» There are another four years to go before Crossrail 1 opens, but consultation is advancing quickly on Crossrail 2. London is ready for more fast cross-town links.
As Paris begins construction on a massive new program of circumferential metro lines designed to serve inter-suburban travel, London has doubled down on its efforts to improve links within the center of the metropolitan area. The two approaches speak to the two regions’ perceived deficiencies: Paris with its inadequate transit system in the suburbs, London with a core that is difficult to traverse.
There’s one thing both cities deem essential, though: Much faster transit links to reduce travel times around each respective region. In London, that means growing support for additional new tunneled rail links designed to bring suburban commuters through the center city while speeding urban travelers.
Since the conclusion of the second World War, London’s Underground network has grown very slowly: The Victoria Line was added in 1968 and the Jubilee Line extended in 1979, but that’s about it. In some ways, that made sense: London region’s population peaked in 1951 at 8.1 million and declined precipitously until the 1980s. It only recouped it losses in 2011. But the region is now growing quickly, adding an estimated 100,000 or more people a year, reaching a projected 9.7 million 20 years from now. The number of commuters entering the city is expected to grow by 36% by 2031.
That growth has put incredible strain on the city’s transit network, with ridership growing by 40% in fifteen years. Through direct government grants, the support of the pseudo-public Network Rail, and the commitment of Transport for London, the local transit organizing body, the city has two major relief valves under construction. The Thameslink Programme, which will open for service in 2018, will improve the existing north-south rail link through the city by allowing for trains every two to three minutes; the Crossrail 1 project, also opening in 2018, will create a new, 21-km northwest-to-southeast subway corridor that is expected to increase overall transit capacity by 10% while significantly reducing east-west travel across the city center.
Those projects, which cost more than £21 billion ($36 billion) between them, will allow the system to accommodate new growth, but they won’t resolve London’s most significant transit bottleneck, the Victoria Line, which carries far more riders per mile than any other Underground Line. That’s where Crossrail 2 comes in.
Crossrail 2, as the following map shows, would extend from the southwest to the northeast of the city, connecting Victoria with Euston, St. Pancras, and King’s Cross Stations, roughly paralleling the alignment of the Victoria Line. The project will allow certain trains on the West Anglia Main Line to the north and the South Western Main Line to run through the city. The project was submitted to a public consultation process that ended last week that examined several options for line routings; a preferred route is expected to be selected this year, with construction beginning at the earliest in 2020 at a cost of £12 to 20 billion ($21 to 34 billion). Last year, a separate consultation for the route selected a “regional” option (allowing through-running commuter trains) over a “metro” option, which would have been an automated subway.
Like Crossrail 1, Crossrail 2 is expected to increase the transit capacity of central London by 10%, possible thanks to 10-car trains running every two minutes, allowing 45,000 passengers per hour per direction. As the following map illustrates, that capacity increase will be needed by the early 2030s if the project is not implemented. Major sections of the Victoria, Piccadilly, Northern, and District Lines are all expected to be crowded at more than four passengers per square meter at rush hour, enough to make much of London Underground a truly inhospitable environment.
The opening of the the high-speed rail line HS2, which will link London to Birmingham by 2026, makes the capacity bump provided by Crossrail 2 even more important because of the influx of passengers expected at HS2’s terminal, Euston Station.
The result of the new connection will not only produce less crowding on other lines, but it will significantly reduce journey times. To Tottenham Court Road, where Crossrail 1 will will meet Crossrail 2, the latter project will reduce travel times from Kingston in the southwest from 49 to 27 minutes and from Tottenham Hale in the northeast from 27 to 16 minutes.
There is little about Crossrail 2 that has been easy thus far, and certainly there is plenty more work to be done, particularly in assembling the project’s financing. The project has been studied since the 1970s (as the “Chelsea-Hackney Line”) and was considered as a serious alternative to the initial Crossrail project in the late 2000s. In other words, its necessity isn’t exactly a new idea.
Extensive support from business groups, including London First, however, is new. The organization has proposed funding the project, in part, with £3 billion in fare increases on all transit services, £2.4 billion in revenue from allowing denser development along the corridor, and £1.8 billion from expanded business taxes. In addition, the line — like Crossrail 1 — is expected to be operationally profitable and therefore able to raise some its capital funding by bonding on the back of future fares to the tune of an additional £3 billion.
If these seem like huge sums, they are. But London transit proponents have successfully been able to make the case not only that the city’s residents rely on its transit system, but also that investing in a better transit system produces overwhelmingly positive benefits to the economy as a whole. Crossrail 2’s advocates note that, even with a £16 billion price, the project’s benefits to cost ratio is 4.1 to 1 when wider economic benefits, such as agglomeration, are considered. This is a message that American transit promoters, who are unable to effectively make the argument for new lines, should practice making, because while London’s a great town, there’s nothing particular about the benefits of fast transit there versus anywhere else.
Image at top: Crossrail station at Canary Wharf, almost complete, from Flickr user George Rex (cc); Crossrail 2 map from Transport for London; Crowding map from London First.
» A new route from London to Birmingham to be opened by 2026, with further extensions planned into 2030s. Project continues to face healthy skepticism.
Whatever the recession’s effects on government budgets, infrastructure development in Europe continues to advance at a steady pace. The United Kingdom government affirmed last week that it would move forward with the construction of a £18.8 billion ($29 billion) high-speed link between London and Birmingham, due for opening in 2026. This in spite of draconian cuts across all sorts of public services, both in Britain and across the continent.
The U.K.’s high-speed effort — it will effectively produce the nation’s first domestic truly high-speed line — follows almost two decades of travel to and from Paris and Brussels via Eurostar trains that operate under the English Chanel. Though those services have only recently met opening-year ridership expectations, Eurostar holds the large majority of the air-rail market share to these continental capitals, especially since following improvements completed in 2007 London finds itself within about two hours of its mainland peers. The popularity of that service surely had something to do with the government’s decision to move forward on a second line.
HS2 will bring measurable benefits: London to Birmingham in just 45 minutes, compared to 1h20 today, and eventually an hour off of trips to Manchester or Leeds, once extensions north to those cities are opened in 2032 at a cumulative cost of £36 billion. Direct trips between northern cities and Heathrow Airport and even the continent via the Channel Tunnel Rail Link will be put into place. London’s aging Euston terminal will be significantly spruced up. The biggest improvement, perhaps, will be the practical doubling of capacity between the capital and the Midlands by providing a release valve for the West Coast Main Line, which recently went through its own upgrading project but which is predicted to reach capacity with a dozen years. (It already handles more than 40% of the country’s freight and 75 million annual passenger journeys.)
Yet the enormous cost of the link up to Birmingham has been put in question repeatedly not only by those who worry about increasing public debt but also those who question the need for the new rail link — especially along the chosen alignment.
The questions vary, depending on the critique: Is it worth spending this much money, primarily to reduce travel times by half an hour on trips between London and northern cities? Is the West Coast Main Line actually at capacity, or can it easily be expanded? Will UK travel patterns change to a significant enough extent to justify more transportation connections?
Much of the criticism of the project has focused on the line’s segment through the Cotswolds northwest of London, a pristine section of Britain that also happens to hold the residences of some of the nation’s most wealthy. But project planners seem to be unable to find an alternative to that alignment; it has remained the same even after the political transition between Labour and the Conservatives after the 2010 elections. That opposition, however, comes across as nimbyism, especially since its prime backers call from the affected area.
But the complaint that there is not enough of an economic rationale for the project is more compelling. The government’s own study of the project suggests that the first section would have a shaky benefits-cost ratio of just 1.6. This means that each pound of investment in the project would lead to £1.6 in economic benefits (in today’s discounted currency). Public works projects should be considered in comparison with one another to prioritize investments, and this rating is low.* The government’s own study of the 51M alternative, produced by project opponents as a suggestion to expand capacity on the West Coast Main Line, suggested a benefits-cost ratio of five or six for that less costly scheme.
