BLAIR’S BRITAIN, 1997–2007
Page 43
back as April 2001, and felt that in a ten-minute meeting they could
quickly come to grips with some of the issues. It never happened.
On 5 February 2002 the Transport Select Committee published a
strongly argued report that recommended that the government not
proceed with the PPP.38 The arguments were reiterated in a Commons
debate led by the formidable chair of the Committee, Gwyneth
Dunwoody on 27 June 2002.
Blair did make a personal attempt to understand the issues in detail, to
the extent of attempting to read and understand the many thousands of
pages of draft commercial contracts. There was a rumour that at a
meeting between Blair and Mayor Livingstone, in the spring of 2002,
Blair showed surprise and concern about the developing long-term
financial liabilities for the government and he asked his aides in No. 10 to
listen to both sides of the argument and to report back.
In parliament Transport Secretary Byers seemed to say that he had an
open mind pending final reports from consultants (rather than from
officials) about the value for money of the deals. Unsurprisingly, when
these arrived they were not definitive, but in any event the government
eventually closed the deals in spring 2003. Final negotiations were
painfully slow, and the terms of the contracts changed significantly with
the effect of reducing the exposure to risk for the private sector, as noted
by the critical report from the Public Accounts Committee (PAC) in
March 2005.39 The government’s absolute commitment to completing
the policy greatly weakened its bargaining position against the preferred
(and, by then, effectively the only) bidders.
The ex post appraisals are beginning to appear. On publication of a
further Transport Select Committee Report in March 2005,40 the chair,
Gwyneth Dunwoody, made the crucial point: ‘I welcome the fact that the
government is at last putting real money into the Tube. But I cannot see
why it needed a PPP to do it.’ The PAC found that the PPP had caused
38 House of Commons Committee on Transport, Local Government and the Regions,
London Underground, HC387 (London: TSO, 2002).
39 House of Commons Committee of Public Accounts, London Underground Public Private
Partnerships, HC466 (London: TSO, March 2005).
40 House of Commons Transport Committee, The Performance of the London Underground,
HC94 (London: TSO, March 2005).
years of avoidable delay, and the procurement alone had cost the taxpayer
getting on for £900 million, about half in fees to advisers and consultants,
and half in higher borrowing costs than an alternative promoted by
Livingstone, amongst others. Transport for London has published
progress reports41 showing a mixed experience, including an emerging
concern that the contractors may fail to deliver the investment programme as rapidly as they had promised and that the predictions of the
consequences of lack of management control are beginning to be realised.
An editorial in The Guardian (1 April 2005) on the occasion of the
publication of the critical PAC report summed up the sorry episode:
One of the few dents in Gordon Brown’s reputation for sound economics is
his dogged pursuit of public–private partnerships for the underground in
London, despite widespread criticism that it would have been much
cheaper if the project had been financed by government-backed bonds.
Yesterday’s report by the all-party public accounts committee will do
nothing to restore his reputation . . . Looking back, the whole episode
looks like a triumph of dogma and personal prejudice over common sense.
As Blair approached the end of his final term the public were beginning
to learn of the parlous state of the finances of Metronet (responsible for
two-thirds of the Underground PPP). Successive annual reports from
Transport for London had documented the progressive falling behind on
the investment programme in track replacement and, especially, station
refurbishments. The independent PPP Arbiter gave a ‘mixed’ first annual
review in November 200642 and when asked for a preliminary view about
a disputed £750 million overspend, he replied that there was evidence
that Metronet had not been entirely ‘economic and efficient’, with the
implication that the consortium would be held liable for at least some of
the over-run.43 As the Evening Standard and many other commentators
reported, ‘Metronet has been forced to admit that its handling of work
has been a shambles and is under intense pressure to improve its performance.’44 Within two days of Blair leaving office, Metronet filed with the
PPP Arbiter for an Extraordinary Review of its fees, revealing that its
overspend had spiralled to £2 billion in respect of the two-thirds of the
41 London Underground, London Underground and the PPP – The Third Year 2005/06
(London: London Underground Limited, 2006). There were similar reports for the two
previous years.
42 PPP Arbiter, Annual Metronet Report 2006 (London: Office of PPP Arbiter, 2006).
43 PPP Arbiter, Treatment of Investment at an Extraordinary Review (London: Office of PPP
Arbiter, 2007).
