Public Values

London underground's privatization experiment dead

Remaining PPP is bought out.

London is abandoning PPPs to run its subways.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 UK 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...

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Posted: May 13, 2010

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