London mayor Ken Livingstone has denied he is running up crippling debts in his bid to upgrade the city's transport infrastructure.

Livingstone was speaking at a Conservative conference fringe event on Tuesday that gave delegates the opportunity to question him on his policies.

He told delegates that he had raised the price of public transport in the city in order to reverse decades of under-investment and avoid damaging London's finances.

In response to a question from Conservative London assembly leader Bob Neil on how mush debt he was building up, the mayor said: "We have to radically improve our public transport to cope with increased demand. I have made the difficult decision to increase bus and tube fares to pay for that investment, as a result debt is not a problem."

Livingstone said plans to extend the congestion charge zone west and build a tram system in west London were ongoing.

He told his audience he intended to stand again in the 2008 mayoral race, and set out what he believes are the major challenges facing the Capital.

"Government did not invest as it should have done in London and when you invest in London it is a benefit to the whole country," he said.

"That's why we must build Crossrail. The £3 billion it will cost the Treasury will be more than made up from the tax it will raise."

He said that the city was not competing for jobs with other British regions but with other world cities.

"Most new jobs in London are not jobs that would otherwise go to Birmingham or Leeds but ones that would otherwise go to Paris or Berlin," he said.

Livingstone said that the city had adapt to cope with growth.

"London grows by about 70,000 people a year and in order to accommodate those numbers we need to invest in the infrastructure," he said.

"Our education system has to reflect the fact that 80 per cent of new jobs will  be in the service and finance sectors and equip our young people to work in those sectors."