A "radical transformation" of rail services in London was announced by the capital's mayor today.

Ken Livingstone unveiled the creation of a new rail artery which will be operated by Hong Kong firm MTR in partnership with construction giant Laing.

From this November, the so-called London Overground will operate on the North London Railway, currently run by private firm Silverlink Metro.

The new system will serve 20 of the capital's 33 boroughs and will also include the East London Railway when it opens in 2010.

Mr Livingstone said 400 more jobs will be created over the next three years and there will be £1.4 billion of investment, including new trains, a "vastly upgraded" service, and refurbished and new stations.

The mayor will set fares and revenue will be retained by Transport For London for reinvestment in the transport network.

The move sparked claims by the Rail Maritime and Transport Union that switching the East London line from being run by the Tube to mainline operation was "privatisation", a claim strongly denied by Mr Livingstone.

The union pledged to fight the switch and warned of possible industrial action.

Mr Livingstone said: "This contract paves the way for the radical revitalisation of London's rail services, which have suffered from years of neglect and under-investment.

"With London Overground we are investing over £1.4 billion to transform this part of London's railway network so that it will provide passengers with the levels of staffing, safety and security and customer service they deserve.

"By joining together the North and East London Railways ahead of the 2012 Olympic Games, we will create a new rail artery around the city serving 20 boroughs, including some of the poorest.

"This will not only create new opportunities and encourage inclusion across our diverse economic and cultural centres but it will also be a vital means of increasing capacity on public transport as London's population grows over the next 20 years."

As part of the restructuring, 11 Silverlink stations will transfer to direct London Underground control.

The final signing of the contract will take place on July 2.

A spokesman for Transport For London said: "This is neither renationalisation nor privatisation but a completely new way of running the rail network.

"This franchise has been awarded by the public, will be controlled for the public and will be run for the public.

"We set the timetable, the fares and staffing levels, we take control of the stations and the whole network will be integrated with the Oyster card service."

Bob Crow, general secretary of the RMT, said: "However it is dressed up, this announcement means that the operations of London Underground are now being dragged down the same failed path of privatisation that has already so disastrously undermined the national railway network.

"For the first time in more than seven decades, the operations of part of the world's most successful metro system are to be taken out of the public sector and handed to an organisation for which profit comes first.

"That raises grave safety concerns both for our members and for the travelling public and raises the prospect of millions more in public money being sucked out of the network."

Copyright Press Association 2007.

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