Up in the air is the issue of whether the system will ever be extended north of Birmingham, to Manchester and Leeds as suggested by current planning, and then further north to Scotland. Of course, the financing to make those expansions possible is lacking, despite the fact that they would improve the benefits-cost ratio of the program to between 1.8 and 2.5, a far better result.
Meanwhile, the delayed completion of the line (it will not enter the construction stage until 2018) forces us to ask whether governmental action today is “final.” The justification of the wait has been that the government wants to first complete the equally huge Crossrail urban rail project for London. But who knows what priorities the government of 2018 will have. Will the high-speed rail project by then have lost political support?
A low cost-benefit ratio, however, does not necessarily mean the project shouldn’t be built.** The 51M scheme would be fine, but according to the government, it would fail to provide the capacity expansions to the rail network the country necessitates. It would force increasing freight shipments onto congested roadways. As the U.K. plans for its future, it has a choice: Allow its existing infrastructure to become paralyzed by disinvestment and a lack of capacity, or invest to expand it. The latter choice will allow for expanded travel and trade, the former will not.
These issues plague the development of many similar infrastructure investment projects. The California High-Speed Rail project, which continues to attract significant criticism from across the country and which lacks the national commitment devoted to Britain’s program, nonetheless represents a fundamental choice about the future of that state. Will it invest in its mobility systems to guarantee that its future inhabitants have access to travel options? Or will it overwhelm its existing infrastructure with the pains of growth? It’s an expensive choice.
* The government’s insistence that the project will create a large number of jobs (and therefore that it is good) improves the benefits-cost ratio only to the extent that external (non-construction) employment growth occurs because of the rail project and wouldn’t otherwise. After all, construction jobs, if that were the priority, could come cheaper: We could pay people to dig holes.
** As long as the ratio is over 1. Otherwise, the project would then produce more costs than benefits…
Image above: Rendering of British High-Speed Rail, from HS2
» Comparing the approaches taken by Paris and London suggests that to ease traffic U.S. cities can attempt other, more politically palatable solutions than pricing.
When it comes to transportation economists, there’s pretty much one answer to every problem: Equate pricing of all modes with their greater societal impacts. In general, this means that we (in the U.S.) ought to be charging drivers more to make up for the negative effects they have on the environment and the roadway infrastructure, and that we ought to be increasing subsidies to encourage people to take transit.
This approach could be implemented in a variety of ways depending on location, but one model that has been particularly appealing to planners interested in reducing the perceived negative economic and social effects of traffic has been that of London, which in 2003 implemented a congestion charge on drivers entering its central business district. Revenues from the program went to increasing transit service. The method, unsurprisingly, has been a major success in terms of reducing traffic: Between 2002 and 2007, overall car movements in the district decreased by 39%. Meanwhile, travel on public transportation increased correspondingly over the same time period: By 24% on commuter railways, 16% on the Underground, and 18% on buses.
These are excellent results and the effects have been overwhelmingly positive for commuters and residents of London’s central areas.
But what if congestion charging is just too much of a hot topic for even progressive American cities to handle? The effort to instate a similar system in New York City in 2008 was so thoroughly brought to its feet that it is hard to imagine wanting to repeat the fight.
Yet there’s an alternative, and it may prove just as productive if the goal is to reduce traffic: Paris’ systematic engagement to make it harder to drive in the city. The French capital has proceeded in a manner far different from that of London, choosing to avoid paid penalties on drivers in order to prevent the further development of the already-existing sense that the City of Paris is attempting to isolate itself from its suburbs, which are already cut off by a ring road. 40% of drivers within the city’s borders are inhabitants of the surrounding areas.
