No deal for Railtrack shareholders

Stephen Byers: Railtrack was a major problem, not a solution

By BBC News Online's Mike Verdin at the CBI Conference

Railtrack shareholders will not receive government compensation for the firm's collapse, Transport Secretary Stephen Byers has said.

Shareholders were warned in a statement in April that the rail infrastructure did not enjoy a government viability guarantee, Mr Byers said.

While repeating a commitment from Prime Minister Tony Blair on Monday that investors would receive what they were "entitled to", this did not include a government hand-out.

"We do not believe... that we should now be putting in more taxpayers' money in order to compensate shareholders," Mr Byers told the Confederation of British Industry's annual conference.

Mr Byers has made his position clear on this several times since Railtrack collapsed.

The government was also prepared to defend its position over Railtrack's collapse at an inquiry, Mr Byers told CBI delegates, after being questioned after his speech by the firm's chairman John Robinson.

Failure to deliver

"The government will fully co-operate with an inquiry which might be taking place," the transport secretary said.

The firm's balance sheet and "failure to deliver" desired results had left him with no option but to press for Railtrack to be put into administration.

Cash projections predicted a Railtrack deficit of £700m by next month, and £1.7bn by March.

"Railtrack went into liquidation because it was insolvent," Mr Byers said.

"I firmly believe that Railtrack was not part of the solution for railways, but was a major problem."

Doubts over future

Mr Robinson, saying he did not intend to "trade spin" with Mr Byers, warned that the decision to seek administration for Railtrack had left the functioning of Britain's rail network shrouded in uncertainty.

Liquidators view as "tight" the government's six-month target for settling Railtrack's liquidation crisis, Mr Robinson said.

"Railways do not need uncertainty."

Calling for the government to pay shareholders at a stock price of £3.60, he said many employees, who had invested in Railtrack, had been "stripped of their life savings" by the firm's collapse.

Mr Byers countered by asking why, if Railtrack had indeed been a viable concern, the company had not opposed his High Court petition seeking administration.

And he referred again to a 2 April statement released through the London Stock Exchange saying that the government supported the rail network, but not individual companies.

'One aim'

The transport secretary said the government had drawn up plans to replace Railtrack with a not-for-profit company run "with one aim and one aim only - to deliver... a safe and efficient railway fit for the 21st century".

But he said he would consider "very, very carefully" alternative scenarios proposed by private sector firms.

John Robinson warned, however, in comments outside the conference chamber, that funding in the industry would remain uncertain until issues involving Railtrack shareholders and the future of staff were sorted out.

Industry in limbo

"Until then the industry is in limbo," he told BBC News Online.

Mr Robinson has called for an independent inquiry into the events leading up to the administration order.

Commenting on press reports that Mr Byers had apparently completed plans to force Railtrack into administration by the end of September, Mr Robinson said: "We want to see an inquiry into whether a false market was allowed to exist. What is there to hide?"

Conservative leader Iain Duncan Smith said earlier on Tuesday that the government would suffer increased trusts and project costs because of its handling of Railtrack.

Mr Byers said City and business enthusiasm for private sector involvement in public projects remained unabated.

"I was glad to read on Friday that the CBI shares this view," he said.