44 Dick Murray and Hugo Duncan, Evening Standard, 18 April 2007.
Underground infrastructure under its management.45 The ratings agency
downgraded some of Metronet’s bonds. So Gordon Brown as Prime
Minister was faced with the prospect of sorting out the problems of his
own creation as Chancellor. This set of contracts is so important and so
expensive that no Prime Minister could escape an involvement in a decision about whether and how to rescue it.
Further indecision over London devolution:
Livingstone and congestion charging
Road user charging – or congestion charging as the London realisation
was to be branded – was another transport subject where Blair showed
inconsistency. Charging road users by time and location as a means of
controlling traffic congestion whilst producing revenues was a long-established idea, but it had always been thought to be too politically difficult to
implement (except, of course, crudely by increasing fuel duty). But the
powers for local authorities to implement it were contained in the GLA
Act 2000 in the case of London, and the Transport Act 2000 in the cases of
other local authorities. Crucially, the legislation insists that the net revenues be applied locally for transport purposes for at least ten years.
This policy is a sensible component of devolution and it represents one
of the only sources of locally generated income at the discretion of an
English local authority. No doubt the ‘economic-efficiency’ half of the
Treasury brain welcomed this move. But the ‘control-of-public-spending’
half certainly did not: it represented a move towards hypothecation of
a ‘tax’ income over which the Treasury would have no control. But the
battle had to be won if the policy was to have any chance of political
acceptability. And it was won through the persistence of the Deputy
Prime Minister.
/> One might have expected that Blair, apparently committed to real
devolution, would have supported any local politician who sought to
make use of the new powers. But once candidates for London Mayor were
announced and Independent Ken Livingstone committed himself to
introducing congestion charging, the policy of the official Labour Party
candidate became not to introduce it. Blair and his colleagues were
careful to emphasise the political and technological risks of using the
powers they had themselves created. When on many occasions backbenchers asked ministers to intervene on their behalf, the answer was
45 Dan Milmo, The Guardian, 29 June 2007.
always that this was the responsibility of the Mayor of London and the
government had no powers to intervene.46 The clear expectation was that
the policy would fail spectacularly and it would all be Ken Livingstone’s
fault.
In the event the London congestion charging scheme went ‘live’ in
February 2003, worked well and demonstrated to considerable interest
round the world. In October 2003 Blair gave a fulsome acknowledgement:
I was very, very sceptical but I think that it has made a difference, and I
think that provided the money is ploughed back into transport, then I
think it is an interesting example of how we can manage transport policy
for the future. I think it is too early to evaluate all the results of it, but you
have got to give credit where it is due.47 This history seems to have been forgotten in Blair’s Brief to the PLP of May 2007 in which he claims for himself
as a ‘key moment’ ‘congestion charge operating successfully in London’.48
Now it is apparent that Livingstone has become an important political
ally of the Prime Minister’s, as revealed in a MORI survey for the GLA.49
Livingstone has been allowed to rejoin the Labour Party and seems to
enjoy a good relationship with Blair. The growth in London bus patronage – a clear consequence of Livingstone’s policies – has been sufficient to
allow Blair to claim in his PLP Brief that ‘Bus use [is] increasing year on
year for the first time in decades’,50 even though the annual statistics show
it to be falling outside London.51
It is Livingstone and the GLA that are leading the way in implementing
the devolutionist Prudential Borrowing regime that allows local authorities a new freedom to borrow within limits of ‘prudence’. In December
2004, with a delightful irony, Ken Livingstone successfully launched the
first £200 million onto the financial markets: the government had flatly
refused Livingstone’s proposition that he be allowed to do precisely this
as an alternative to the Underground PPP, on the grounds noted above
that ‘To saddle the city with an enormous amount of debt is a recipe for
disaster.’52 This was the beginning of a £3,000 million, five-year programme of long-term borrowing, and subsequent issues have proved to
be in heavy demand in the markets, attracting rates of interest close to
government securities and preserving excellent ratings with the ratings
46 For example, see the exchange in the Commons with Richard Ottaway, 9 January 2002.
47 London Today, ITV.
48 PLP Brief, May 2007, p. 17.
49 The Guardian, 17 January 2005.
50 PLP Brief, May 2007, p. 17.
51 Department for Transport, Bus and Light Rail Statistics GB: October – December 2006
(London, TSO, 2007).
52 Financial Times, 23 November 1999.
agencies. All this with the explicit approval of the Treasury as part of a
good five-year funding agreement for London.
