Tube funding flaw to cost £1m a week

London Mayor Ken Livingstone's tube supremo Robert Kiley has admitted to vnunet.com that his multi-billion pound London Underground rescue plan has not accounted for the cost of a vital £1.2bn radio communications network.

Financial experts warned that the omission would cost taxpayers more than £1m a week.

Kiley said he knew current tube bosses had signed off a £1.2bn deal which will see the Underground's radio communications network upgraded to a Tetra-based system. "I have heard about the radio network," Kiley commented. "I understand there are troubles with its development."

However, in a shock admission the tube's future chief added that he had not accounted for this £1.2bn Tetra contract in his rescue plan. "These figures are not included," he said.

Nick Nell, partner at management consultancy firm Best, Nell & Co, confirmed that such an omission would cause a serious problem with Kiley's cashflow forecasts. "Clearly there will be a payback," he said. "This could drive up the Underground cost by some £1m per week."

London Underground has not revealed how it intends to balance its books and meet the £60m per year cost of the radio upgrade. However, Derek Smith, the tube's managing director, said he is considering "third-party opportunities", including leasing part of its radio network to allow mobile phones under ground and video advertisements on station walls.

Nell said the tube should be investigating alternative revenue opportunities. "Advertisers and radio broadcasters could be willing to pay for using the network," he said. "The amount of traffic in the London Underground is huge - this means great advertising opportunities."

Kiley would not be drawn on whether he believed the radio upgrade should be shelved. He said only that "communication between trains was important for running a tube system".

Kiley's rehabilitation programme centres on £10bn funding from both public and private funding over a period of 15 years. He asked the government to chip in £250m a year from 2001 and the Greater London Authority to fund another £100m a year from 2004.

The money for the Tetra deal - called Connect - comes from private contracts. However, over time, paying back this investment will drive up costs by the controversial figure of £1m per week - causing Kiley to fall significantly short of his 15-year cashflow forecast.