NAO launches inquiry into underground privatisation.

The National Audit Office is to launch an urgent examination of the proposed public private partnership for the London Underground, write our parliamentary staff.

The highly unusual move of investigating the hand-over of a public asset to the private sector before rather than after a contract is signed, is set against a background of a bitter feud between new London mayor Ken Livingstone and deputy minister John Prescott.

Four consortiums are bidding for the contracts to take over two groups of tube routes and they have until next month to submit their final offers.

A decision on who wins the contest is due in December. The NAO plans to publish its report on the process in November – only one month earlier.

Prescott claims that the partnership solution is the only way to secure proper long-term finance for the underground, while Livingstone says the taxpayer will lose money in the partial privatisation.

If the PPP goes ahead there will be a further NAO report on its final outcome as well as a separate study into plans partially-privatise a third set of tube routes, known as sub-service lines, due to be dealt with next year.

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