Tube would be cheaper public than in partnership

The Government's public-private partnership for London Underground could cost more than if the network was kept in the public sector, new figures show.

London Underground has admitted that changes to contracts have increased the cost of the private-sector bids by £300m, while the estimated cost of keeping LU in the public sector has fallen by £200m.

As a result, the total private cost is £9.7bn over the first seven and a half years, the only period for which prices are fixed, compared with a public-sector budget of £9.5bn to £11bn.

The figures are a blow to repeated assurances by ministers that the private-led scheme will prove better value.

London Underground has admitted that two of the three bids for the network were only within "the low end of the public-sector range", and one is below it. The Government had said the PPP would save £4.5bn and would not go ahead unless it would "prove better value for money". One of the key factors in cost fluctuations is risk transfer.

Under the PPP, Tube Lines Group and Metronet are to sign three 30-year contracts to run the Tube infrastructure, while LU services will be run in the public sector by Transport for London (TfL), the London mayor's transport agency. TfL opposes the PPP.

Alistair Darling, the Transport Secretary, yesterday reassured Labour MPs about the prospect of the Government bailing out any PPP failures. MPs have signed a Commons motion expressing concerns about Mr Darling's decision this month to in effect provide a guarantee to the private sector for potentially billions of pounds if the project collapses.

In a statement, Mr Darling said that the Tube PPP was a "contingent liability" that would only crystallise if Ken Livingstone, the Mayor of London, succeeded with his legal challenge and if such a challenge had an adverse effect on any private firm involved.