And John Hendy QC, for the victims' families, said Great Western Trains, which operated the passenger express involved, plans to phase out a much safer but more expensive mechanism which would have averted the accident.
He accused the company of putting "profit before safety", and questioned Mr Prescott's endorsement of a device unlikely to prevent accidents with train speeding above 70 mph.
The inquiry in London was told the company had already bought high- speed trains without the fail-safe Automatic Train Protection ATP) system installed. Instead, Great Western plans to use the Train Protection Warning System, an upgraded version of the mechanism which was switched off on the train which crashed at Southall, killing seven and injuring 150.
The ATP system would have brought the Swansea-Paddington express to a halt automatically hundreds of yards from a slow-moving freight which was crossing its path. The device Mr Prescott favoured would have stopped the train, but not in time to avoid the impact.
Mr Hendy said the choice flew in the face of the recommendations of the Hidden Report into the Clapham rail disaster and seven other reports into rail accidents. Between 1968 and 1994, evidence suggested ATP would have prevented 61 accidents that killed a total of 80 people.
He told the second day of the hearing that Mr Prescott had been "warned off" ATP because of the impact it would have on share prices.
He also questioned relying on the driver to stop at red lights. "Humans are fallible," he added. "Inevitably, they will make mistakes. A railway cannot rely on driver vigilance alone."
Mr Hendy, who tabled 200 questions, said Larry Harrison, the driver, had admitted driving through three warning lights, but no individual had taken responsibility for the fact that the express was not turned round before it left Swansea to put the cab with a functioning AWS at the front.
Anthony Scrivener QC, counsel for Mr Harrison and Aslef, the train drivers' union, said suggestions that Mr Harrison had used his bag to depress the "dead man's handle" floor pedal were ridiculous.
Experts established it could not be used for such a purpose, he said, and offered a bottle of champagne to anyone who could demonstrate that Mr Harrison could drive the train with his feet up on the dashboard, as some passengers had reported.
The union called for the immediate establishment of a state-owned safety executive funded by Railtrack and the train operating companies.
The inquiry is expected to last until November and Professor John Uff, the chairman, will report in the new year.Reuse content