National road pricing
The success of London congestion charging encouraged Alistair
Darling – who had been appointed by Blair as Secretary of State for
Transport, to sort out the transport policy muddle left behind by Prescott
and Byers – to take the idea seriously at a national level. To have been seen
to be considering this would have been unthinkable a couple of years
earlier, yet this kind of traffic management forms the core of the
Transport White Paper of July 2004. And Blair himself wrote a foreword
to it. Whilst hardly a strong endorsement for the eventual possibility of
national road user charging, it is the most one could expect and it is
remarkable considering the sensitivity Blair had previously shown to the
power of the motoring electorate. In fact, after some hesitation, he had
already given his endorsement to road pricing in 2002 in his foreword to
the RAC Foundation’s Motoring Towards .53
Importantly, in endorsing this aspect of the White Paper Blair was
endorsing the positive conclusions of the Road Pricing Feasibility
Study.54 This was a major piece of research by Department for Transport
officials overseen by a steering group mainly of non-civil servants and
chaired by a senior official who would, in spring 2007, rise to become
Permanent Secretary at the Department for Transport and therefore to
assume overall responsibility for delivering the policy on road pricing.
Blair, having given approval ‘in principle’ to developing national road
pricing, delegated development of the policy to his Secretary of State,
Alistair Darling. Further staff work was carried out and substantial sums
of money were put on offer through the new ‘Transport Innovation Fund’
to local authorities that could be encouraged to bid for grants to assist
them in implementing pilot schemes (Birmingham and Manchester being
two of the most prominent candidates). When Douglas Alexander succeeded Alistair Darling, Blair’s remarkable introductory letter of instruction reaffirmed that:
Managing demand for road transport and ensuring we get the best out of
our existing network are vital. We therefore need to advance the debate on
53 RAC Foundation, Motoring Towards 2050 (London: RAC Foundation, May 2002).
54 Department for Transport, Feasibility Study of Road Pricing in the UK (London, TSO,
2004).
the introduction of a national road-user charging scheme. The successful
roll-out of local schemes funded from the Transport Innovation Fund will
be critical. I would like you to identify the other key steps for the successful
introduction of road-user charging within the next decade.55
Everything was consistent with Blair leading on this matter at the
highest level, securing consistency across Whitehall and delegating policy
development to the relevant departments. Then in early 2007, in the same
way as during the fuel price protests of 2000, that dozing monster ‘the
motorist’ reawoke. The stimulus was an ‘e-petition’.56 This system was set
up in November 2006 on the official No. 10 website. It allows the general
public to initiate a petition on more or less anything and the public can
‘sign’ online. Initially, many of the petitions were on trivia and poorly
supported. But ‘We the undersigned petition the Prime Minister to scrap
the planned vehicle tracking and road pricing policy’ received some
press coverage: it closed on 20 February 2007 with over 1.8 million signatures. This caught Blair’s attention. Within a day he sent a personal
email response to every signatory,57 and, as already noted, on 1 March he
created a podcast interview with motoring journalist Richard Hammond
on the No. 10 website.58
These responses are significant for several reasons. First, here was a
Prime Minister announcing important policy changes though the
medium of email and podcast. Second, his replies seem to make little connection with the 2004 Transport White Paper for which he had written
the foreword and he makes little reference to the Road Pricing Feasibility
Study or the other research and policy development work that had been
carried out over several years by the Department for Transport59 to which
he had delegated the task: ‘I see this email as the beginning, not the end of
the debate . . . we have not made any decision about national road
pricing’. The podcast seems to deny the existence of the thorough investigation in the 2004 Feasibility Study:
You could decide you were going to get rid of all the other taxes and just
have that and you could decide that it is going to be revenue neutral. Now
all these are policy decisions that you take in the future. The only issue at
the moment is do you want to investigate this technology as a way of
dealing with the problem both of congestion and of how you raise money
for transport, do you want to do it or not? And you may decide at the end of
55 www.pm.gov.uk/output/Page9455.asp.
56 http://petitions.pm.gov.uk.
57 www.pm.gov.uk/output/Page11050.asp.
58 www.pm.gov.uk/output/Page11116.as.
59 The email does give a link which leads to comprehensive material on the DfT’s website.
it you don’t want to do it, but all I am saying at the moment is because you
have got this additional dimension of congestion, as well as all the complexities of how you tax people in relation to transport, is it not sensible at
least to investigate it?
Third, some of the Prime Minister’s comments in the podcast suggest
that he is not entirely clear in his own mind about the point of road
pricing: ‘you could charge very low amounts when you are travelling in
the non-peak times and higher amounts when you are travelling at the