Private rail firms to get pounds 1bn handout

The Government plans to give privatised rail companies a back- dated dowry, estimated at pounds 1bn, by writing off outstanding debts, writes Paul Routledge.

An order has been discreetly laid before the Commons, which will come into effect this week, allowing the industry's on-going debts to be paid for by the Treasury as part of the winding up of British Rail later this year.

This commercial ruse has caused ructions between ministers and the BR Board, with top-level figures in the railway industry refusing to sign British Rail's accounts for the last financial year.

"Whilst the Government hands over all the precious assets of the railway to the private sector at a knockdown price, they intend the taxpayer to be saddled with all the risk and all the cost," Clare Short, Shadow Transport Secretary, said yesterday. "This is just another example of how this shoddy privatisation seeks to profit the private companies involved, and the taxpayer pays the price."

Among the liabilities that will be siphoned off into British Rail are increased charges for use of the Channel Tunnel, asbestosis claims, and compensation for victims of a train fire at Maidstone and a train accident at Chingford.

The Treasury and British Rail both refused last night to comment on the row, a sign of the sour relationships that have grown up between the two sides in the run-up to privatisation.

However, industry sources said that the BR Board member for Finance, James Jeram, is refusing to "sign off" the BR accounts for 1995/96, due to be published on 3 July, until the Treasury agrees to pick up a large part of the bill for making the railway ready for sell-off.