Ministers have moved closer to a deal on the future of London Underground according to newspaper reports.

The deal, under which the network infrastructure would be split from train operations and leased to the private sector in two or three parts, was reported in the Financial Times.

Services could be franchised off

The newspaper said that the Paymaster General Geoffrey Robinson has been advised by a panel of four leading businessmen that the Underground's investment backlog of £1.0bn could be cleared by inviting the private sector to take over LU's tracks, tunnels and stations on leases of up to 30 years.

The plan could leave the operation of train services in the hands of the public sector, allowing the government to meet its election pledge to avoid "wholesale privatisation" of the network.

The businessmen were brought in to offer fresh advice and help break the six-month deadlock in negotiations with Deputy Prime Minister John Prescott.

The four businessmen are Ed Wallis, chairman of PowerGen, Malcolm Bates, chairman of Pearl Assurance, John Roques, senior partner at Deloitte & Touche and Sir Graham Hearne, chairman of Enterprise Oil.

Mr Robinson asked the panel to advise him on the possibility of pursuing LU's favoured option - that the network should remain as a single entity either in public or private ownership, said the FT.

However, the newspaper said it is understood that the business leaders agreed that the network should be split, broadly in line with the plan drawn up last summer by Price Waterhouse, the accountancy firm, at the request of Mr Prescott.

The FT said that under the new proposals, LU's infrastructure, including rolling stock, would be auctioned off in two or three parts to the private sector on long leases.

The infrastructure companies would recoup the necessary investment of between £6bn and £8bn over the next 15 years from the access charges paid by the operating company.

The train services would either be retained entirely in the public sector or franchised off to the private sector for much smaller concession periods.

Mr Prescott has been advised that LU will be able to operate without public subsidy after 2000, said the FT, adding that an announcement on the future of the underground could be made next month.
 

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