End of the line for state-owned Tube

Sale to release cash for repairs

The Government yesterday sought to sweep away the last vestiges of a state-owned transport system when it announced that the London Underground system would be sold off.

After relinquishing the state's hold over ports, airlines, motor industry and, most recently, the railways, the Government will privatise the world's oldest underground rail system. The move will return the system to private hands almost 60 years after it was nationalised.

Because of the poor state of the 255-mile network, Sir George Young, Secretary of State for Transport, announced that the money raised by the sell-off would be ploughed back into the cash-strapped system which ferries 2.7 million people around London every day.

Built in the great rail rush of the Victorian era, the Underground grew to be one of the wonders of the Edwardian age. Electrified by private capital before many nations had any railways, it has been run down by successive governments.

The sell-off is seen as an important victory over the Treasury, which has opposed "ring fencing" privatisation proceeds.

But Sir George convinced Kenneth Clarke, the Chancellor, that without the assurances the privatisation would have hit the buffers.

Today, forced to survive on half the grant which it requires, the system is more a triumph of financial, than engineering, wizardry. The Underground has been plagued by shut downs, caused by old cables and worn-out signalling.

Last week, the funding crisis forced Tube managers to shelve more than 200 schemes, owing to the lack of Government cash. London Underground's directors also revealed that the ailing system would need pounds 1.2bn to clear the backlog of urgently required work.

However, the proposals mean that the system will not receive any more cash until it is privatised.

Sir George said the sale proceeds would help clear that backlog within five years, and most of the money left over would be set aside for public transport.

The Government is considering three options for privatising the Underground. One option, favoured by Tory Central Office, would be to sell it as a single business.

However, Downing Street favours the British Rail model, with a "Tubetrack", owning the stations, track and signalling and the lines leased out. Sir George is also considering selling lines individually.

There would be no shortage of bidders. Stagecoach, the bus and rail giant, and Railtrack, which already owns Britain's track, stations and signalling, have expressed an interest. The present management, which is privately opposed to the sell-off, would also be allowed to bid.

The Government believes the policy will be a vote-winner. London's transport system would get a regulator that would oversee a new-look operator; the popular go- anywhere Travelcards would be retained; and private managers would have to guarantee service levels. A detailed plan of the sell-off will be outlined in a White Paper this summer.

The Prime Minister, John Major, said the move would give the capital a "world-class" Tube network. But in the Commons, Tony Blair, the Labour leader, clashed with Mr Major, saying receipts from the sale of the Tube might go into the Treasury coffers. Labour called the sell-off an "abdication of responsibility".

Labour figures were last night holding talks with London Underground officials aboutLabour's pledge to find private investment for expansion on the Tube. One option would be to allow London Underground to fund projects by issuing bonds. This has enabled Hong Kong's "mass transit" system to make pounds 12m profit a year.

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