How Kiley forced Ken into battle

The battle against the PPP was the defining issue of Ken Livingstone's mayoral candidacy.

He made the election a virtual referendum on PPP. It was his token of faith with the electorate. And now he has lost the fight.

The Mayor gathered his most trusted associates to attack PPP. His chief of staff Simon Fletcher was responsible for a series of secret negotiations with the Government. His transport adviser Redmond O'Neill plotted strategy. Declan Gaffney, an academic from University College, was drafted in to go through the contracts with a fine-toothed comb. Mr Livingstone once boasted: "There is only one person who really understands these contracts - and he works for us."

But the battle against PPP moved up a gear when Bob Kiley, the Mayor's transport commissioner, took up his post. Observers say Mr Kiley hated PPP even more than Mr Livingstone did. He brought with him a battery of sharp New York lawyers including Steve Polan. Almost the whole of Mr Polan's remit was to find holes in the PPP contracts. In December 2000, Mr Kiley set out his alternative to PPP which involved raising cash for redevelopment through bonds.

The Mayor first took his case to the High Court last July. But his application to have the PPP contracts ruled illegal was thrown out.

The Mayor accepted the battle was effectively over. But not so Mr Kiley. Having denounced the PPP as unworkable, Mr Kiley was determined not to be placed in the embarrassing position of having to operate under its strictures.

Last month, as a fallback position, the Mayor sent Mr Fletcher to Downing Street to discuss what kind of deal might be struck if he dropped his opposition to PPP. He hoped to gain extra cash to try to make PPP work.

But Mr Kiley revolted. Sources close to City Hall reveal the Transport Commissioner threatened to resign if Mr Livingstone did not return to the High Court. Today the second legal challenge failed. No one will be surprised if in the next few weeks Mr Kiley quietly books his ticket back to New York.