Tube firms to get 'success fees'

A new row broke today over the escalating cost of the part-privatisation of the Tube after it was revealed that the two consortia taking over are in line to recoup hundreds of millions of pounds.

The payments, described as "success fees" and recovered costs, will be made after the two private-sector groups sign contracts with London Underground.

The money is basically all that they have spent on preparing the take-over plans and contracts.

The disclosure adds to the controversy over the huge costs of the Government's plan to hive off large sections of the Tube to the private sector on 30-year leases. The consortia are already expected to get up to £6billion, on an initial outlay of only £70 million, over the life of the contracts.

The National Audit Office is expected to launch an investigation into the costs - but only after the contracts have been signed.

Tube Lines, the consortium taking over the Jubilee, Northern and Piccadilly lines, is claiming £109million once contracts are signed and a further £60million at a later stage. Metronet, which is taking over all the sub-surface lines along with the Bakerloo, Central and Victoria lines is understood to be claiming more than £300million.

The payments were described as "extraordinary" by shadow transport secretary Theresa May. She said they were "yet another incredible development in an altogether strange bidding process".

London's transport commissioner Bob Kiley condemned the payouts as "inexcusable". Mr Kiley, as head of Transport for London, the Mayor's authority, is due to take control of the Underground - but only once the contracts are signed. He has no power to halt the payments.

He has written a letter of protest to Sir Malcolm Bates, chairman of London Transport, parent company of the Tube.

In it, he says: "The Underground is in desperate need of investment yet PPP has been allowed to degenerate into a simple feegenerating mechanism for investors and advisers who have so far taken no risk and will be signing contracts that shelter from them any real possibility of loss.

"Your approval of these payments, to be borne by London through 30 years of financing responsibility, would simply be unconscionable."

Tube Lines communications director George Hutchinson defended the payments saying they reflected the consortium's commitment to the public-private partnership.

"We put an enormous amount of effort into developing that plan, how it will work, the timetable and what we'll be doing to individual stations, tracks and trains."

An LU spokeswoman said: "Bidders are entitled to recover the sums they have invested during the PPP procurement process. This is perfectly normal commercial practice."