TRANSPORT systems that lose money, such as the Tyne and Wear Metro, are throwing the building of further light rail systems into jeopardy, spending watchdogs have warned.

A report by the National Audit Office (NAO) raised the alarm over the failure to attract enough passengers or integrate properly with other transport.

It said the Tyne and Wear Passenger Transport Executive was forced to subsidise the Metro to cover an operating deficit of £647,000 in 2001-02.

The Department for Transport expects light rail systems to be self-financing and not require operating subsidies from government.

The report also pointed out that Midland Metro, Manchester Metrolink and Croydon Tramlink were all running at a loss. Midland Metro, it said, was losing £11.4m a year.

Passenger numbers on the Sheffield Supertram were 45 per cent below expectation and the Midland Metro was 38 per cent below.

Only seven light rail systems have been built since 1980. The Government wanted up to 25 new lines by 2010, but only 12 were being developed, the NAO said.

Under Project Orpheus, trams would be introduced on 29 North-East routes, including Newcastle to Denton, Killingworth to Cramlington, Sunderland to Seaham and South Shields to Sunderland.

However, Mike Parker, director general of Nexus, the passenger transport executive, has admitted the proposals would require huge sums of money.

Nexus would like to see the proposed light railway system in Middlesbrough connected to the Tyne and Wear Metro.

The 2002 extension of the Metro, from Pelaw to Sunderland, was one of five schemes studied by the NAO to assess their construction costs and benefits.

Built at a cost of £98m, the 18.5-kilometre route was the cheapest per kilometre of all the existing and proposed light rail schemes.

A similar system to link Darlington with Teesside is under consideration but a report last month warned it could prove too expensive.

The NAO also criticised the average of nearly two years before legal powers to build lines are granted under the Transport and Works Act.

Sir John Bourn, head of the NAO, said: "Light rail systems need to be better integrated with other modes of transport to attract more passengers and help to reduce urban congestion. And if more systems are to secure private sector investment, construction costs must be brought down and operations placed on a sound financial footing."

Damian Green , Tory transport spokesman, said: "This report is yet another blow to the Government's ten-year transport plan."