How it took just two years to steer Tube into the red

Since London Underground's chairman and managing director were appointed in 1999, the company has managed to turn a 200 million surplus into a deficit of 122 million. Tony Travers calls for a public inquiry

SOME time in 2002, the Government intends to hand London Underground over to Mayor Ken Livingstone.

After four-and-a-half years in which the Tube's performance has - according to its own figures - declined badly, Labour will be rid of one of the grimmest of its inheritances. If it proves possible to conclude the negotiations over the public-private partnership (PPP), Transport Secretary Stephen Byers will not only be relieved of the Underground, but will also have ensured that Mr Livingstone is kept away from decisions about reinvestment in the Tube.

London Underground is a national tragedy. It is relentlessly criticised, yet few organisations enjoy so much public goodwill. Londoners have a love-hate relationship with the Tube: they love its familiarity, the famous map and many of the individual staff they meet. On the other hand, they hate the breakdowns, the strikes and the fact that they are treated like cattle.

Tube managers hide behind the excuse of long-term under- investment.

There is undoubtedly a problem of under-funding, though any regular user of the system will know that service failures are also because of poor management. New trains and signalling fail more than older equipment. Gaps between trains occur without explanation. Strikes take place despite generous pay and conditions improvements for staff.

Successive governments have set LU performance targets. Each year the Underground fails to achieve them.

According to the Tube's most recent annual report, seven targets were set for 2000/2001. None was achieved.

Worse still, in a world where the Blair Government requires schools, hospitals, police forces and other parts of the public services to produce an array of widely published performance indicators, virtually no figures are routinely made available about the Tube. There is no inspectorate - as there is for education, health, prisons, the police, fire brigades or for the nationalised utilities - nor is LU subject to National Audit Office scrutiny.

Small wonder, then, that the monopolistic Underground's management and drivers have, between them, conspired to provide the capital's commuters with what must now be the worst metro system in the world.

Evidence about the failure of the Tube can be witnessed every day. Some hard facts can be pieced together from LU's annual reports and other official publications. An analysis of recent trends in the Tube's finances reveals an appalling collapse in the organisation's position. As recently as 1998/1999, there was a surplus of income over running costs of between 150 million and 200 million a year. The forecast for the current year (2001/2002) is a deficit of 122 million. The rapid decline suggests that, by 2002/2003 - when the Mayor will have to fund any losses - the deficit will exceed 200 million.

LU's board and management have thus turned a surplus of about 200 million into a deficit of 122 million within two years, at a time when passenger numbers were rising sharply and when fares were increased in real terms. The beginning of the collapse in the company's finances coincides, as it happens, with the arrival of Sir Malcolm Bates as chairman and Derek Smith as managing director. The Public Accounts Committee of the House of Commons should immediately institute an inquiry into how a monopolistic public service with rising customer demand could possibly have let such a disaster occur.

Part of the explanation is the huge increase in its operating costs. Between 1998/1999 and 2001/2002, LU's costs have risen by 55 per cent: almost 20 per cent a year. Heaven knows where such staggering extra sums have gone.

Possibly on the numerous consultancies feeding off the minor PPPs already signed. Doubtless these rising costs are a leading indicator of the year-on-year service charge that will, as a result of PPP, burden London's taxpayers for the next 30 years.

The financial problems of the Underground are further evidence of what London sees every day. Labour MP Bridget Prentice recently highlighted the Underground's "worst ever" day.

Many of the problems she revealed resulted either from failures by LU to manage contracts properly or because newly bought equipment did not work.

Liberal Democrat transport shadow Tom Brake has produced figures showing staff absenteeism is rife and that peak-hour train numbers were worse in 2000/2001 than for at least five years.

The London Transport Users' Committee's annual report calculated that millions of work hours are lost each year, simply because the Tube does not achieve its published timetable.

THE Government cannot escape all the blame for the decline in the Underground's performance.

After almost five years in power, strong economic growth - and with a massive Parliamentary majority - the buck must stop with the Transport Secretary, who has responsibility for appointing the board of London Transport. The Treasury is supposed to oversee the use to which public money is put. Average annual investment in the core Tube in the years since 1997/1998 has been less than during John Major's years in office. Boasting that the PPP will somehow produce miraculous improvements in 10 or 15 years' time is just not good enough.

In the long term there is another problem. Because the Government will have forced through the PPP, Mr Livingstone will always be able to blame Tube failures on Whitehall.

During next year's London borough elections, the 2004 Greater London Authority election and the 2005 general election, the Tube will come back to haunt the Labour party. In fact, the Government will never be able to avoid the blame for Underground failures.

Sooner or later, this reality will have damaging electoral consequences.

Tony Travers is director of the Greater London Group at the London School of Economics

Copyright 2001
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