Stifling debate won't solve our transport mess

London Underground; Sainsbury/Boots; Manchester United
Click to follow

Bang, bang. No, not the sound of police marksmen killing off another cigarette lighter wielding suspect, but that of the Government repeatedly shooting itself in the foot over its plans for part privatisation of the London Tube. OK, so technically it was London Underground that placed the gagging order on Bob Kiley, the sacked London Transport chief, but we all know who's pulling the strings.

Combined with yesterday's inexplicable decision from the Department of Transport to overrule the Strategic Rail Authority and grant GNER a two-year extension on the East Coast mainline franchise, rather than the new 20-year franchise the SRA had recommended, it looks as if the Government's transport policy both above and below ground is degenerating into a shambles.

Let's go below ground first. Transport for London had commissioned its own report from Deloitte & Touche into the economics of the Government's public private partnership approach to financing the Tube, and according to Mr Kiley, it raises "crucial concerns". He was planning to tell us more about them at a press conference yesterday, but then came the London Underground injunction.

As both Mr Kiley and his political master Ken Livingstone, the London mayor, were quick to point out, it cannot be in the public interest for the Government to attempt to restrict public debate in this way, however "commercially confidential" the material contained in the report.

The Deloitte report was commissioned as an antidote to the Government's own cost benefit analysis of the PPP, which was conducted by PricewaterhousCoopers. We haven't seen that report either, but the Government is adamant that it backs the claim that the PPP offers better value for money than a full public sector approach. This column has repeatedly argued that ministers are probably right in this contention, but the fact that they are refusing to let anyone outside the Treasury publicly run the sums is strongly suggestive of weak ground.

The realpolitik of the tube is the following. The best solution would be total privatisation, subject to firm regulation of prices, quality of service and safety. This would ensure private sector finance, skills and efficiency in an unfussy, uncomplicated way.

But after the fiasco of rail privatisation, that would be a non starter even for the Tory Party, let alone Labour. The public sector solution would also be operationally uncomplicated and, because the Government can borrow more cheaply than anyone else, relatively inexpensive in terms of its absolute cost of capital. It seems odd for a Government which is in hefty fiscal surplus to say it can't afford it, but the truth of the matter is that the Government has other priorities for public spending – health and education – and in a business downturn, a fiscal surplus can in any case disappear as quickly as summer snow.

The half-way house approach of the PPP obviously leaves a lot to be desired, but in the circumstances it is probably the best solution. A degree of public control is maintained while the private sector takes on responsibility for finding the finance and any cost overruns involved. The tube also gets the benefit of private sector management and attention to customer service.

That the Government has found this argument impossible to win is as much down to its own ineptitude as the disaster of Hatfield. Attempting to suppress the Deloitte report is only the most crass in a long line of misjudgements. Ministers seem to forget that we live in an open society, not a Stalinist state. They will never convince anyone of the merits of their case by attempting to prevent the opposition legitimately airing its case.

Above ground the situation is equally unconvincing. Another fudge on the East Coast mainline seems to help no one. The upgrade is happening anyway, so it makes no sense to argue, as the Government does, that a new 20-year franchise cannot be awarded until the final cost of the upgrade is clear. No franchisee is going to make the necessary investment in new rolling stock and station upgrades on a two-year time frame. Vital improvements are only getting pushed further out into the future.

Britain's business and economic prosperity is vitally dependent on getting public transport right, so that people can get to work on time for as little cost and stress as possible, but progress seems as slow as ever.

Sainsbury/Boots

Boots and Sainsbury have both seen better days as retailers, so it is tempting to see yesterday's link-up as tantamount to two drunks propping each other up at the bar. Others may see it as a way of testing the waters of a full scale merger without actually committing to one.

For Boots the deal offers the chance of making more rapid progress out of town where a third of health and beauty purchases are currently made. It may also give some protection against the relentless onslaught of the major supermarkets, which have been eating into its core markets for years.

For Sainsbury's the deal offers the prospect of greater customer footfall and the top health and beauty brand in the country. You can see what Sir Peter Davis, chief executive, is up to. The idea is that Sainsbury's stands for food and drink and should concentrate on that. Everything else is being contracted out. He has already signed deals with Adams in childrenswear, Jeff Banks in adult clothing and Starbucks to run some of the coffee shops. Now he has got Boots in to do the nappies and make-up.

But there is a downside too. If Boots charges the same at Sainsbury's as it does in its high street stores, it will represent a price increase to shoppers and they'll vote with their feet. If prices are cut to supermarket rates, then Boots may start cannibalising its own high street stores.

The bigger question is whether this is all a prelude to a full blown Boots/Sainsbury's merger. There are certainly similarities between these two retail stalwarts. They both have newish chief executives keen to make their mark. They both have upmarket brands which they have struggled to export to other markets. Both are now seeking new avenues of growth at home.

But both of them were also ruling it out yesterday. Even if they felt so inclined, the limited reaction from the shares prices yesterday shows the City can see little logic in marriage.

Manchester United

You couldn't really make it up – the world's most famous football club, a mystery stakebuilder, the British Virgin Islands and a letter box company going by the name of Cubic Expression. As the silly season gets under way, it would be hard to find a more promising story. Unfortunately, the race to unmask Manchester United's new shareholder was over almost before it could begin. Man U's new kids on the share register soon revealed themselves as the Irish racehorse-owning mafia in the shape of JP McManus and John Magnier, and their intentions are entirely passive.

Even if they had wanted to, they couldn't have remained anonymous for long. Man U would have disenfranchised the shares, stripped them of rights to the dividend and put them in trust for safekeeping if they hadn't owned up. You cannot hide for long in today's ever more transparent world.

j.warner@independent.co.uk

Comments