Tom Winsor, appointed recently as the Government's official rail watchdog, said: "Railtrack was established on an assumption that it would be a dynamic, entrepreneurial and risk-taking organisation. It was given the leadership of the industry with the expectation that it would discharge that role, under the supervision of the Regulator, proactively and well. The years since have been years of disappointment and Railtrack has all but squandered that opportunity."
In the hard-hitting foreword to a document setting out his approach to a review of the privatised company's activities, Mr Winsor said that its management of nationally important assets had been "poor".
He said the business had received severe and well-deserved criticism for its failure to meet performance targets for the punctuality of trains, broken rails, inadequate provision for rising demand, treatment of passengers and progress on major projects.
The review is due to be completed by July 2000 and implemented from April 2001.
Mr Winsor's comments come a week after he warned Railtrack that it could face a penalty of up to pounds 40m unless it cut delays caused to passenger trains.
Yesterday the City shrugged off the latest broadside from the assertive Mr Winsor, and the shares closed up on the day. Most analysts believe the regulator will provide a framework in which the company will be able to make reasonable profits as this is the only way it can invest.
Roger Elliott of Salomon Smith Barney said the document had a positive impact on shares as it provided a "road map" of the way the review would proceed. He said that while some of the criticisms were justified, it was a tough task to change a public sector organisation into an entrepreneurial company overnight. "It is a question of an academic regulator meeting the real world," he said.
Damian Brewer of Paribas said there were signs that the US economy might run into problems, and therefore a company such as Railtrack, with little international exposure, might be regarded as a safe bet.
Tony Shepard of Charles Stanley & Co pointed out that the company had performed well over the summer as far as train delays were concerned, but the real test would come in winter.
Mr Winsor said that while there was nothing objectionable about healthy profits, "they have to be earned". He wrote: "Railtrack can and must raise its game to justify the considerable amounts of money it receives from fare-paying passengers and freight shippers and in taxpayers' subsidies. The public should get what it is paying for."
Management needed to pick up the challenge quickly if it was not to be relegated to the role of a "mere contractor" for the Government, with major decisions taken by regulators.
Mr Winsor said the reviewwould be tough but "demonstrably fair", and the best way Railtrack could succeed would be to harmonise commercial aspirations with the public interest. He described his approach as "incentive regulation".Reuse content