Tube upgrades must be scaled back, says arbiter

London Underground needs to dramatically reduce the scope of the tube upgrade or produce convincing evidence it can afford it, the arbiter of the fraught London Underground PPP has today determined.

The arbiter, Chris Bolt, has delayed his final decision on the costs of the next seven and a half years of work to allow London Underground to either find more money to pay for the project or reduce the scope of the work.

In a statement he said he had delayed his decision, expected this week, to the 30 June, because London Underground had not demonstrated it could afford to pay the £4.46bn cost of the project.

Bolt rejected London Underground’s assertion that the remainder of the funding for the next phase of the project could be raised by Tube Lines on the private market, and then paid back later by LU.

Last month Bolt said PPP contractor Tube Lines should be paid £4.46bn for the next phase of the project, to upgrade the Northern, Piccadilly and Jubilee lines. LU said the job should cost £3.7bn, while Tube Lines had said it should be paid £5.87bn.

He said: “On 9 April, London Underground gave me revised assumptions of what it can afford to pay. It suggested that I should adopt those revised figures in my final directions on charging and financing. But there is no provision in the contract for this.

These are tough times for everyone and it is vital that LU does not commit to an investment programme it cannot fund with any certainty

Andrew Cleaves

"Tube Lines had previously argued that what London Underground said in 2008 it could afford is not enough to finance London Underground’s future requirements, and I agree with this.

Bolt has given LU until 21 May to formally notify him of changes in its “affordability limits” and any other changes it wishes to make to the PPP contract.

Tube Lines is made up of a consortium of Amey and Bechtel.

Andrew Cleaves, Tube Lines acting chief executive said the decision was “sensible” by calling on LU to only ask for what it can afford.

He said: “These are tough times for everyone and it is vital that LU does not commit to an investment programme it cannot fund with any certainty.

"We have also long since recognised the financial constraints on LU and TfL due to economic conditions and as early as June 2009 provided them with an alternative approach which would deliver all of their key objectives, including the line upgrades, within a much lower budget to recognise these pressures. We hope now that they will sit with us to finally resolve the issue.”