Think-tank dismisses Labour's plans for the Tube

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The Independent Online

London's crumbling underground railway must be allowed to issue bonds to fund the investment it needs, a leading British economic think-tank said yesterday.

London's crumbling underground railway must be allowed to issue bonds to fund the investment it needs, a leading British economic think-tank said yesterday.

The contents of the report by the National Institute of Economic and Social Research will come as a blow to the Government, which has rejected the idea of allowing London Underground to issue bonds.

The National Institute said the experience of New York City, which now funds one- third of all public transport investment through bonds, provided a model. "These features of the New York transport system could be helpful in designing a renovation plan for the London transport system," it said. "Bond finance on New York lines would be at least as effective as expanding private finance initiatives in London."

New York renovated its transport network by introducing five-year capital plans and issuing special bonds. The report said recent changes to Treasury rules to make possible a three-year budget horizon did not go far enough. Professor Ray Barrell, one of the authors said: "Governmentbacked five-year Local Transport Plans, with local control, have been introduced everywhere else in England. London also needs plans of at least five years, backed by a political will and imagination."

The report also said London's mayor should be free to decide how to develop the capital's transport network. Ken Livingstone was almost excluded from the Labour shortlist for mayor after insisting he would not accept plans for a public-private partnership.

Both the Prime Minister and John Prescott, the Transport Secretary, have criticised the idea of issuing bonds, saying that New York's decision to issue large amounts of debt almost led to the city going bankrupt. But the report says that the move to issue bonds saved the transport network from collapse after an earlier financial crisis led to investment almost totally drying up.

The Government is insisting that the experience of the Jubilee Line extension, which was opened two years later than planned and almost £2bn over budget, shows the need to allow the private sector to invest in big projects.

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