Headlines: August 25th, 2000

The National Audit Office is to scrutinise the financial arrangements of the proposed infrastructure Public Private Partnerships (PPP) for London Underground before the contracts are signed. The announcement has been made following a recommendation from the Environment, Transport and Regional Affairs Select Committee in its report, Funding of London Underground.A key element of this work is to scrutinise whether the two key options for going ahead have been judged on the same basis. The PPP is the Government’s preferred solution to London Underground’s long-term funding problems. It is intended that for the first 15 years the PPP will invest 13 billion pounds in the service, funded by fares revenue and private sector capital. Responsibility for maintaining and improving the infrastructure (track, signals, and stations) and rolling stock will transfer to three privately-owned infrastructure companies on fixed term contracts.

London Transport is assessing the alternative cost of a wholly public sector London Underground to contrast with the PPP proposals. The comparison will be used by London Transport and the Government to test whether the PPP is the best option for the funding of London Underground’s infrastructure. It is this that exercise that the NAO will review, using its expertise and background of developing detailed guidance on all aspects of the use of private finance in public sector projects.

The National Audit Office will report once best and final offers have been made by the PPP bidders, and to assess the options on the basis of those bids. The results of this examination should be available ahead of final negotiations leading up to the eventual decisions and the closing of any deal. After decisions have been made, the National Audit Office also intends to undertake a full examination of the final outcome