down by shareholders and the (PPP) business model.
"However, it is important that work that has been started to improve the Tube is not delayed. Also, we don't want to see the farepayer picking up the bill for all this."
