Byers will study Tube bonds plan

Proposals by Ken Livingstone to finance Tube modernisation with a US-style bond issue were boosted today when Transport Secretary Stephen Byers declared the Government would study them closely.

Mr Byers told MPs, for the first time, that he would publish a comparison of the cost of the Mayor's bond-issue plan and the Government's PPP part-privatisation scheme before making a final decision on the future of the network.

Until now, ministers have simply dismissed the bond plan, the brainchild of transport commissioner Bob Kiley, out of hand. Mr Byers dropped a further hint that he is preparing a climbdown over PPP plans, declaring once again that if they did not offer value for money, he would not go ahead with them. A decision on whether to go ahead with PPP has been set for 20 March.

Addressing the transport select committee at Westminster, however, Mr Byers got himself into difficulties about an alternative to PPP, which he referred to as "plan B."

First, he said plan B "will be announced" when the final decision on the future of the Tube is taken, thought to be in March. However, he later claimed: "No decision has yet been taken on what plan B might be, or the terms under which plan B might operate."

He ruled out claims by Tory MP Chris Grayling that the Government had a secret plan simply to hand the whole network over to Mr Livingstone's Transport for London - with up to £1billion of debt including some of the extra costs of the Jubilee Line Extension.

His tone towards the bond issue was much warmer than any previous comments by ministers. He described it as a "big issue which has caused a lot of debate" and added: "It would not have been a right consultation, or an effective consultation, if all that we had been comparing with the PPP had been the traditional form of public-sector comparator."

Mr Byers claimed ministers would be "very open" with Tube passengers in the run-up to the final decision, which he claimed would be taken by him alone with very little input from the Treasury.

He also dropped strong hints that debts run up by Railtrack before his decision to put it into administration-would prove to be even bigger than first feared. He refused to go into details but suggested the financial picture would worsen once the full story of the cost of upgrading the West Coast main line, which has already spiralled from £2.5billion to £6billion, was known.

He said he was "hopeful and confident" that Railtrack would be brought out of administration by the end of 2002, but said he would not pressure the administrator to conclude his work more swiftly.

Mr Byers said that as details emerged, it would become clear the company was insolvent, despite the £292million six-monthly profits it announced in December. He said: "I think when people see the level of debt combined with our projections of a £700million deficit by December last year, rising to £1.7 billion by March, they will understand why the judge made the decision he did."

Mr Byers delivered a put-down to Lord Birt - charged by Tony Blair with finding long-term transport solutions - saying the new role kept the former BBC chief "occupied". Lord Birt's appointment to the transport brief in No10's Forward Strategy Unit had led to Tory claims that Mr Byers was being sidelined.