Railtrack has agreed to give the rail regulator extra powers to force it to deliver on its spending commitments after Mr Swift threatened to take the matter to the Monopolies & Mergers Commission.
The regulator was determined to make Railtrack change its operating licence and refused to accept any compromises. Up to now Railtrack has stubbornly objected to the demands, claiming they would lead to "more bureaucracy, second-guessing of decisions and a loss of flexibility". But after a no- nonsense meeting with Mr Swift, Sir Robert Horton, Railtrack's chairman, has unconditionally agreed to the rail regulator's demands.
A joint statement from Railtrack and the rail regulator stated: "Railtrack confirmed its agreement to work with the regulator to produce a mutually agreed licence amendment which would give effect to its public accountability as the owner of the nation's railway infrastructure."
Railtrack's investment programme will be regularly monitored by Mr Swift and if it underspends the regulator will have powers to levy fines or even strip Railtrack of its licence. The two sides are due to meet again early next week to thrash out the final details of the proposals.
The rail regulator became concerned that Railtrack would not meet its investment targets after it became clear earlier this year that it was significantly underspending on its pounds 1bn station refurbishment program. Mr Swift wanted to increase its powers to make sure the shortfall was addressed. "The rail regulator would not take no for an answer and Railtrack finally realised that," said one industry analyst yesterday.
Railtrack's opposition to the changes went right to the wire. Only on Monday a Railtrack spokesman said: "We have no intention of changing our position and changing our operating licence." But the threat of a long, drawn-out, and potentially damaging MMC enquiry proved too much.
The Labour Government is also believed to have put pressure on Railtrack to meet the rail regulator's demands. John Prescott, Deputy Prime Minister, recently met Sir Robert to discuss his concerns over its investment shortfall and is determined to make sure that Railtrack delivers on its promises. He told delegates at a conference for the train workers' union, Aslef, in Torquay last Friday that the regulation of the railways needed to be tightened.
At the conference, Mr Prescott said: "Railtrack is seemingly rejecting a voluntary improvement in its contract to give the regulator tighter powers with respect to providing investment. I would emphasise that unless a satisfactory agreement is reached then the whole question of how Railtrack is regulated will be opened up once more."
If Railtrack had refused to capitulate over the planned changes to its licence then the Government was likely to step in and force Railtrack to act.
Neither the rail regulator nor Railtrack would comment further on the agreement.
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