Legal and professional advisory fees were cast into the spotlight as MPs picked over the bones of Metronet, the collapsed London Underground upgrade consortium whose failure cost the taxpayer up to £410m, at a public accounts committee hearing last week.
Magic circle firm Freshfields was the top-paid professional adviser on the public private partnership (PPP) deal between Metronet and London Underground, netting £29m before the deal was signed in 2003.
MPs grilled transport permanent secretary Robert Devereux over advisory fees paid for structuring the deal following a recent National Audit Office (NAO) report on the collapse.
Richard Bacon, Conservative MP for South Norfolk, asked Devereux if he had ‘asked for his money back’ from Freshfields. Bacon said: ‘It was tens of millions of pounds on professional advice to structure this… How do you spend that much money on professional advice and end up with something which gives you such inadequate powers?’
Devereux said that, with hindsight, a ‘shipwreck clause’ should have been written into the PPP contract, so that ‘were something to go wrong with [Metronet], those people with money at stake would right it.’
Bacon said: ‘Surely that is why you pay a lawyer £29m for every conceivable circumstance, is it not?’ Devereux replied: ‘You might hope so.’
According to an earlier NAO report in 2004, Freshfields earned £29m in fees, accountants PricewaterhouseCoopers earned £21m, business advisers Arthur Andersen earned £13.8m, and management and IT consultancy PA Consulting earned £12m.
Devereux acknowledged that the £130m spent on advisory fees for the deal, which was scheduled to run for 30 years but only ran for four and a half years, was ‘a lot.’
Freshfields declined to comment.