Downing Street acted quickly to throw its support behind the Deputy Prime Minister after claims that his rail, road and planning strategy lacked credibility. Tony Blair's official spokesman said: "The Prime Minister supports him totally."
After backing down on handing one-third of the Tube to Railtrack, and scaling back plans for house-building in the South-east, the Transport Bill published yesterday signalled that the Government may be preparing a further climbdown over the formula for selling 45 per cent of the shares in National Air Traffic Service (Nats), with 6 per cent for employees.
Mr Prescott is fighting hard for the plan in the face of criticism by unions and pilots, who yesterday opposed the sell-off at the Commons Select Committee on the Environment. He is said to have the staunch backing of Gordon Brown, the Chancellor, and Mr Blair for the plan, which could raise an estimated pounds 500m.
The Deputy Prime Minister was prepared for a showdown with Labour MPs who oppose his plans at the weekly Parliamentary Labour Party. Party officials said Mr Prescott turned in a vintage performance, and was cheered after he insisted that selling shares in public companies would raise money for hospitals and schools. Mr Prescott also took a popular sideswipe at Ken Livingstone, warning that his plans to raise money for Underground investment through bonds would not have stopped an overrun on the costs of the Jubilee line, leaving Londoners with a bill for pounds 1.5bn extra.
Friends of Mr Prescott said the rebel Labour MPs had "lost their bottle" by failing to show up for the meeting but last night they were facing the prospect of a long campaign to secure backbench support.
Martin Salter, the Labour MP for Reading West, covering many air traffic controllers, attacked the Nats sell-off as "unnecessary and divisive".
While the proposed legislation provides for a public- private partnership for the service, ministers confirmed that it did not rule out the creation of a non-profit making organisation. Details of the part-privatisation were absent from the Bill and supporting material published by the Department of the Environment Transport and the Regions.
The Deputy Prime Minister said the Government had stated its preference for the future of the service and so far had not heard of a "better solution" for securing increased investment. However "active discussions" were still taking place and nothing in the Bill prevented the option suggested by airlines.
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