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Thursday, May 27, 1999 Published at 11:28 GMT 12:28 UK

Business: The Company File

Railtrack profits 'a scandal'

Critics say Railtrack must do more to modernise the railways

Railway infrastructure company Railtrack's profits have steamed ahead to 428m - or 1.2m per day.

Critics described the figure as "a scandal" and called for tighter government control of the firm which owns the UK's rail stations, track and signalling.

Simon Montague: "The railways watchdog says the lack of investment is adding to delays"
Since being privatised three years ago its profits have risen each year with the latest figures, for the year to 31 March, up from 406m in 1998 .

But the company defended itself against critics, claiming that the profits were necessary to fund the massive investment needed.

[ image: Railtrack's Chief Executive Gerald Corbett: Increased investment follows from good profits]
Railtrack's Chief Executive Gerald Corbett: Increased investment follows from good profits
Chief executive Gerald Corbett said its new investment programme is the biggest since the first age of steam.

He also said that it had reduced its share of the blame for rail delays to 45% of the total, from 65%, and had increased the total number of passenger train miles by 25% since being privatised.

"Profit and investment are two sides of the same coin. Today's profit is tomorrow's investment," he said.

Railtrack Chief Executive Gerald Corbett: "Profit and investment are two sides of the same coin"
"I'm unashamed about these profits, because it is the key to solving the problems caused by huge under investment in the railways over the last 30 years.

"We have to have the profits to get the investment we need to solve the problems we inherited from BR," he said.

Defending its performance Railtrack said the rate of growth in rail use had not been expected when the industry was privatised.

It argued that the current system of financial incentives to the industry were hindering progress - in particular the fact that charges to train operating companies, Railtrack's main source of income, were fixed.

Jonathan Bray of 'Save Our Railways': "One of the few industries where profitability is inversely related to performance"
"As over 90% of access charges are fixed, Railtrack has no financial incentive to accommodate growth," the company said.

Organisations such as pressure group Save Our Railways are furious that the profits are high when, they claim, overall satisfaction with Railtrack is low.

"The Railtrack scandal rolls on, with the company pocketing higher and higher profits while its performance is being criticised right across the industry," said Keith Bill, National Secretary of Save Our Railways.

"The new strategic rail authority must take much more control of the company and ensure that it carries out the work it has promised but not yet carried out."

Earlier this spring Railtrack published a 10-year 27bn investment programme.

But some of the schemes will need an investment partner if they are to go ahead.

Wendy Toms of the Southern Rail Users Committee: "How about a few more dividends for rail passengers?"
The Central Rail Users Consultative Committee said that despite the healthy profits there was little evidence of any major enhancements taking place on the rail network.

"There is clear evidence that lack of investment by Railtrack is a major contributory factor to train delays and critically is now holding back train operators' plans to introduce much-needed new services," said Stewart Francis, deputy chairman of the watchdog.

"Railtrack is paying handsome dividends to its shareholders. When will passengers get their dividends?"

But Conservative MP and shadow transport minister Bernard Jenkin said: "Railtrack has offered John Prescott 27bn of investment over the next 10 years.

"If John Prescott continues to undermine public and City confidence in Railtrack, he is destroying the best chance for improvement that the railways have had this century."

The final dividend was increased 9.3% to 17.6p to give a 9.6% increase in the total payout for the year to 26.3p pence, covered by earnings of 83.5p a share.

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