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Fri October 30 2020

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Mayor Boris threatens legal action over Tube Lines ruling

10 Mar 10 Mayor of London Boris Johnson is considering legal action after a Tube PPP ruling left London Underground with a £465m funding gap.

Mayor of London Boris Johnson is considering legal action after a Tube PPP ruling left London Underground with a £465m funding gap.

LU, which reports to the mayor through parent organisation Transport for London, felt that upgrade and maintenance costs for the Jubilee, Northern and Piccadilly lines over the next seven years should be set at £4bn.

Its contractor Tube Lines wanted £5.75bn.

However, the independent PPP arbiter Chris Bolt has ruled that Tube Lines should be paid £4.465bn for the work.

He said: “If I adopted LU’s preferred interpretation of the contract, this would not remove the problems of affordability resulting from my final directions on costs. Any Tube Lines financing would require additional prudential borrowing approval which the Department for Transport has indicated that it is unlikely to give.

“It could also mean that the revised terms constitute a material change in risk and could make it impossible to raise finance.”

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Tube Lines said that while it “acknowledged” the ruling, the figure would put pressure on the contract.

“The arbiter has made some very challenging assumptions in his final statement that will involve substantial changes in the way the contract is operated and managed,” it said. “It will be essential that it is underpinned with a strong partnership between Tube Lines and LU and that both parties embrace the parameters of the agreement.

“The findings are extremely complex and Tube Lines will be carrying out a full assessment to better understand the basis of the judgement and its implications, but remains fully committed to the contract.”

Meanwhile, Johnson said he was "examining legal remedies". He also criticised the arbiter for suggesting that London Underground cut back on improvements to save money.

Bolt has given LU more time to either confirm that it is able to meet the full costs of its requirements or to revise them. He will issue his final directions on financing on 29 April.
 

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