The collapse of Tube maintenance company Metronet landed the taxpayer with a bill of between £170m and £410m, a report from a Government spending watchdog said today.
The Metronet failure has meant London Underground (LU) passengers have not seen all the promised improvements on the Tube, the report from the National Audit Office (NAO) said.
Metronet went into administration in July 2007 predominantly because of poor corporate governance and leadership, the report added.
The NAO said that when Metronet failed the taxpayer was left exposed. NAO added it saw Transport for London's (TfL) takeover of Metronet as an interim solution and the DfT needed to consider how to reduce future risks to the taxpayer.
Edward Leigh MP, chairman of the House of Commons Public Accounts Committee, said: "The news that the failure of Metronet has cost the taxpayer hundreds of millions of pounds and led to the cancellation of much needed improvement work on the London Underground will not be welcomed either by the taxpayer or by passengers who use London's creaking Tube network.
"Most of the blame for Metronet's going into administration must lie at the door of the company itself and its poor governance arrangements and leadership.
"But it is baffling - given how much taxpayer money was at stake - that the DfT sat back and decided not to get involved in trying to sort the Metronet mess out.
"Instead, the DfT passed the buck to LU and LU reciprocated by passing back the bill."
Mr Leigh said that the lack of a formal role for the DfT in the PPP (the Tube public private partnership) contract made it harder for the department to get a grip on the unfolding situation, but it did not even try to.
He went on: "LU knew in February 2006 of Metronet's prediction that it would overspend by more than £1bn.
"But it took more than a year before it started to become clear exactly how much the taxpayer would have to bear of that projected overspend.
"Now the challenge is for TfL and the DfT to agree a permanent solution that satisfies both taxpayers and London travellers."