That’s not much of a surprise – the PPP deals for the tube upgrades were some of Gordon Brown’s flagship policies. To do other than cough up the money from the public purse would have been a) to lose even more face at a time when the PM needs every ounce of credibility he can get, and b) to leave urgently required improvements to half the capital’s tube network unfinished.
But what it does do is expose the fundamental fallacy which lies at the heart of every PPP deal. One of the founding principles of PPP is that of risk transfer, the concept that if the private sector is to benefit from the doing of public works, it should also shoulder in the possible financial losses of failing to complete on time, or of doing substandard or unnecessary work. And so the PPP, with all its deeply ccounter-intuitive, output based mechanisms and Byzantine feedback controls was born.
The paper contracts for the tube deals run to 2,000 pages, all in what has now been shown to be a futile effort to absolve the taxpayer from risk. Because as the Metronet saga has demonstrated, if investors feel they are in danger of taking a bath on the deal, they will simply turn off the money supply, works will cease and the company will fail. And when a company goes into administration, it doesn’t matter how complicated your contracts are, all bets are off.
In the case of Metronet at least, the travelling public could hardly have failed to get better value for money had the cash been spent directly by the Treasury rather than being filtered through an ultimately unsuccessful private venture first.