As a result, the administration of Mayor Bertrand Delanoë has since 2001 prioritized the creation of bicycle, bus, and tramway infrastructure along with the reduction of vehicle lanes along both major boulevards and side streets. Huge sections of the city have been designated 30 km/h zones and biking is now allowed in both directions on most streets, even those that are one-way for automobiles. Free parking has been mostly eliminated. This spring, the city reinforced its efforts to commit far more street space to biking and expand that mode’s travel share.
Looking back, the results have been astonishing: Even with no direct financial reason to abandon driving, the city saw a 17% decrease in driving between 2002 and 2007, a trend that is continuing (according to the most recent information, it may now be 24%). In the same time period, travel on the regional rail network increased by 16%, by 8% on the Metro, and by 2% on buses in the city. Weekend traffic has seen the most significant gains. This has reduced further the already extremely low share of overall commutes made by car or motorcycle in the city: Just 16.3% in 2008. In the near suburbs, the equivalent statistic is 40.2%, though those areas are soon to be better connected by a system of tramways and bus-only routes (and eventually by a massive circumferential metro).
Paris’ accomplishment, though not as large in percentage change as London’s, was arguably more significant since it affected the entire city of 41 square miles, versus the original eight square miles of the London congestion zone (later roughly doubled).
Moreover, these statistics fly in the face of the commonly-cited idea that “congestion pricing is the best way, and perhaps the only way, to reduce traffic congestion,” to quote transportation policy experts David King, Michael Manville, and Donald Shoup. For cities truly concerned about finding ways to limit the number of cars traveling down the street, whatever the purpose, this example demonstrates that a concerted effort to get cars off the street by limiting the space available to them can be an effective technique.
There are, of course, dissenters who make the argument that the Parisian approach limits economic productivity and results in a “decrease in mobility” because car drivers no longer are able to move as easily as they once were. That interpretation, however, is based on the fact that overall passenger-kilometers have decreased; yet that statistic favors trip distance thereby discounting the value of, say, walking to the neighborhood store — an essential trip for people living in an urban place. Also, economic discussions focused on “mobility” fail to reflect the fact that inhabitants of neighborhoods with fewer cars benefit significantly in terms of quality of life.
Arguments that suggest that bus ridership has not gained enough passengers to reflect the decrease in car traffic do have some merit, though there is no doubt that certain interventions, such as the installation of a new tramway along the southern edge of the city limits, have significantly increased public transport use.
The major failing of Paris’ approach is that it does not guarantee a new revenue source for the public transportation system. Whereas London was able to use its congestion charge to reinforce spending on its local bus system, Paris has had to continue relying on other funds to ensure the increase in services provided on increasingly packed buses and trains. Even so, that may be a compromise worth considering for other cities wanting fewer cars without the political nightmare that is congestion pricing.
» London’s experience may provide a useful example for American cities looking to introduce large bike sharing systems.
Bike sharing is growing rapidly as the transportation mode du jour; not only have the standardized bikes and their docking stations invaded most major cities across Europe, but they’re now headed towards introduction in a number of American cities as well. Before investing full-scale in the purchase of thousands of new bikes and the installation of hundreds of docks, U.S. planners should be looking closely at previous experience to determine best practices in system design.
Last month, I laid out my concerns that Washington, D.C.’s new Capital Bikeshare doesn’t plot its stations close enough together for the system to be effective, at least based on the manner in which Montréal and Paris have implemented their networks. The lack of station density could prevent easy use by day-to-day users because of difficulties related to finding stations in some neighborhoods.
London, which just introduced its Barclays Cycle Hire system using 6,000 Montréal Bixi bikes and 400 docking stations spread out across 17 square miles of the center city, does not have the same problem, since its stations are tightly packed in a circumscribed area. One difficulty it might have, however, could potentially be even more problematic: Because of London’s land use geography, commuting patterns are overwhelmingly unidirectional, towards the center in the mornings and away from it in the afternoons. This may put a strain on bike sharing, since to work, the concept requires a relatively even pattern of bike pick-ups and drop-offs at every station.
