MPs warn of Chunnel rail link fiasco
A "fundamentally flawed" deal to rescue the Channel Tunnel Rail Link risks costing the taxpayer hundreds of millions of pounds, MPs declared today.
The all-party public accounts select committee released a damning verdict on the public-private scheme, put together by Deputy Prime Minister John Prescott in 1998. The deal emerged as a Dome-style fiasco, with a business plan based on wildly unrealistic estimates of the passenger numbers.
The report puts yet another black mark against PPP schemes.
In 1998, with the Chunnel link plan close to collapse, Mr Prescott insisted he had found a way to build it under a partnership scheme which would not hand over any more public money to developer London and Continental (L&C).
His former Whitehall department in 1998 rejected an (L&C) request for ? 1.2billion grants on top of the £1.73billion it had received to make up for a shortfall in the sale of Eurostar tickets.
Instead, the firm agreed to issue some £4billion worth of bonds, subject to government guarantees. However, the report said: "It is likely further substantial sums of taxpayers' money will have to be lent directly to the company to keep it afloat."
Committee chairman, former Tory minister Edward Leigh, said: "The Department let this deal proceed on the basis of a fundamentally flawed business plan, based on uncertain forecasts of passenger numbers - all very reminiscent of the Dome."
