Railtrack move 'unavoidable' - Blair

Mr Blair said it was time to leave the blame culture behind

Prime Minister Tony Blair has said the government's decision to put Railtrack into administration was unavoidable.

During a speech on public services, Mr Blair said that the opportunity now existed to concentrate on safety and delivering decent rail services.

I decided I could not give Railtrack a blank cheque

Stephen Byers

He also suggested that the "blame culture" in the railway industry could be left behind.

Instead the new trust that would take over from Railtrack had the chance to provide a unified sense of purpose.

Mr Blair's comments follow those of transport Secretary Stephen Byers who on Monday made a statement to the Commons.

Mr Byers made it clear that Railtrack's replacement would be a private company limited by guarantee, without shareholders, and re-investing any profits into the network.

Railtrack shareholders have launched an action group to protect their interests, and are threatening to sue.

The transport secretary said it was Railtrack which first raised the possibility of insolvency, Mr Byers told a packed house.

Although Railtrack were quick to hit back at Mr Byer's speech saying that it "lacked substance" in many crucial aspects.

The company also denied it had gone to the government with a "begging bowl, month after month", and had been trying to negotiate a broad package of reforms since July.

No guarantees

The rail company admitted it had raised administration as an option, but said it was in the context of ruling it out, not suggesting it as a viable course of action.

Mr Byers maintained the company told him in July that it was facing financial disaster.

By December 2001, losses would have been £700m, expanding to £1.7bn by March 2002, he said.

In August, Mr Byers said, Railtrack told him that it had only three options: restructuring, renationalisation or receivership.

Restructuring would involve an open-ended commitment to cover Railtrack's costs and ensure a profit rather than a loss, as well as four years' suspension of regulation, Mr Byers said.

That was when administration began to emerge as a realistic option, he said.

Railtrack's board denied this, saying that prior to 5 October it had sought a "measured and fundamental" overhaul of its finances, not an "effectively open ended funding requirement".

It said the requested overhaul would have increased the transparency, predictability and stability of its affairs to deliver a better public railway.

But by 5 October, said Mr Byers, with Railtrack unable to put a figure on what it needed from the government, administration became the only course.

"I decided I could not give Railtrack a blank cheque," he said.

Mr Byers said the government had already made clear - with the agreement of Railtrack - that it would not protect shareholders over the travelling public.

Railtrack executives have been insisting that their shareholders should be compensated to the tune of about 360p a share, slightly less than the price at privatisation in 1996.

But Conservative transport spokesman Eric Pickles, said the £34bn private investment built into the government's 10-year plan was now at risk - and he called on Mr Byers to resign.

"Who will trust the government again? Not the City institutions. They will run a mile."