Prescott rescues Channel rail link

JOHN PRESCOTT, the Deputy Prime Minister, announced a rescue package for the much-delayed pounds 5.4bn Channel Tunnel Rail Link yesterday with a deal that will see high-speed Eurostar services start in less than five years.

The new arrangement will mean the 68-mile London to Folkestone link will be built in two stages and will not be completed until 2007 - four years later than originally planned.

As revealed by The Independent yesterday, British Airways will lead a consortium that will run the Eurostar services and aim to run high-speed services from London to Paris and Brussels.

"We want to make Heathrow a transport hub," said Bob Ayling, chief executive of British Airways. "We will bring our international marketing expertise to the project."

He added: "There are a lot of people from the west of London that will use a European rail link."

The BA consortium, which saw off a bid by Richard Branson's Virgin group, also includes rail and coach operator National Express as well as the French and Belgian railways. Mr Prescott said BA's team hoped to start work on a Heathrow airport to Paris rail link in the year 2001.

The link was almost scuppered in January when London & Continental Railways (LCR), the troubled project's sponsor, discovered that Eurostar was haemorrhaging money and asked Mr Prescott to bail out LCR with a pounds 1.2bn cash injection.

Mr Prescott rejected that option and instead sought to restructure the deal.

The new scheme will involve pounds 140m of extra Government money, with Railtrack, the owner of the nation's track and signalling, playing a major part in the project.

In addition, ministers require LCR to come up with proposals before the end of the year for regional Eurostar services which will link the northern and Midlands areas of Britain with Paris and Brussels.

"This is an agreement snatched from the ashes of LCR's collapse," Mr Prescott said.

Railtrack will build and buy the first phase of the high speed line linking the Channel Tunnel to Waterloo. The company, which announced profits of pounds 388m - up from pounds 346m in the previous year - will also have the right to take over the second phase of the project, the construction of the line to north London.

Gerald Corbett, Railtrack's chief executive, welcomed the deal saying the 68-mile rail link was a natural extension of Railtrack's existing business.

"We are pleased to be working together with the Government on this big project. It is a project of major national significance," he added.

Others were not so pleased. Lew Adams, general secretary of the train drivers' union Aslef, said the Deputy Prime Minister had inherited a "dog's breakfast" from the Tories.

"We are disappointed that we have not had a complete plan for the high- speed link but we recognise the problems that Government has faced," he said.

Mr Prescott, in a statement to MPs, said work on the first stage of the link, from Folkestone to Ebbsfleet in north Kent, would begin towards the end of this year and be completed by 2003.

Ministers pulled off an extraordinary feat of financial wizardry by agreeing on behalf of the Government to guarantee nearly pounds 4bn in borrowing for LCR.

This piece of nifty accounting - unheard of in Westminster before - ensured that the extra cost to the taxpayer would be only pounds 140m.

Business, page 23