Byers defends rail rescue package

Byers: Network Rail offer should 'benefit' commuters.

Stephen Byers has been defending the £500m rescue package for Railtrack which includes a payment to shareholders.

In a House of Commons statement, he said the rescue deal offered an early opportunity to bring the company out of administration.

I am not at all clear why the government now feels that they have to take this rather precipative action

Gwynneth Dunwoody
Labour MP

He said that this early exit from administration would benefit both taxpayers and rail-users.

But Mr Byers came under fire from his Conservative opposite number, Theresa May who said: "Passengers are paying the price of the Secretary of State's incompetence."

Mrs May accused the government of a "180 degree turn" on the issue of compensation for shareholders.

"Given his repeated assurances inside and outside this House that this government would not use taxpayers' money to compensate shareholders why has he broken his word yet again?" she asked.

'Wake-up sign'

BBC political editor Andrew Marr said there were few supportive interventions by backbenchers as Mr Byers made his announcement.

Instead Labour MPs stopped asking questions to leave the transport secretary to be grilled by opposition MPs.

Marr said this U-turn had been a "wake-up" sign for the government.

But he dismissed any sense it might pave the way for a challenge to Prime Minister Tony Blair as "frankly bonkers", although he said that the Tories were getting harder for Labour to write off.

Earlier Mr Byers had received the backing of Tony Blair whose spokesman said the transport secretary was "absolutely right" in the way he has handled Railtrack affair.

'Right decision made'

The package includes paying off shareholders at about £2.50 a share.

The prime minister's spokesman conceded that Mr Byers has been under pressure over the affair but insisted that he made the right decision.

Mr Byers told MPs that the rescue plan - based on a bid by Network Rail - meant that because there would in future be no shareholders any surplus would be invested in the railway.

"Network Rail say their proposal, if accepted by the shareholders, could take Railtrack plc out of administration as early as July this year," he said.

Byers: Insists there's no U-turn

He added: "[Network Rail's] core focus will be the maintenance and renewal of Britain's railways.

"They will focus on the needs of the travelling public not short term profit for shareholders."

But Mrs May said: "I wonder if your indecent haste to conclude this deal might have anything to do with your desire to avoid legal action from Railtrack shareholders.

"That would have required you to explain under oath why you sought the court order to wind up Railtrack when funds from the rail regulator were available to keep it afloat - £300m of taxpayers' money to save your face."

Senior Labour MP Ian Gibson described the move as "astonishing" and accused Mr Byers of "dancing to the tune" of the City.

'Precipative action'

Labour chairman of the influential Transport Select Committee, Gwynneth Dunwoody, said she was concerned about taxpayers' money being used to bail out shareholders.

"I am not at all clear why the government now feels that they have to take this rather precipative action," she said.

She added: "If it is true that the rest of Railtrack is still holding very large assets I believe the House of Commons will want to know why they haven't been used to compensate shareholders."

Simon Haslam, chairman of the Railtrack Shareholders' Group, described the move as a "modest victory".

Network Rail chairman Ian McAllister said the £500m was an "early exit payment" that would get Railtrack out of administration quickly, enabling his company to tackle some of the problems on Britain's railways.

Change of heart?

The transport secretary had insisted last year that he would not bail out Railtrack with public funds.

He had told BBC Radio 4's Today programme: "I don't think it is right to put in what would be over a billion pounds of taxpayers' money to compensate the shareholders of Railtrack."

Gibson: MPs will be 'disappointed' by the offer.

Mr Byers stressed the cash payment would only be made if Railtrack came out of administration early.

"I welcome the bid for Railtrack tabled today by Network Rail. A company limited by guarantee will be able to put the interests of the travelling public first," he said.

The £300m, together with £200m to be borrowed from the City, is part of a financial proposal to take over Railtrack being outlined by Network Rail, the newly-named not-for-profit company limited by guarantee (CLG) bidding for Railtrack.

The City was outraged by the decision to pull the plug on Railtrack last autumn.