Tube Lines has rubbished London mayor Boris Johnson’s claim that it can meet the potential £400m shortfall in funding for the next seven-and-a-half years of its PPP contract
In an attack on the tube maintenance consortium last week, Johnson called on the government to “ensure that Tube Lines’ shareholders Ferrovial and Bechtel forgo the huge sums they receive under so-called ‘secondment agreements’ in order to plug the gap”.
Speaking to Building this week, Steve Hurrell, Tube Lines’ finance director, said Johnson’s claims were “preposterous” and the shortfall could force it to make job cuts during the period, which begins in July.
He said: “The mayor’s statement is groundless. The arbiter [Chris Bolt] has said we get about £195m in secondment fees, which is a fair reflection. Considering our contract liability of around £120m, the risk we are taking is quite significant.”
The row began in December when Bolt found that London Underground (LU) should pay Tube Lines £4.4bn over the next seven-and-a-half years, rather than the £5.75bn the consortium was demanding or the £4bn that LU was insisting on.
Hurrell admitted that working towards the £4.4bn figure would be “challenging” and that Tube Lines would need to make savings, including job cuts, to accommodate the changes.
Doing more heavy maintenance will mean a change in the workforce
Steve Hurrell, Tube Lines
He said: “One of the outcomes is less spend on pure renewal and doing more heavy maintenance instead. This would mean a change in the workforce.”
Meanwhile, Tube Lines is continuing to pursue separate cost claims against LU. A £20m claim for station work could be followed by others. Hurrell said: “If it is successful, we will pursue up to £200m for work done on other stations.”
The PPP arbiter will publish its final determinations on the spending budget on 4 March.
Tube Lines owns the concession to upgrade the Jubilee, Northern and Piccadilly lines.