£500m 'sweetener' offered to attract bidders for Tube

Transport

The Government is trying to rescue its controversial plans for London Underground by offering a £500m "sweetener" to commercial firms bidding to take over the network.

Public-private partnership (PPP) contracts for the Tube have been revised at the last minute to allow private firms to pull out with 30 years' of estimated profits if the Mayor of London, Ken Livingstone, makes their life too difficult.

The change was revealed in a confidential letter by Bob Kiley, the Mayor's transport commissioner, to the chairman of London Transport.

The letter, which has been obtained by The Independent, shows that London Underground has promised to pay substantial compensation if a commercial company can prove it has been subjected to "unreasonable behaviour" by management.

Mr Kiley, as the head of Transport for London (TfL), will take over responsibility for managing and monitoring the PPP once the contracts have been signed in April. As the minister with overall responsibility for the Tube, Stephen Byers, the Transport Secretary, is likely to have approved the changes.

Mr Kiley says in his letter to Sir Malcolm Bates, the LT chairman, dated 4 January, that the new "devolution unwind clause" is clearly the Government's attempt to reassure investors in the wake of its takeover of Railtrack.

The American transport chief said that "polite words cannot be found to describe this bizarre and risky new clause". Mr Kiley goes on to warn Sir Malcolm that although the Government is driving the PPP, legally "the buck stops with the LT board".

Transport for London sources have estimated that 30 years' worth of profits are likely to exceed £500m, after studies by the consultants PriceWaterhouseCoopers.

A spokesman for London Underground confirmed last night that the revised contract would allow a private consortium to terminate its deal and take 30 years' of profits with it in the event of "unreasonable" interference by TfL.

Sir Malcolm's reply says that Mr Kiley's comments have not been ignored and will be examined by the LT board at its next meeting.