Tube Lines signs £4.4bn deal for Underground

The most bitterly fought privatisation since Labour came to power was given the green light yesterday after the Government signed a £4.4bn deal to hand over part of the London Underground to private contractors.

The Tube Lines consortium, which comprises Amey, Jarvis and the US construction group Bechtel, said it would start work immediately to modernise the section of the Tube it is now responsible for.

Alistair Darling, the Secretary of State for Transport, hailed the deal as "good news for Londoners", saying it marked the start of the biggest improvement programme the Tube has ever seen.

But the threat of legal action still hung over the controversial public private partnership. The London Mayor, Ken Livingstone, has until 31 January to lodge an appeal with the European Commission. Last night the Mayor's Transport for London body, said: "There are real safety and management issues. It seems that the only reason to sign these PPP contracts now is a desperate attempt to save private companies like Amey from going bust."

Tube Lines, which stands to make about £1.4bn over the 30-year life of the contract, pledged that it would cut delays by 10 per cent in the next 12 months and improve the cleanliness of trains and stations with immediate effect. Terry Morgan, the consortium's chief executive, also said it intended to place an order for an additional 59 train carriages "within weeks".

The deal between Tube Lines and the state-owned London Underground covers the Jubilee, Piccadilly and Northern deep tube lines. The consortium has pledged to invest £1.6m a day on the three lines for the first seven-and-a-half years of the contract. At that point there will be a review of the service targets and penalties contained within the agreement.

A similar agreement with a second private-sector consortium, Metronet, covering the remaining deep and sub-surface underground lines is due to be signed in the first half of this year.

In total some £16bn is being spent on the Tube over the next 16 years. The Tube Lines consortium will receive a £300m "infrastructure service payment" each year from the Government to provide track, trains, signalling and stations to London Underground, which will continue to be responsible for the actual operation of trains, ticketing, fares and safety.

The consortium expects to make profits of about £47m a year on the contract. Financial penalties are payable if it fails to meet agreed service standards but critics say these are too lenient.