Yesterday, the following news story came out:

Almost £2bn of taxpayers' cash is being given to London Underground to cover the collapse of the private maintenance firm Metronet.

A total of £1.7bn will be used to pay back the amount lenders made available to the company, which went into administration last July.

What this means is that the final stage of a scam/fraud has now been implemented. Why do I say this? Well here's the sequence that led up to this decision.

1) The government decides to sell of the Tube's infrastructure (track, stations, signals etc) to private companies under what are effectively 30 year lease-holds. London Underground will pay these "infracos" large amounts of continuing money for the use of this infrastructure. In return, they will maintain the infrastructure, and improve it, borrowing money in order to do so. For each set of improvements, London Underground will increase the size of the regular payments, the amount being determined by the contracts. (Which is how the infracos will then pay the money back).

2) At around the same time, the government declared Railtrack (the private company that owned the surface rail infrastructure) bankrupt, and then nationalised it - with no payments whatsoever to the former shareholders. This was a move that many considered dubious and many others considered illegal.

3) The government then found that no-one wanted to lend money to potential infracos, because they were afraid that the government might do unto the infracos what they'd done to Railtrack. So they announced that they would guarantee any debts that the infracos run up. (A bit like when a teenager borrows money from the bank but the bank insists on his or her parents guaranteeing the loan).

4) Five construction/rail supplies companies get together and form a company called Metronet. Metronet successfully bids for two of the three infraco contracts. (i.e. It now controls/owns two-thirds of the Tube).

5) Metronet does *not* put out all its work contracts for maintainance and improvement to competitive tender. Instead, it gives them to the five companies that own it at rates considerably above market rates. Of course, all the money it's paying them is borrowed.

6) The five companies make a lot of money.

7) Metronet goes bankrupt because it's paying too much money out.

8) The taxpayer then pays off all the debts for the money that Metronet borrowed and gave to its owners.

To go back to the analogy, imagine a teenager who borrows a load of money to start up a business, gets his parents to guarantee the loan, "buys" a non-existent business from his girlfriend (giving her all the money), goes bankrupt (because it wasn't ever actually a business), and then tells his parents that they'll have to pay the bank back. (With him and his girlfriend getting to keep the money).

Nice, huh?

Personally, I think people should go to prison for this. In terms of loss to London, the £1.7 billion is only the tip of the iceberg. Valuable years have been wasted, and we have an even more broken down system than we had before.

At the time that PPP (this whole shitty scheme) was going through (against this wishes of pretty much everyone in London), it felt like a lot of non-London MPs were really motivated simply by a desire to truly shaft London and Londoners.

Well you truly did shaft us.

I hope it was worth the £1.7 billion.