Taxpayers are to cover nearly all of the debt owed by Metronet Rail after creditors exercised their right to call in public-sector guarantees for 95 per cent of the value of the debt of the collapsed private underground contractor.

The Department for Transport yesterday announced it would pay Transport for London, the London mayor's transport organisation, £1.7bn to cover the cost of the guarantees, at the same time as announcing a £39bn funding package for the organisation over the next decade.