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Thursday, November 18, 1999 Published at 09:05 GMT

UK Politics

Analysis: London's sound and fury

Ken Livingstone: Facing second grilling

By BBC London Political Editor Shaun Ley

To anyone outside London, quite why a simple question about the future of the Underground should derail Ken Livingstone's appearance before Labour's mayoral selection board must be impossible to judge. Yet the result was three hours of confusion, and a hastily arranged reappearance on Thursday morning.

Party insiders insist it is not tube policy but Mr Livingstone's carte blanch approach which is causing the problem. No candidate, they say, could pick and choose what bits of the manifesto he or she is prepared to accept.

Labour's policies for next May's election will be drawn up in consultation with London members, candidates for the London Assembly, and whoever emerges as the party's mayoral hopeful. This is supposed to be about devolving power to London.

But the national party retains a veto. And that is the problem. How to resolve the tension between central government's view and those of the capital's politicians.

[ image: Tony Blair with his preferred choice]
Tony Blair with his preferred choice
Not that there are not plenty of Labour politicians in London who agree with the government. Among them, two other candidates, Frank Dobson and Glenda Jackson (who used to be in charge of transport in the capital until she left the government in July). They have accepted that the Treasury will never come up with the billions of investment which is needed to reverse 30 years of cuts.

The only alternative is private money. The government wants to broadly follow the Private Finance Initiative used to fund new building projects, like hospitals. Private companies pay for the construction, with the public sector paying the money back over a number of years. Like a mortgage, inevitably that means paying back more than was originally borrowed.

John Prescott's innovation for the tube is a Public-Private Partnership. Private firms would take over different tube lines, smarten them up, and improve the service. But the government insists that the assets would remain in public control. There would have to be a regulator to ensure safety standards were maintained.

Londoners are sceptical about the private sector's ability to deliver a safe, service, especially in the wake of the Paddington rail crash. Mr Livingstone thinks they are even more sceptical when one of the company's to be involved is Railtrack, who have borne much of the public opprobrium for the failure of rail privatisation.

Yet even the Livingstone alternative admits the need for private money. The difference is that this would be raised by going to the markets and offering bonds. When the bonds are cashed in, the person or company who bought them gets a profit. It is a way of raising quite considerable sums. New York's subway has been funded this way since 1981. Of $22m of investment, $14m came from bonds.

The problem for the government is that there is a risk. Bondholders who cashed in their bonds would still have to be paid even if the tube was not making a profit. That would mean the Treasury bearing a huge risk.

Supporters of the idea - who include the Liberal Democrat candidate Susan Kramer (herself in the business of transport project finance), and at one point Trevor Phillips, before he became Mr Dobson's deputy - say the Treasury could change its rules to allow this sort of borrowing. They also say that London Underground makes a surplus from the fares it charges, but most of the money is sucked in to paying for the backlog of repairs.

[ image: The victor will have little power over the Underground anyway]
The victor will have little power over the Underground anyway
Promptly at 1000 GMT on Thursday morning, the Labour mayoral selection panel will meet again below the portrait of Clement Attlee in the party headquarters at Millbank Tower. They will ask Ken Livingstone again to agree that he'll accept the manifesto as approved by the leadership.

He will say yes, but add the caveat that he couldn't support the PPP for the tube. I still believe a form of words will be found that gets his name onto the shortlist along with Mr Dobson and Ms Jackson.

Perhaps the candidates will be allowed to campaign for any policies they would like in the manifesto, at least until that manifesto is finalised. After that they would have to accept it.

The leadership might be prepared to accept that compromise, because by the time the manifesto is agreed, they expect Ken Livingstone to be long gone - defeated by the votes of the electoral college which will choose Labour's candidate.

But if things go badly wrong on Thursday and the panel declines to put him on the shortlist, Ken Livingstone will milk his rejection for all its worth. He would look like a political martyr, creating the circumstances for any decision he might take in the future to run as an independent. Perhaps he might even do so on a ticket of keeping the tube intact in the hands of Londoners.

The irony of all this is that the Mayor of London will not even control the tube until after the government's public-private partnership deal is in place. Nor will the contracts be up for review for a further seven years. With only a four-year term, the first Mayor of London could be entirely irrelevant to the future of London Underground.

So perhaps those people from outside London are right after all. This row is full of sound and fury, but it signifies not a lot.

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