The Department for Transport has been reprimanded by the Commons watchdog Public Accounts Committee for ignoring a warning from the National Audit Office over the management of risks involved in the doomed Metronet London Underground contracts.

PAC chairman Edward Leigh said officials were wrong to assume Metronet would establish strong financial management and corporate governance and lenders would exert strong influence — when the lenders' role was undermined by the government underwriting 95% of their risks.

PAC chairman Edward Leigh said: "This committee finds it unacceptable that the Department ignored the warnings by the NAO in 2004 to avoid a hands-off approach to overseeing the contracts."

He demanded: "These mistakes must never be repeated."

The collapse of the PPI contract ultimately forced on LU and former London Mayor Ken Livingstone by Prime Minister Gordon Brown, chancellor at the time, cost taxpayers £410m.

Further reading:

E &Y paid £33m for Metronet administration