The U-turn was announced last night after John Prescott, London Transport and Railtrack agreed that the scheme was not viable. The plans' collapse means that new bidders will be invited to tender for the multi-billion- pound contract to take over the sub-surface lines of the Tube.
Mr Prescott, the Secretary of State for Transport, was heavily criticised by Ken Livingstone and others when he awarded exclusive rights to rebuild the Metropolitan, Circle and District Lines to Railtrack.
The Deputy Prime Minister decided to abandon the scheme when the private- sector company could not come up with a way of integrating east-west routes in the capital.
Mr Prescott had hoped that Railtrack would be able to produce a workable project by March. When the company admitted that such a timetable was impossible, he decided to end the deal.
The Deputy Prime Minister told The Independent last night that the Paddington disaster had played a key part in his decision, as it proved that the station, through which the east-west route would pass, had to be reviewed before any new building could begin.
"The tragedy at Paddington raised the question of the layout and capacity of Paddington. The crash has raised the whole issue of the station as a vital crossroads into London, and we want to get it right," he said. "I gave Railtrack an exclusive contract because I thought they were best placed to come up with a way to integrate the lines with the rest of the rail network. They have been unable to do so." The decision was taken on the advice of Sir Alastair Morton, head of the shadow Strategic Rail Authority.
The sub-surface line contracts will now be awarded alongside all other parts of the Tube next September, with work due to start in early 2001.A separate study of plans to build a tunnel linking east and west London, with connections to Heathrow, will be made by Sir Alastair. Its conclusions should be ready within months.
The public-private partnership is the Government's flagship policy for bringing massive investment to London Underground, and is seen by Tony Blair as a classic New Labour project. But after Paddington, ministers were left in the embarrassing position of working with Railtrack on the scheme.
Mr Livingstone has made his opposition to Railtrack a central theme of his campaign to be London mayor, claiming the Tube was being privatised. By attacking one of Britain's most unloved companies, the former GLC leader forced Mr Prescott and his mayoral rival Frank Dobson on the defensive.
He is now likely to claim victory because of the U-turn, although Mr Prescott stressed the decision was not political. "My job is to run the railways, not react to what Ken says. Decisions like this cannot be taken on the basis of politics," he said.
In a statement last night, the Department of Transport stressed that the main reason for the deal's collapse was the failure to identify a practical scheme to integrate east and west London rail routes. The department said that although a viable north-south link had been drawn up, there was no "satisfactory" east-west plan.
At least two consortia have expressed an interest in running the sub- surface lines. Railtrack will now assess whether it should now bid with other firms.
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