MP accuses Metronet of corruption

The former chair of collapsed tube consortium Metronet was forced to defend accusations of corruption yesterday during a heated Select Committee hearing into its failure.

Graham Pimlott, Metronet chair from January to July this year, faced a grilling from MPs while transport secretary Ruth Kelly was pushed to begin a public inquiry into the collapse, now costing £13m a week in administration costs.

Ernst and Young said it hoped Metronet would emerge from administration by mid-January, by which time the company should be transferred to the sole bidder for its contracts, Transport for London.

Metronet went into administration after racking up £2bn in losses on its public-private partnership contract to upgrade two-thirds of the London Underground network.

Metronet failed because, at risk of being simplistic, it ran out of cash.

Metronet, chair Graham Pimlott

Yesterday, blame for the collapse was spread between shareholders, financiers, executives and the consortium’s structure.

Five of its former managers, including chief executive Andrew Lezala, left in October. Pimlott, left to explain the debacle, told MPs: “Metronet failed because, at risk of being simplistic, it ran out of cash”.

The contractual relationships were fatally flawed and, he said, “it seems to me in this case what has happened was that one or two things have gone wrong and ultimately badly wrong over a period of time”.

The evidence was attacked by Labour MP Graham Stringer who said Metronet “in straightforward English language, is corruption. It is looking even more corrupt when companies that are doing work don’t have a contract for the work they are doing”.

It is looking even more corrupt when companies that are doing work don’t have a contract for the work they are doing.

Labour MP Graham Stringer

London Underground managing director Tim O’Toole said Metronet failed because of a “unique flaw in its structure”.

There was no-one with “an iron fist” who could force the contractors to do the work “or fire them if they didn’t”.

Difficulties with the contract resulting in “a self-perpetuating army standing around and nothing getting done”, he said.

“[Even] if Jack Welch [former chair and chief executive of General Electric] had been running the company it would have failed. The structure guaranteed failure in my opinion”.

Thyere was no evidence of corruption but collapse was great failure

Ruth Kelly

Stringer pushed Kelly for a public inquiry, saying what she considered poor governance practice “seems to me corrupt. There is nobody publicly accountable. Don’t you think, given that, there should be a public inquiry?”

Kelly said she had no evidence of corruption but accepted the collapse was a “great failure”.

She defended PPP arrangements, saying they can “deliver very good outcomes and value for the taxpayer,” but adding, “it’s clearly the case they won’t automatically deliver value for money”.

None of the committee’s witnesses were able to put a figure on the final cost to London taxpayers, despite pressure from the MPs. Kelly said that figure would become apparent “in due course”.

She said the shareholders’ reputations had suffered and warned their history could count against them when bidding for future contracts. Three of its five shareholders – Balfour Beatty, Atkins and Bombardier - have written a combined total of £300m off their books.