London Underground infrastructure map

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date 24 August 2001
source Transport for London
type Press release

The Deloitte and Touche report critical of the Government’s part-privatisation of the London Underground was cleared for publication by the Court of Appeal today.

The Court of Appeal judges were in agreement with the High Court judge, Mr Justice Sullivan who said the report was: "a serious report by a serious player on a matter that is of very considerable public importance."

Commissioner of Transport for London Bob Kiley said: "The Deloitte and Touche report, which I asked the Board of London Transport to consider as long ago as 18 July, reveals that the Government’s plans to privatise the Tube do not demonstrate value for money.

"The analysis of any public sector alternative was manipulated to make it look more expensive. The public’s bargaining power was thrown away in the rush to appoint chosen bidders. Moreover, the Underground applied ‘judgmental adjustments’ when they selected one of the preferred bidders.

Mr. Kiley continued: "The big question is why the Underground was so keen to keep this vital information from the public. The answer may lie in the fact that the Government has regularly said PPP contracts will not be awarded unless they demonstrate clear value for money when measured against the public sector alternative. The Deloitte and Touche report suggests that the Government’s plan does not pass the test."

Mayor of London Ken Livingstone said: "In the light of this independent report, London will expect the Government to honour its pledge to abandon this PPP if it does not provide value for money."

The Deloitte and Touche report says:

"Neither the 30 year nor the seven-and-a-half year [value for money test] provides a satisfactory basis for establishing value for money;
"Highly material adjustments to the [Public Sector Comparator] are judgmental, volatile or statistically simplistic;
"Selection of preferred bidders too early in the process could lead to a materially adverse impact on value for money;
"The financial advantages of selecting [one of the] preferred bidder[s] depends upon judgmental adjustments;
"Public sector bond financing has been largely dismissed."
The Court of Appeal also agreed that an unedited version of the Deloitte and Touche report could be sent to the National Audit Office for consideration.

The Deloitte and Touche report follows another report produced for TfL by engineering firm Parsons Brinckerhoff on the London Underground’s Code of Standards - the Tube’s safety ‘Bible’. The Parsons Brinckerhoff report concluded that the Code of Standards was "inappropriate and inadequate to serve as an effective management control mechanism to protect the public interest in performance-based PPP contracts with privately owned Infracos."

Railhub Archive ::: 2001-08-24 TfL-001