Chancellor's special unit to push for break-up of Railtrack

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The Independent Online

Gordon Brown has formed a special unit – headed by the Treasury's lead negotiator in the privatisation of the London Underground – to examine ways of breaking up Railtrack.

Fronted by Shriti Vadera, a hard-nosed special adviser to the Chancellor, the unit is expected to recommend that Railtrack's role in investing in new rail infrastructure should be stripped away.

Ms Vadera, a former banker at Warburg, is regarded as having the ear of the Chancellor. She first came under fire this year for her role in the controversial Tube Public Private Partnership.

Ms Vadera's unit, which also includes senior civil servants from the Treasury and the Department of Transport, Local Government and the Regions, will report to Mr Brown at the end of the month. Railtrack has been effectively neutered by the stock market, as the City has lost faith in the track owner and operator. This year Railtrack's shares have fallen from 1030p to 322p, closing the doors to equity and debt markets.

In a further sign that the City has lost faith in Railtrack, its market capitalisation is now £1.65bn, roughly half the value of its property assets.

It is understood that the Treasury believes that Railtrack's rating in the City would recover if its capital-intensive investment role was removed.

One analyst, who asked not to be named, said: "Railtrack, with the remit of owning and maintaining the rail infrastructure, would be much more palatable to shareholders."

Trading in Railtrack's shares over the last three months has been relatively slow as shareholders have awaited a ruling from the Government on the company's future. However, some investors have increased their holdings in Railtrack's bonds on the expectation that the Government might buy or take a stake in the troubled rail company.

If Railtrack's investment remit were removed, this could be handed to the train operating companies. Such a move would help to align the interests of the fragmented rail industry as the train operators would have a clear financial interest in the network of track and signals.

Another plan mooted by government officials involves removing Railtrack's responsibility for running the rail network. Instead of paying an access charge, train companies would lease the track from Railtrack.

Mr Brown and Tony Blair are unlikely to make a formal announcement concerning the plans until after the Labour Party conference in October.

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