Outlook: Prescott gives Railtrack a Tube ticket

JOHN PRESCOTt dislikes Railtrack so much that he has decided to, er, hand over half the London Underground network to this most reviled of companies. The Deputy Prime Minister has helped turn Railtrack-baiting into a national sport and rarely misses an opportunity to contrast its rising profits and dividends with its less impressive record on investment and reducing delays.

So just to make sure he has plenty to continue complaining about he has decided to invite Railtrack to take on the Tube's sub-surface lines - the Circle, District, Metropolitan, Hammersmith and City and East London lines in case you were wondering. If all this sounds a little counter- intuitive, it is because this is what tends to happen when political bluster collides with commercial reality.

Mr Prescott would dearly have loved to have found someone else to form the other half of his latest Public Private Partnership. Unfortunately, as with the Channel Tunnel Rail Link, the obvious partner is Railtrack, particularly when it comes to those bits of the Tube that run closest to the surface and could be linked up to Railtrack's national rail network.

Railtrack will not own these assets, however. Instead, the taxpayer will pay it an annual fee to maintain and invest in the lines while at the same time making them available to a publicly-owned operator, London Underground, for a fixed period. But what the minister giveth with one hand he taketh away with the other; Mr Prescott is promising a tough regulatory regime and swingeing fines for poor performance to keep Railtrack in line.

Since it will take at least a year to sort out minor details like the length of the Underground contracts, the amount of investment required and the rate of return that will be allowed, making an investment judgment about the impact on Railtrack remains hazardous.

The shares have underperformed the market by a quarter since the start of the year, largely on the strength of the tub-thumping of Mr Prescott and the Rail Regulator. But if they truly want a "joined up London", then they may have to cut Railtrack a little slack. Mr Prescott's dream is of a rail system that allows a passenger to travel from Essex to Heathrow without ever changing trains. He reckons Railtrack could deliver it, but those who remember the ill-fated Crossrail project will not be holding their breath.