Election '97: Labour plans partial privatisation of Tube

A massive investment programme in London Underground could be financed by partly privatising the Tube system under a Labour government.

Senior Labour Party sources close to Tony Blair confirmed yesterday that the party is looking at the partial privatisation of the Tube to raise finance.

One option being studied is to create a "public interest" company with a Golden Share held by the Government to ensure that the control of London Underground remains in public hands.

Properties owned in central London by the Underground, said to be worth pounds 8bn, could be privatised to raise the money to invest in the network. The investment in out-dated underground services would be highly popular, but it would do nothing to fill the alleged pounds 1.5bn "black hole" in Labour's finances.

The Shadow Chancellor, Gordon Brown, is understood to have asked for a study to be made of the alternatives for raising finance for London Underground, in addition to allowing the Post Office to raise private finance for more investment.

The proposals, which stop short of full-scale privatisation, have the backing of John Prescott, the deputy leader of the Labour Party. They explain the confusion surrounding Labour's privatisation plans last week, when Labour sources denied that the Underground would be privatised.

Mr Prescott yesterday on GMTV hinted at his support for the plans when he reinforced his belief in public and private sector partnerships to raise money for investing in public services. He said he had long believed in "sweating" public assets to produce more money for investment.

"Gordon Brown has said let us review those resources and see that we can do the best by the taxpayer. In some cases it might be privatisation, in others it might be private-public partnership."

He added: "Gordon Brown made it absolutely clear he wanted to do an audit of public finances because we were well aware the Government had made a mess of financing."

The Cabinet considered the so-called "Prescott option", he said, before going ahead with its plans for the total privatisation of London Underground, to which Labour is firmly opposed.

There is a consensus among the main parties that London Underground is in need of investment. There are fears at the extent of cracking in the Tube structure, letting in water, causing short-circuits and breakdowns. The rolling stock on some lines, particularly the Northern Line is antiquated and in need of replacement.

There is anger over the Government's plans for privatising the entire system because not all the money raised from the private sector would be reinvested in the Underground.