Ministers ‘naive’ before Metronet failure

By staff

Ministers’ promises to meet 95% of Tube upgrade firm Metronet’s financial liability helped drive the company towards failure, MPs have suggested.

The Commons’ public accounts committee said the Department for Transport (DfT) was “naive” in assuming that Metronet – tasked with two of the three 30-year public-private partnership contracts begun in 2003 – would put in place robust financial management and good corporate governance.

Metronet went into administration in July 2007, having delivered just 40 per cent of promised upgrade work in its first three years and run up £2 billion in unscheduled costs.

“The DfT got itself into a position with the Metronet contracts whereby it was exposed to big financial risks which it had little scope or means of mitigating,” committee chairman Edward Leigh said.

“These mistakes must never be repeated on future large contracts and government departments must establish and exercise the right to intervene where problems of this magnitude occur.”

Latest estimates put the loss to the taxpayer as a result of the Metronet contracts at arond £410 million.

The committee called on the DfT to “learn from its mistakes” by playing a more proactive role in managing long-term risk on its other contracts, including other Tube contracts and, in the future, with the Cross Rail Scheme.