Mayor to 'underwrite Crossrail'

Tube and bus commuters could be faced with inflation-busting fare increases to help fund the cost of Crossrail, the proposed £10 billion rail tunnel through central London, it emerged today.

Council taxes could also rise to kick-start the project, which has been on the drawing-board for more than a decade. Tube commuters have already faced huge fare rises this year and now seem set for years more of the same.

Mayor Ken Livingstone is considering all options. The Treasury, say reports, is willing to contribute about £2 billion of taxpayers' money, leaving a huge amount still to be found.

Crossrail - east-west twin-bore tunnels connecting Paddington and Liverpool Street stations, with connections to existing main lines - is expected to receive a further boost this week in a crucial report to be delivered to the Department of Transport.

Compiled by Adrian Montague, the government troubleshooter, the report is understood to have come down firmly in favour of building the controversial link. The £10billion minimum cost remains the major stumbling-block. The project has been mooted since the late Eighties but has always been scuppered by costs.

Everyone likes and wants the scheme - including the City Corporation, which wants a direct link between the Square Mile and Heathrow airport but is not willing to pay for it. There would be "spurs" at either end including a link to Heathrow.

Mr Livingstone is a staunch campaigner for Crossrail. In an article in today's Financial Times he says he believes it can be built for "substantially less than £10 billion".

He goes on: "However, I am still proposing a funding plan that works for everyone at the higher amount."

The Mayor has told Mr Montague that he is preparedto sign a contract with the Government under which he would accept responsibility for Crossrail - but only in return for a significant contribution from the Treasury.

Chancellor Gordon Brown, however, already has a financial crisis on his hands with the existing mainline railways, with rail chiefs demanding billions of pounds more.

Mr Livingstone will also use Crossrail as a lever to persuade the Treasury to allow him to raise billions of pounds of investment for transport in London via a public bond issue.

He says today: "But for all this to happen I require the Government to provide me with the legislative power to promote the project and to raise the capital required."

Without bonds or a " significant" boost from the taxpayer the Mayor would be left with little choice but to raise fares and/or council tax. All funding options are now being considered by Mr Livingstone's aides as a means of raising money to build Crossrail.

A special business-rate levy has also been proposed - firms which would receive a direct benefit from the project would pay. But this has been tried several times before and failed.

Mr Livingstone said: "The Crossrail project was shelved a decade ago because of concerns about whether the capacity was needed.

"Today, with the Tube and national rail services in London already full, there is no doubt that more capacity is needed.

"A modest supplement to business rates can raise billions of pounds. Along with fare revenues on Crossrail, this will mean that much of the cost will be borne directly by Londoners."