Gordon Brown ignored dire predictions from Ken Livingstone when forcing through the London Underground public private partnership (PPP) four years ago. He now risks the humiliating prospect of seeing, within his first month as prime minister, the biggest PPP company collapse.

Chris Bolt, the PPP arbiter, will decide in the third week of July whether to throw Metronet a lifeline by increasing the monthly payments that it receives from Transport for London (TfL). Mr Bolt’s decision will give a clear indication of where he thinks the blame largely lies for Metronet’s overspend of at least £1.5 billion, which has pushed it to the brink of insolvency. Mr Bolt said last November that Metronet was partly to blame because it was “not economic or efficient” in its efforts to maintain and upgrade the Tube’s trains, track and stations.

However, Metronet insists that it is not working on fixed-price contracts and that the overspend is almost all because of TfL expanding the scope of projects, such as tripling the number of CCTV cameras at stations and demanding exact replicas of antique tiles.

The gaping hole in the company’s argument is that Tube Lines, the other PPP company, has managed to deliver almost all its projects on time and on budget.

Metronet has already admitted that it was wrong to have given the most lucrative work to its shareholders: Balfour Beatty, Atkins, Bombardier, EDF Energy and Thames Water. After criticism by Mr Bolt, it has belatedly put station upgrades out to tender and appointed an independent chairman.

The arbiter may grant Metronet enough money to stagger on until December, when he expects to conclude a review of its funding.

That will give its shareholders, who are all hoping to win future public sector contracts, a little more time to decide whether to embarrass Mr Brown by walking away from the PPP.

Their liability is limited to a joint equity investment of £350 million. The big question is how much more they will be willing to bear for the sake of goodwill and the chance that the 30-year contracts will eventually be profitable.

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