Anger over Railtrack's pounds 428m profit

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The Independent Online
JOHN PRESCOTT is to take tough new powers to force Railtrack to invest more in rail improvements after the privatised company yesterday announced a pre-tax profit of pounds 428m for the past year.

The Deputy Prime Minister and Secretary of State for the Environment, Transport and the Regions is expected to win a cabinet battle with the Chancellor, Gordon Brown, who is wary of intervention in Railtrack, but Mr Prescott has told colleagues the level of profits made by Railtrack underlines the need for more direct powers to force it to invest more in the rail system.

Mr Prescott is preparing to change his draft legislation to give the new Strategic Rail Authority powers to pay the pounds 1bn taxpayers' subsidy direct to Railtrack, with powers to direct the investment.

Railtrack fears that Mr Prescott's intervention could further hit its share price, and Bernard Jenkin, the Tory spokesman on transport, attacked it as "nationalisation by the back door". Railtrack's chief executive, Gerald Corbett, warned: "Enforcement regulations will raise our cost of capital and not get the railway rebuilt."

Defending the profit figures, Mr Corbett said: "Today's profit is tomorrow's investment. I am unashamed about it because that is the key to getting the investment in."

However, Railtrack admitted that it was failing to meet its targets. Rail users groups said the profits amounting to 50p for each of the 850 million journeys taken a year by train passengers proved passengers were being "ripped off".

The Independent has learned that the rail regulator, Chris Bolt, has recently reported to Mr Prescott after a consultation period that it would be feasible to pay the subsidy directly to Railtrack, ending the system inherited from the Tories under which the subsidy is paid by the Government to the train-operating companies to pay to Railtrack in return for service improvements.

Mr Prescott believes the system contains no financial incentives for Railtrack to invest at the level he wants. Railtrack anticipated his move by announcing plans for pounds 27bn in investment, but that has failed to impress the Secretary of State, who estimates that pounds 16bn is earmarked for maintenance, not enhancement.

His priority will be to force Railtrack to invest more in East Coast capacity, and commuter routes in the South-east through signalling and longer stations to enable extended trains to carry more passengers as part of his drive to get people out of cars and onto public transport.

He told BBC Radio 4's PM programme that he wanted Railtrack to make a "definite commitment" to an investment programme "and to have it delivered as certainly as we have seen the profits in the last couple of years".

He said that at present Railtrack did not have to guarantee levels of investment: "You can be sure I am going change the basis so that we get a guarantee of investment which we have not had up until now," he added. He wants the amended Bill on the Statute Book in the Spring, next year, and it could be introduced before the summer.