American cities, which feature similar concentrations of office jobs in the inner-city core and distributions of residential areas in peripheral zones, must evaluate how London is handling this problem and develop their own coping techniques before moving forward with a major spending program.
Consider the images below of usage distribution of London’s bike share, products of a mapping system developed by Oliver O’Brien. In the mornings, thousands of people bike from the outside of the Cycle Hire zone into its interior; by the afternoon, this produces a situation in which the majority of stations in the center are full (red) and the majority of those along the edge are empty (blue). In the evening, on the other hand, the movement of commuters from the core and into the periphery produces the opposite situation, where the stations in the center are empty and those on the periphery are full.
Afternoon – 1:35 PM London Time
Evening – 8:55 PM London Time
Red dot: full station | Blue dot: empty station
For commuters intending to use the bikes during off-hours, this is extremely problematic. If you want to ride from the London jobs center to the outside of the Cycle Hire zone at 9 PM, for instance, it may be virtually impossible to find a bike; even if you do, you might have a difficult time finding a station at which to dock your bike. The same can be said for a commuter attempting to make the reverse commute at 11 AM.
Perhaps more important, this situation is difficult to handle from an organizational standpoint. Because of the fact that the managers of the system want to alleviate these problems, they have 14 trucks (one of which is pictured at the top) which transfer bikes from full stations to empty ones. Other cities with bike sharing have a similar transportation method, but London’s may be particularly overcharged because of the monofunctionality of many of the city’s neighborhoods.
The worse-case situation seems to be occurring at the bike share docks adjacent to the Kings Cross and Waterloo intercity stations. There, the Cycle Hire management company Serco is simply leaving dozens of non-docked bikes in front of full stations, cluttering up the sidewalks sometimes for hours in anticipation of them being moved elsewhere. There are a few solutions that could be implemented relatively easily, including the hiring of more trucks to move bikes around and the creation of more docking points at places with heavy demand for parking.
But both of these would require a ramp-up in operations costs. One of the great benefits of a well-designed bike sharing system is that the riders can do the moving for you, thereby reducing the onus on the operator to make sure there are an adequate number both of bikes and of empty docks at every station.
Some cities, like Paris and Barcelona, have it a bit more easy, simply because office and residential uses in those cities are not nearly as segregated as they are in London, making the flow of bikes in the sharing system multidirectional. In other words, a mixed-use city is most appropriate for the implementation of a bike share system. It is indicative that the one place in Paris where there is a massive concentration of jobs but few residences — at La Défense, just outside of the city limits– has virtually no access to the Vélib bike sharing network. The city’s planners likely understood that the result of putting docks there would be the same problems as are now experienced by London, and have resisted expanding the system into that business district.
But most American cities have no choice but to include their primary, monofunctional, business districts in their bike sharing plans simply because those business districts are in the center of the city. It will be interesting to watch Washington, D.C. and other cities attempt to cope with the problem of the unidirectional commute as their inhabitants get used to biking to and from work, but London’s experience makes clear what they’re likely to experience.
Images above: London Cycle Hire bikes being moved about the city, by Flickr user Tom Anderson (cc); and Status of London’s Cycle Hire stations (17 and 18 August 2010), from OOBrien.com (cc)
» Mayor Boris Johnson instructs Transport for London to purchase controlling shares of Tube Lines, the PPP process’ remaining private infrastructure manager.
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 U.K. 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.
One of the largest forays into re-privatization of a public transportation entity in the West has come to an end, less than a third of the way into what was supposed to be a thirty-year commitment.
I’ll be the first to admit that I’ve been a repeatedcritic of significant private involvement in the creation of what is supposed to be public infrastructure, so I may come at this discussion with a bias.
But the facts here speak for themselves: The history of the London Underground’s journey in and out of private stewardship should put a damper on what is increasingly frequent talk from the United States to Uganda of expanding PPP models into the provision of a whole series of public services. That is — I say this with a degree of self-imposed moderation — at least until the reasons for London’s failures are understood and appropriate precautions are taken to prevent similar problems from occurring in the future.
