Magazine article Public Finance

PAC Slams £1Bn Cost of Tube PPP

Magazine article Public Finance

PAC Slams £1Bn Cost of Tube PPP

Article excerpt

The deal to bring the private sector in to rebuild the London Underground has cost the taxpayer 'the best part' of £lbn.

Figures in a Public Accounts Committee report, published on March 31, reveal that the bill for the partial privatisation of the Tube included £180m set-up costs for the public-private partnership and £275m worth of bidder costs.

Between them, the two bidders chosen for the PPP contract - Metronet and Tube Lines - 5 received £90m success fees' to compensate for the use of staff and equipment employed on the Underground which may have been used elsewhere. Unsuccessful bidders were paid £25m.

There is also the cost of repaying banks, which lent some £3.8bn to finance the PPP. The government is committed to repaying 95% of this debt in the event of termination and project risks.

Despite this government assurance, the debt was given a BBB rating by the City, which means the lenders are charging £450m more in interest on the amount borrowed than they would claim on £3. …

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