Ken puts Byers on spot over PPP

Stephen Byers was today accused by London Mayor Ken Livingstone of giving the green light for Tube part-privatisation before he knew the full cost of the multi-billion deal.

Mr Livingstone claimed the Transport Secretary made his announcement despite having been told by Tube chiefs that negotiations with private companies had not been completed.

Mr Byers told MPs on 7 February that the PPP contracts represented "value for money" and that accountants Ernst &Young had been satisfied with the deal. However, Mr Livingstone claimed, a very different picture was painted in a letter to Mr Byers just one day earlier from London Regional Transport chairman Sir Malcolm Bates.

Sir Malcolm's bombshell letter - only today released to the Mayor - warns Mr Byers that the bid prices involved in the deal were "not firm". Sir Malcolm also urges Mr Byers not to publish the full report into value-for-money by Ernst & Young because this would damage the Government's negotiating position.

Mr Livingstone today wrote to Mr Byers claiming: "This already bad situation has been made considerably worse by you jumping the gun and and making announcements on value for money that you had no way of knowing would be ultimately supported by the facts."

Mr Byers admitted at the time that the contracts had not been signed but at no time did he suggest that the final cost was still unknown.

In another blow to the Government's PPP plans, the drive to raise £1.5 billion of vital funding from the City for the Tube is being boycotted because investors have lost faith in Labour.

The problem is due to Transport Secretary Stephen Byers's decision to put Railtrack into administration.

Institutions such as Barclays, Legal & General, M&G and Scottish Widows are saying quite bluntly that they cannot put pension fund money into the Tube, following Byers' shoddy treatment of them over Railtrack.

News of the financing boycott emerged as more than 20 top institutions fired off a letter to Chancellor Gordon Brown suggesting the Railtrack collapse had fundamentally undermined relations between Government and the City.

Commentary: An action that goes beyond money