Johnson and Transport for London, the city agency that runs the U.K. capital's rail and bus system, say that extra government cash is needed to cover contractor Tube Lines Ltd.'s costs.

Prime Minister Gordon Brown's government has agreed to provide Transport for London with a 10-year, 40 billion-pound funding package to cover train and bus operations and any cost overruns, the U.K. Department for Transport said in a statement read by a spokeswoman today.

"It's time now for Transport for London to manage its generous budget settlement and deliver the high-quality transport that Londoners expect,'' the department said.

The funding dispute may slow Tube Lines' work on the Northern, Piccadilly and Jubilee lines. The company, a joint venture of Spain's Grupo Ferrovial SA and San Francisco-based Bechtel Corp., has a 30-year contract to refurbish stations, tracks and switching systems and add capacity to the railway.

Chris Bolt, the government-appointed arbiter of the Tube Lines contract, in September estimated that the company's costs would be around 5.5 billion pounds between 2010 and 2017. London Underground forecast the cost at 4.1 billion pounds. Bolt is continuing the review and will recommend a payment formula by 2010.

The London Underground, known locally as the Tube, carries 3 million passengers a day and has been straining to keep pace with growing numbers.

Johnson says that Brown's government should pay because it negotiated the so-called public-private partnership contract with Tube Lines in 2003.

"We feel the government should stump up and be plugging that gap,'' said Kulveer Ranger, the mayor's transportation adviser. Speaking to reporters yesterday, he said the cash shortfall "is down to'' the mechanics of the agreement.

See also:

Minister refuses to bail out London Underground

Guardian: November 04 2008
Dan Milmo, transport correspondent

The government hit back at Boris Johnson in the London Underground funding row today, warning that taxpayers will not plug a multibillion pound funding gap in the tube.

The London mayor has written to the chancellor, Alistair Darling, to demand a bail-out of the tube network, which is facing a cash shortfall of at least £1.4bn. However, transport minister Lord Adonis rejected Johnson's demands this afternoon, which could lead to cut backs on station refurbishments and disabled access projects, according to the Mayor's officials. Asked if more money would be forthcoming, he said: "No."

Lord Adonis said Transport for London, the mayor's transport authority, must fund the tube from a £40bn government grant that is supposed to cover its funding needs from 2010 to 2017. TfL argues that the funds are insufficient because they must cover the cost of running a heavily subsidised bus network and London's £7.7bn contribution to the Crossrail project, while paying for a tube upgrade programme in which the budget is escalating.

"TfL got a large injection of funds from the government. How it prioritises funding from that is a matter for TfL, not for us," said Lord Adonis. He added: "We don't accept that TfL does not have the money." The minister added that the funding settlement included a provision for higher-than-expected tube costs.

The mayor has warned that the tube will buckle under the pressure of rising passenger numbers unless extra money is provided for a £30bn upgrade programme that will install new tracks and signalling systems — and therefore faster and more frequent train services — on the tube's busiest lines.

The mayor's director of transport policy, Kulveer Ranger, today said the £40bn grant was not enough: "We can show him the budget if he wants and he can see the gap with his own eyes." Ranger said the funding problem was the government's responsibility because it imposed the Public Private Partnership programme that was supposed to carry out the tube upgrades.

In an interview with the Guardian last week, the head of the underground, Tim O'Toole, said disabled access projects, tunnel-cooling programmes and plans to ease overcrowding in stations might have to be sacrificed if the government refuses to release more cash.

He warned there could be consequences for politicians if the blame for worsening overcrowding in London's busiest stations is pinned on the government's refusal to provide more funds. He said cutting back on vital work such as installing new signal systems and tracks was impossible because maintenance costs would rise as the unmodernised parts of the network suffer intense wear and tear.

Lord Adonis also rejected comments from O'Toole in which he said Crossrail was less important for the capital than the tube. The minister said Johnson had met the transport secretary, Geoff Hoon, recently and asked if the Crossrail programme could be accelerated.

The Crossrail project will cost £16bn and will bore two railway tunnels underneath central London, linking Heathrow airport to Canary Wharf and the Essex suburbs.

The Department for Transport announced today that Heathrow owner BAA had agreed a £230m funding package as part of its contribution to Crossrail. The government will provide a further £5.6bn. However, Lord Adonis admitted that a contribution from the Canary Wharf Group and a £250m payment from the City of London Corporation had yet to be sealed officially.

"We are in highly productive discussions with both. We are confident that we will have the private sector funding that we need."