London faces £4m bill after Tube appeal is dropped

Londoners were left facing a legal bill of up to £4m last night after Ken Livingstone dropped his High Court challenge against the Government's part-privatisation of the Tube.

The decision by the Mayor of London and Bob Kiley, his transport commissioner, means that the £16bn scheme to renovate the London Underground network will finally go ahead this autumn.

The scale of the court costs triggered accusations from ministers and the Tories that Mr Livingstone had wasted London taxpayers' cash on the legal action.

John Spellar, the Transport minister, said he wanted the Mayor, Mr Kiley and London Underground to "get on with the job" of making the public-private partnership (PPP) work to produce improvements for passengers. However, Mr Livingstone and Mr Kiley were backed by Labour MPs and rail unions in warning that the scheme offered poor value for money and compromised safety.

Lord Lester of Herne Hill, QC, appearing for the Mayor, told the court that "as responsible public servants and authorities" his clients had decided to drop the case because they did not expect to win.

The PPP splits the Tube infrastructure into three parts, which will be leased for 30 years to two private sector consortia – Metronet and Tube Lines Group. Train operations remain in public hands. Final contracts are now expected to be signed within weeks.

After the case collapsed, all of the opponents asked for their legal costs on an indemnity basis, the highest level of costs, with the exception of the Secretary of State for Transport, Alistair Darling, who received costs on the normal basis.

Lord Lester agreed to pay indemnity costs after the judge heavily criticised Mr Livingstone and Mr Kiley for delaying the case.

During the four-day hearing, the Mayor's legal team had argued that the PPP would create a "funding gap" of £1.5bn, which would lead to a 25 per cent fares increase and cuts in other transport schemes. The legal team also argued that public procurement regulations were breached by the PPP.

The part-privatisation passed a huge hurdle earlier this month when the Health and Safety Executive accepted the PPP "will provide an effective safety management system for the Tube". That failed to ease safety fears from the unions, who held a 24-hour strike on the network last week.

Mr Spellar said that it was "very unfortunate" that Mr Livingstone had decided to go ahead with a second legal action after an earlier challenge had failed. "We'd said to the Mayor and Transport for London, frankly, we didn't believe that they had a case, they shouldn't be wasting London council taxpayers money," he told BBC Radio 4's World at One programme.

Mr Spellar rejected the suggestion that splitting up the company's infrastructure to three different private contracts would repeat the mistakes of Railtrack. The PPP was a service contract that would deliver "real-time daily benefits and penalties" for the companies rebuilding its infrastructure, while London Underground could get on with running the trains, he said.

But Gwyneth Dunwoody, the Labour chairman of the Commons Transport Select Committee, said the PPP scheme was heading for a Railtrack-style failure and the taxpayer would be left footing the bill.