Watchdog move boosts Railtrack shares surge

Railtrack shares surged yesterday after the Rail Regulator, Tom Winsor, unveiled a new incentive regime allowing the company to increase its charges to train operators to reflect growth in passenger numbers.

Shares in the embattled rail network operator rose by almost 3 per cent to their highest level since January, ending the day up 23.5p at 845p.

Mr Winsor said that he intended to introduce a carrot- and-stick approach to the regulation of Railtrack in an effort to make it "more imaginative, more creative and more responsive" to the needs of passengers and train operators. "Good performance will be rewarded and bad performance will be penalised," he added.

But the regulator also said that the current charging arrangements penalised Railtrack for promoting growth on the railways by not giving it the scope to increase charges as train journeys increased.

Since privatisation, train journeys have grown by 25 per cent but Railtrack's income from charges, currently running at £2.3bn a year, is fixed. Railtrack says that charges will need to rise by £1bn a year - mainly funded through increased subsidies to the rail operators - if it is to afford a planned £18bn investment plan over the next five years.

Under the new pricing regime, due to take effect next April, Mr Winsor said usage charges should be increased to cover the extra costs to Railtrack caused by the wear and tear of additional trains.

Railtrack gave a cautious welcome to the announcement. Gerald Corbett, chief executive, said: "We see this as a step in the right direction. We have long been arguing for the right incentive framework to deliver the enhancement on the network which is necessary to allow continued growth in rail travel."

However, he said that the regulator's proposals did not go far enough. In particular, Railtrack criticised Mr Winsor's proposal that it should only be allowed to earn the same 7 per cent rate of return on enhancement projects as it receives on renewal and maintenance investment.

Mr Corbett said this took insufficient account of the greater financial risks Railtrack would have to shoulder and the premium its shareholders would expect.

Mr Winsor also disclosed that he will not now announce his final decisions on Railtrack's new charging formula until September. He had been due to announce it in July.

The two-month delay will give him more time to assess the impact on Railtrack of the West Coast main-line modernisation and the Shadow Strategic Rail Authority's proposals for additional investment in the network.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific