Labour attacks Railtrack `outrage'

Click to follow
The Independent Online
The Labour Party has reacted angrily to a decision by the Government to make Railtrack pay investors in the privatisation a dividend of almost pounds 70m out of last year's profits.

Clare Short, the shadow transport minister, said yesterday: "This is a monstrous outrage. The Government is shameless, throwing taxpayers' money around in its determination to get Railtrack sold."

Ms Short also, controversially, said Railtrack's bosses were "disreputable and incompetent". She alleged that the management was intent on profiteering from the sale. "They are a bad bunch of people - I realise these are serious words to use - and, as everyone says, they're interested in getting their hands on Railtrack so they get valuable commercial land in the centre of every town and city in this country, because they're interested in property development rather than running trains. They're a bad bunch, I'm afraid."

Railtrack denied her claims that the management was going to make huge sums from the sale.

Ms Short also attacked a bonus scheme that could double the salaries of six top Railtrack executives.

The hefty sweetener for investors is aimed at kick-starting the controversial pounds 1.8bn flotation that has been fiercely attacked by Labour, and will be the subject of a Parliamentary debate on Wednesday. The Opposition is threatening to reduce the returns to investors by imposing tougher regulation if it gets into power.

As well as luring City institutions to buy the shares, the extra payout will allow private buyers to earn income over the next 12 months that will dwarf anything they can get from a building society, even without allowing for the prospect of a gain in the value of the shares.

The extra dividend, to be paid in October, will be in addition to the normal interim and final dividends of just over pounds 100m that Railtrack will pay out of its profits for the financial year that began this month.

With the second payment on the shares not due until April 1997, private investors can take advantage of two full years' worth of tax allowances for Pep savings schemes. The arrangements mean that investors will receive more than pounds 100m in dividends - the extra pounds 70m in October and a normal interim dividend of more than pounds 30m in February - before they have to pay the second installment on their shares next year.

The Government had been hoping to raise as much as pounds 2bn from the sale of Railtrack next month but has suffered a series of blows to its hopes. These included the announcement last week that Roger Salmon - regulator of the train operating companies rather than Railtrack - is to leave more than a year early.

Fears about safety have also prompted half of Railtrack's senior managers and more than four in five of its middle managers to oppose the sell-off of the company, according to a poll released today.

Managers spoke of "accidents waiting to happen" and "safety systems not in place" as reasons for their opposition to the sell-off. The poll findings are being sent to all MPs ahead of Wednesday's House of Commons debate.

The safety fears come in a secret postal ballot conducted by the white- collar union, the Transport Salaried Staff Association, with the results published today by the campaign group Save Our Railways. The group is also to launch a new legal challenge to the sell-off.

The prospectus for the flotation, to be published today, will include a reprint of a speech by Ms Short setting out Labour's plans to tighten regulation, rearrange subsidies and eventually return the railways to public control.

The prospectus is expected to confirm that the Government plans to sell 100 per cent of Railtrack. It will also disclose that while the directors receive no share options - in a bid to avoid "fat-cat" controversy - there will be a long-term management incentive scheme paying up to 40 per cent of basic salary that includes the award of actual shares rather than options.

The highest-paid director last year was Norman Broadbent, the finance director, who received pounds 195,000 including a bonus, pounds 2,000 more than John Edmonds, the chief executive, while Robert Horton, the three-days-a-week chairman, was paid pounds 159,000.

Despite the controversy, the scale of the sweeteners looks set to undermine Labour's attempt to knock the sale, because it was hard to detect any signs last week that the City was alarmed about Labour's proposals.