Otherwise, we may see a whole lot of wasted spending.
It’s worth reviewing the way the London PPP process was set up: three contracts were written, each covering the renewal and maintenance of about a third of the system’s 250 miles of track for a period of thirty years. The government let the contracts out to bid, and two companies won: Metronet took the Bakerloo, Central, Victoria, Waterloo & City, Circle, District, East London, Hammersmith & City, and Metropolitan Lines while Tube Lines took the Jubliee, Northern, and Piccadilly Lines. TfL would continue running the trains, but these companies were to be paid to do the work keeping stations, trains, and track up to par — under the direction of TfL management. This went far further than the usual government agency/contractor relationship by giving almost complete control over the system to the private companies rather then just bits and pieces of work to be done, as is more typical.
After the 30-year contracts were signed in 2003, there wasn’t much room for maneuver, though a “Tube Arbiter,” Chris Bolt, was supposed to guarantee that the cost estimates of work to be done by the private consortia and to be paid out by TfL were accurate reflections of reality. Theoretically, the involvement of private contractors would reduce overall costs by inducing the supposed “creativity” of the private sector.
Unfortunately, that “creativity” was motivated by profit and insider deals, particularly in the case of Metronet, which gave exclusive contracts to the companies that owned it, including Bombardier, the train maker, Atkins, an engineering specialist, and Balfour Beatty, a construction firm, increasing costs substantially. Because the PPP contract spread out over a 30-year period, the “competitive” nature of private involvement in the reconstruction of the Tube was abandoned as soon as the deal was signed.
And then Metronet fell apart beginning in 2007, forcing TfL to pay back £1.7 billion in borrowing, of which the taxpayer lost £410 million — not exactly chump change. The government had bet on private sector productivity, and lost.
The problem for the public sector, of course, is that it can’t allow investments like those in the London Underground to be simply thrown away: The system must be upgraded, no matter the cost. Thus the government gave the PPPs a 95% guarantee on their borrowing, virtually eliminating any risk. It was the public’s responsibility to clean up the mess when Metronet broke down: It had no other choice.
Tube Lines was in better shape financially; the decision by Mayor Johnson to buy it out had a lot more to do with a conviction that the public sector could do the work better than private companies than a fear that Tube Lines would go bankrupt. TfL will spend £310 million to buy out the shares of Tube Lines’ owners, contractors Bechtel and Grupo Ferrovial, funds that the mayor’s office claims it can make up by eliminating shareholder profits, cutting “middle management fees,” reducing the amount of duplicated work, and taking out debt at cheaper rates than was possible by a private company.
But Johnson’s main concern — the situation that got him into this buyout deal in the first place — had been the fact that while TfL had scheduled £4 billion to pay for seven years of upgrades for the routes covered by Tube Lines, the company claimed to the PPP arbiter that they would cost £4.46 billion — £460 million of which TfL did not have on hand. So the only choice was to reduce the amount of work planned to be done — or simply purchase the company’s commitments, eliminating direct private involvement in the London Underground, exactly the choice Mr. Johnson’s TfL made.
The problem, suggested former London Underground Managing Director Tim O’Toole last year, is four-fold:
“The lack of competitive bidding in allocating work over 30 years results in inflated costs and preferential fees to the involved private companies; negotiations over future or new work are conducted without the ability to introduce market discipline, resulting in higher costs; in place of competitive bidding, the structure relies on record-keeping, derivative measurements and man-marking, all at additional administrative expense; the asymmetry of information in favour of the private companies leads to a claims culture, resulting in future unpleasant budget overruns.“
It is unclear whether TfL will be able to maintain its infrastructure for a cheaper price than have the PPP companies: The claimed reason for involving private actors in the first place was that the government-performed upgrade of the Jubilee Line, done in the 1990s, had been a fiscal disaster, going over budget by one billion pounds. And PPP Arbiter Chris Bolt suggested this year that TfL’s work was more expensive than that of Tube Lines.
