Byers blames Railtrack for collapse

Mr Byers delivered a pugnacious performance

Railtrack left the government with no option but to put it into administration, Transport Secretary Stephen Byers has told the House of Commons.

I decided I could not give Railtrack a blank cheque

Stephen Byers

And no decision has yet been made on whether the company's parent can hang on to the Channel Tunnel rail link project to help it compensate its shareholders.

It was the beleaguered rail company which first raised the possibility of insolvency, Mr Byers told a packed house.

But Railtrack later hit back at Mr Byers' Commons speech, claiming 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.

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

Eric Pickles
Conservative transport spokesman

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."

No word on Channel link

Railtrack had been expecting Mr Byers to announce that Railtrack Group - the failed company's parent - is to retain the right to run the Channel Tunnel rail link, which might provide a boost for out-of-pocket shareholders.

The licence to run Phase One of the rail link - the rest of the work has already been awarded to other contractors - is held by Railtrack Group, the parent of Railtrack plc.

Byers said Marshall agreed to no shareholder protection

But Mr Byers said the issue still needed more negotiation, since the government and Railtrack Group disagreed about how much it was worth. He planned to write to the company later on Monday, he said.

Railtrack has set the value at £400m. The government has yet to put its own value on the project.

Meanwhile, the train operating companies, such as Stagecoach and National Express, expect to be given a bigger role in track maintenance under Railtrack's replacement.

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.