Blairite think-tank backs Tube bond issue

Ken Livingstone's campaign for mayor of London received an unexpected boost last night when Tony Blair's favourite think-tank attacked the Government's plans to part-privatise the Tube.

The Institute for Public Policy Research - which has close links with New Labour - prefers Mr Livingstone's proposal for a bond issue scheme to improve the Underground.It will come as an embarrassment to the Prime Minister as he is due to appear along-side Frank Dobson today to make a speech attacking the bonds plan.

The IPPR report, "Getting Partnerships Going", makes clear that the government plan would be a more expensive option, costing an extra £2.4bn.

Written by Stephen Glaister, Rosemary Scanlon and Tony Travers of the London School of Economics, the report says the public-private partnership (PPP) would also undermine the whole mayoralty. However, the IPPR has failed to publicise the report, leading one insider to claim it had been "sat on".

The study calculates that the "PPP option is not selffinancing" and would need government subsidy of between £95m and £262m each year for the full 30 years of the contracts. If the same programme could be delivered using bonds, it would cost between £16m and £182m a year in grant funding from Whitehall.

"The arrangements for the PPP cut across the Government's own desire to return local democracy to London. There is still an opportunity to deliver a cheaper, more democratic alternative," it states.

The IPPR document adds that if the Government is determined to press ahead with its part-privatisation, it should allow an "independent agency such as the National Audit Office" to assess if it represents value for money.

Mr Livingstone was quick to seize on the report. "Once again, this report blows holes in the Government's plans for partial privatisation of the Tube," he said. "It shows once again how vital it is that the future of London Underground should be decided by London's new elected government."

In a separate move, Mr Livingstone unveiled Britain's first ever "Red-Green" political alliance when he called on voters to back the Greens in next month's Greater London Authority elections.

Mr Blair came under fire from his own MPs yesterday over this month's tiny 75p rise in the basic state pension. He insisted, however, that his government had directed a total of £6.5bn into the pockets of the poorest pensioners, and said this was a bigger boost than if the basic pension had been uprated in line with earnings rather than prices.