Yet the experience with Metronet, which probably had far too much on its plate — was an unforgivably colossal failure: That company had £17 billion worth of improvements planned over a thirty-year period, but was £2 billion over budget just five year in. Before it was put into administration, it had refurbished only four stations, versus the seventeen it had been expected to complete by that point. Moreover, TfL claims it is improving the Victoria Line more efficiently than is Tube Lines on equivalent work elsewhere in the system; that company had been very late in completing its own work on the Jubilee Line.
Administrative costs will go down, as the “partnership” between public and private entities was marked more by disputes over costs than agreements. TfL and the PPP companies sued one another repeatedly over the course of the past ten years. Former Mayor Livingstone has suggested that the difference in cost estimates between Tube Lines and TfL could be accounted for by the outrageous salaries the former pays its staff — 150 from Bechtel and Grupo Ferrovial, for example, are paid an average £500,000 each annually, compared to the £90,000 they might receive in the public sector. Mayor Johnson agreed, suggesting that the price difference was the result of management fees: “In other countries this would be called looting,” he said. “Here it is called the PPP.”
And it is definitely true that the public sector is able to take out loans at lower interest rates than were the PPP companies.
No matter what, London continues to set records in terms of how much money it spends on improvements. Arbiter Bolt has demonstrated that peer systems from New York to Hong Kong cost 20 to 40% less than London — in terms of purchasing-power parity — to complete similar work. This, however, may have more to do with work conditions specific to the United Kingdom than anything else.
If Mayors Livingstone and Johnson are correct — that the PPP process resulted in increasing costs for construction that would be better managed by a publicly-controlled entity — the decision to pull leadership of the Tube renewal program back into the heart of TfL makes a lot of sense. Indeed, the example of Metronet suggests that the limited risk assumed by the private companies at least under the terms of this process has yielded few if any tangible benefits for the London public, actually costing the government millions of pounds that would have been better spent on construction. Peter Hendy, current Commissioner of TfL, expects to save hundreds of millions of pounds over the course of just a few years, and he argues that TfL will be able to complete renovations to the Northern Line (so far very late) faster and with fewer disruptions than had the PPP company.
The more recent controversy with Tube Lines demonstrates the failure of a massive 30-year contract with a single organization. There is little motivation for improved performance and there are too many ways in which the private sector can orient its decision-making inappropriately around profit creation, often with the goal of generating huge salaries for its upper-level employees — spending that wouldn’t occur similarly in government.
The London Underground has improved significantly over the past decade: its renovated stations look modern and its operations reliability has significantly increased. But the public likely would have benefited from similar upgrades at a lower cost had TfL remained in charge. Indeed, the positive differences in the system are the result of a vast expansion in public contributions for its maintenance thanks to a national government effort to expand support for transit, not some sort of private-sector ingenuity. The latter seems mostly to have resulted in delays and cost overruns — all at a cost to the taxpayer, not private industry, which has mostly gotten away unscathed.
Tim O’Toole, the former Tube Managing Director, suggests a more conventional financing structure, which would include shorter-term contracts for smaller work commitments. This would allow TfL to adapt to changing circumstances more rapidly and adjust spending based on needs, not profits or the broader economic environment, notoriously difficult for the private sector to adapt to, unlike the far more steady hand of government.
The involvement of private firms in fulfilling specific, project-based contracts rather than an attempt to literally pass off the running of the network to corporate entities seems to be the appropriate future for London. The ideologically charged vision of a “business-oriented” approach to transportation investments pushed by Gordon Brown a decade ago has been debunked as misleading and expensive. There are things an efficient public sector can be good at, and mass transport may be one of them; the next stage of the London Underground’s history, back in public hands, will provide definitive evidence for that assertion’s validity. Other cities considering such a significant PPP process should get to know this example well before moving forward.
