The Tories have unveiled proposals to sell off London Underground and offer free shares to staff, season ticket-holders and residents.

Shadow Transport Secretary John Redwood has promised "the biggest cash investment in the Tube ever" as a result of the privatisation, which would involve the sale of the entire network.

Under the scheme, the present publicly funded operation would be replaced by a group of up to four private companies, each running one or more tube lines.

A new company, called London Underground plc, would also be created to take responsiblity for matters such as marketing, promotion and travel information.

Among the benefits promised under the new arrangement are a new tube line, a cap on fares, more late-night trains and air conditioning to prevent sweltering summertime conditions.

The future of the capital's ailing network is a key issue in the race to be London mayor.

The Tories will be hoping that the new plan will add momentum to their campaign following the selection of Steve Norris as the party's candidate on Monday.

Mr Redwood said: "The tube needs extensive modernisation if it is to be fit for the 21st Century.

"It's going to need huge sums of money, which this government has failed to deliver from the taxpayer and failed to obtain through a Public Private Partnership.

"We pledge the biggest cash investment in the tube ever. Our Londoners' tube will have more and better trains, more lines and more services, whilst Prescott's Public Private Partnership remains stuck in the tunnel with signal failure."

A decision on where to build the promised new tube line would be left to the commercial interests which took over the Underground, said Mr Redwood.

The four options would include the Crossrail link plan between Paddington and Liverpool Street or an extension of the East London Line north to Dalston and south to Lewisham and Croydon.

The Tories' plans puts them at odds with other parties in the mayor race, who all want to retain at least some public ownership of the tube.

Susan Kramer, the Liberal Democrat candidate, said: "By giving Londoners free shares in the tube, the Tories are just dressing up privatisation into something that appears accessible to Londoners. This will have no long-term value to the tube.

"Do Londoners really want to suffer with the same increase in delays and congestion on the tube as we are now seeing on the railway service that the Tories privatised?"

"As mayor, I will issue revenue bonds that provide full access to the investment needed from the financial markets. This is the only effective way to fund the tube in the long term and keep it in public hands."

A bond issue is also favoured by Labour hopeful Ken Livingstone and the Green Party's Darren Johnson.

But Labour challengers Frank Dobson and Glenda Jackson both remain committed to Downing Street's plans for a partial privatisation of the network.