Learning Lessons From the Wreckage

"If Metro net pulls out another company will be found to take its place," Gordon Brown told MPs last July, a statement that turned out to be untrue. Metro net did collapse, brought down by a towering ziggurat of debt and contractual confusion, and no company has replaced it. On Wednesday afternoon the government slipped out news that taxpayers are to write off £2bn of its debt - the death throes of a scheme inflicted on London by the Treasury, which had cost £500m in administration fees alone.

The story of Metro net - and its smaller, surviving sibling Tube Lines - has not produced the outrage it should have done. It will cost many hundreds of times more than MPs' allowances, which have led to such a fuss. It exposes the worst aspects of new Labor's starry-eyed trust in the private sector. This was driven by the Treasury while Mr Brown was chancellor, both for ideological reasons and as an accounting device to disguise the scale of public borrowing by rebadging it as private. The public-private partnerships (PPPs) that resulted have been applied, with often woeful consequences, to everything from helicopters to hospitals. But nothing has gone so badly wrong as the deal for London's tube, which left the taxpayer carrying 95% of the risk but none of the benefit.

Created in a hurry to pre-empt the objections of London's mayor, Ken Livingstone, Metro net was always an accounting device and never a proper company. Quite incredibly, it consisted of a consortium of the five companies that supplied it with services. This bred such slack management that its "projected inefficient overspend" may have reached £1.8bn. That is what Metro net spent over and above the value of the work that it managed to carry out. In just three weeks last July, the administration documents record, Metro net's spending was £18m over budget. The terrible thing is that all this money achieved nothing more than a handful of retiled, cleaner stations, the half-completed wrecking of several more, some work on the Victoria line and some track renewal. Contracts for 35 station upgrades delivered only 14-40% of what was planned and even that ran up to 375% over budget. Some of this was the fault of Transport for London, which set Metro net stiff standards. But the bigger crime was the creation of PPP: as the Commons transport select committee found last month, this "ended in collapse and chaos. It was a spectacular failure."

The report points out that "the private sector will never expose itself to risk unless it is proportionately, if not generously rewarded. Ultimately the taxpayer pays the price." This does not seem to have occurred to the Treasury. Nor, despite the exorbitant legal fees, was the possibility that Metro net might collapse built into the contracts. "We will not fail," the company's slogan promised. But it did, soon after its creation. Handed the wreckage, Transport for London is left trying to restart the renewal program for the six lines covered by the contracts. Some planned refurbishment should be abandoned: giving surface gloss to the stations does not make the tube safer or faster. Work should concentrate on signals, track and capacity - expensive and neglected by Metro net. Mr Livingstone, who has not made a public show of his wisdom in opposing PPP, seems to have shamed the Treasury into writing off the debts, which will stabilize things. But the price of future improvements will be even higher fares.

Meanwhile, there should be a political inquest. This should consider the lessons for the uncertain funding of Crossrail. It should also require former Treasury officials and ministers to explain themselves. Mr Brown has said nothing in the Commons about Metro net since he promised that all was well last July. Last month he promoted Shriti Vadera, the banker-turned-minister who shaped PPP and is now said to be involved in the equally convoluted public-private bail-out of Northern Rock. In this government, it seems, failure brings reward.