Oct. 5 (Bloomberg) -- London needs a 30-year overhaul of the rail system, less regulation and a surge in Asian investment to ensure its economic future, Mayor Ken Livingstone said.

``There really are 30 years of transport investment to keep running ahead of the growth in population,'' Livingstone said in an Oct. 3 interview at City Hall. ``We are all breeding like rabbits and you have to build the trains.''

Livingstone, 61, has been at the center of London politics since the 1980s as council leader, member of parliament and mayor. He has expanded the police force, introduced a charge on drivers entering the city center and overseen plans for the 2012 Olympics that London will host after beating bids from Paris and New York.

Wooing Chinese businesses and keeping financial regulations and taxes low will secure the city's economic future, said Livingstone, dubbed ``Red Ken'' by newspapers in the 1980s, when he led the city's legislative council. Margaret Thatcher, the then Conservative prime minister, abolished the council in 1986.

``We are a little less regulated than New York and less taxed than the rest of Europe,'' said Livingstone, who plans to run for a third four-year term in 2008. ``That gives us an advantage.''

The U.K. has taken steps to avoid the stricter U.S. accounting rules of the Sarbanes-Oxley Act and has lighter penalties on directors than some countries, lowering listing costs. That has prompted a growing number of companies to list on London's stock exchanges instead of those of Europe and the U.S.

Praise for Thatcher

Livingstone, a self-described socialist and member of Prime Minister Tony Blair's Labour Party, said Thatcher's decision to open the U.K.'s financial-services industry to foreign competition helped transform London from an insular British capital to international city.

``Mrs. Thatcher deregulated it, and all those American and Japanese banks moved in, and the old boys network had been smashed within a decade,'' he said.

Livingstone said he will ``bust a gut'' to see that Gordon Brown, currently Chancellor of the Exchequer, succeeds Blair as prime minister. Blair has said he plans to step down as party leader next year.

Livingstone had been at odds with Brown over the chancellor's private-funding plan for the London Underground, which sold 30-year maintenance rights to companies such as Metronet Rail.

Growing Population

London has added 1 million residents in 20 years to reach a population of 7.5 million and is forecast to gain another 800,000 by 2016, helped by immigration as well as rising birth rates.

The city's economy will expand 3.4 percent in 2006, more than the 2.9 percent a year earlier, led by expansion in the financial-services industry, according to the Centre for Economics and Business Research.

Livingstone visited China this year in an effort to attract businesses and will travel to India next year to do the same, he said. ``If China locks in to seeing this as the place to do business in Europe, then London's economy is secured for a century.''

Improving the transport system may be the biggest hurdle to future growth. The city is investing 10 billion pounds ($19 billion) over five years in roads, buses and trains after what Livingstone called ``decades'' of government neglect.

The biggest challenge to London's economy is a lack of transportation capacity and a shortage of housing, according to a report last year by Oxford Economic Forecasting for the City of London. The City is the world's second-largest financial center after New York.

London Underground

The 143-year-old London Underground carries three million passengers a day and is straining to keep up with demand. Livingstone, who championed fare reductions in the 1980s, has introduced three consecutive above-inflation fare increases and says more will follow.

``We have pushed fares to the limit,'' he said. The cheapest London Underground cash ticket will rise by a third to 4 pounds next year. The fares are the highest in the world, according to a June report by Mercer Consulting.

London was ranked the fifth-most expensive city in the survey, after Moscow, Seoul, Tokyo and Hong Kong.

Livingstone said London is ``close'' to a funding agreement with Blair's government for Crossrail, a 10 billion-pound railway that would increase the city's rail capacity by 20 percent and connect the West End and the financial district with Heathrow, Europe's busiest Airport which lies west of London.

``Without Crossrail we would have to start turning down applications for new office construction in London,'' he said.

Crossrail's Future

After Crossrail, which would become operational in about 2016, the city's suburban rail system would be expanded through 2025, Livingstone said.

The mayor, who introduced an 8-pound congestion charge on cars entering the city center, plans to boost the fee for cars with bigger engines. He favors other ``green taxes'' such as a broader system of charging motorists to use roads and a surcharge of up to 15 pounds on every airline ticket.

Such taxes would help to reduce pollution as well as generating cash for infrastructure investment, he said.

``We are at a limit as to what we can invest without additional revenue streams,'' he said. ``The best companies'' are adopting carbon-neutral pollution-reduction policies, he said.

London expects extra business of 6 billion pounds ($11.31 billion) from the 2012 Olympics, and the ``incalculable'' value of having the city the focus of world media attention, he said. London is spending about 2 billion pounds on stadiums and athletic sites for the competition, which it last hosted in 1948.

London Assembly

London assembly members such as leader Brian Coleman have warned that the project could run over-budget because it's so large and complex. The 2004 Olympics in Athens were the most costly ever because of construction delays.

``I don't think there are going to be any cost overruns on the Olympics,'' Livingstone said. ``We have got to get this right.''

If the Olympics are a success, ``people like yourself will be saying the games have come to the world's leading city,'' he said. ``We are still in a position where we are advancing rather than retreating. Most of the great world cities, particularly in the west, are actually retreating.''

If the transport, housing and Olympic projects don't work, ``I will crawl away under a stone,'' he said.

To contact the reporter on this story: Brian Lysaght in London at blysaght@bloomberg.net

Last Updated: October 5, 2006 05:25 EDT