Taxpayers could be left footing a bill for hundreds of millions of pounds after Metronet, the London Underground contractor, filed for administration yesterday in a move unions fear will trigger a wave of redundancies.

Transport for London (TfL) immediately stepped in and set aside £700 million to ensure safe running for the rest of the year of the nine Tube lines that were under Metronet’s control.

However, Tim O’Toole, London Underground managing director, warned that a programme of up to 70 station upgrades planned by Metronet could be delayed for months.

He added that the Government would be asked to help with the cost of meeting vital track maintenance and signal work.

This would see the burden of funding the transformation of the Tube fall on the taxpayer far sooner than expected had Metronet remained afloat.

Mr O’Toole said: “We do not expect the farepayer to pay the cost of this. The Government will be working with us to replenish our reserves.”

TfL is already facing a battle to secure funding for the £15 billion Crossrail project in the capital.

Mr O’Toole’s comments came hours after Alan Bloom, the Ernst & Young insolvency specialist, was appointed Metronet’s administrator. In a statement yesterday, Metronet admitted that it was “unable to carry out its contract” after Monday’s decision by the regulator, Chris Bolt, to limit the company’s emergency funding over the next year to £121 million.

Metronet had asked for £551 million and gave warning that it was facing total cost overruns of £2 billion. The company’s banks had already blocked access to a £1.6 billion loan facility.

Politicians said that Metronet’s demise was a huge blow for Gordon Brown who, as Chancellor, championed the Public Private Partnership (PPP) drawn up to attract private sector investment on the Tube.

Susan Kramer, Liberal Democrat transport spokeswoman, said: “It’s a disaster. I think the Government needs to step in and take this work back in-house.”

Under the PPP administration, Metronet will continue to manage the contracts it was awarded in 2003 but under the ultimate control of TfL, until a new contractor is found. TfL sources yesterday revealed that a team of executives had been preparing for Metronet’s administration since May under the codename “Project Rocket”.

Mr Bloom said there were no plans for any job cuts among Metronet’s 5,000 staff. However, union leaders last night revealed that Metronet was already in the middle of a 90-day consultation over 700 planned back-office redundancies.

Brian Harris, regional officer for Unite, told The Times: “We want the company to halt discussions about any job losses until the administrator has had a chance to review the future prospects of the business.”

Ken Livingstone, the Mayor of London, who challenged Gordon Brown over the introduction of the PPP in the High Court in 2001, refused to gloat. He said: “How many people have you heard saying ‘I told you so’ and found that it makes them a more attractive human being?”

The Prime Minister insisted that Metronet’s contracts would not be taken back into the public sector. He said: “If Metronet pulls out, then another private company will be found to take its place.”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax