Partnerships UK and the renationalisation of the railways

That loaded phrase "conflict of interest" has again cropped up against Partnerships UK, the public-private partnership created to advise on public-private partnerships.

The accident-prone Transport Secretary Stephen Byers has selected PUK to oversee the fudged renationalisation of the railways, under the guise of a company limited by guarantee. But lo and behold, Mr Byers may have made another blunder.

PUK is a competent organisation. It was spun out of the respected Treasury Taskforce, set up to get the Private Finance Initiative rolling. Run by former City banker James Stewart and chaired by Prudential director Derek Higgs, it isn't short of grey cells. But the rub is that 51 per cent of the group is owned by private shareholders, including Abbey National, Prudential and Royal Bank of Scotland.

PUK has the power to influence the public sector on who is awarded lucrative PFI contracts. As such, its critics are rarely vocal. Over the past week, however, there has been a lot of whispering. The charge is that some of PUK's shareholders have a great deal of interest in the future of Railtrack. That could compromise PUK, it is said.

Jarvis has a 2.2 per cent stake in PUK and arguably has the most at stake. It has three big maintenance contracts with Railtrack, two of which run until 2006 and one to 2005.

Another shareholder with an interest is British Land, which has a 2.2 per cent stake in PUK and where Mr Higgs is a non-executive director. It is partnering Railtrack in a multi-million-pound property development above the railway lines near London's Liverpool Street station.

Then there is Abbey National, with a 6.7 per cent stake. The bank has been tipped by some as a potential bidder for Railtrack, along with WestLB and Babcock & Brown.

There is no suggestion that the shareholders will use their interests in PUK as a shoe-in on the restructure of Railtrack. But another whiff of controversy would be unwelcome.

Some 44.6 per cent of PUK is owned by the Treasury. Therefore, the appointment of the group represents the return of the Chancellor's department to the Railtrack fray. Behind the scenes, the Treasury was influential in the company's downfall. It has downplayed its role, but Shriti Vadera, one of Gordon Brown's closest aides, was working on the possible restructure of Railtrack back in the summer.

The PUK appointment also marks the return of one of the original architects of rail privatisation: Sir Steve Robson. The ex-Treasury official is a non- executive director of PUK.