Rail sale 'at quarter price'

BARRIE CLEMENT and CHRISTIAN WOLMAR

New controversy hit rail privatisation yesterday when a senior railway director closely involved in the privatisation process predicted that the industry's main assets will be sold for a quarter of their pounds 6bn book value.

The BR source said that Railtrack could be sold for less than pounds 1bn because of ministers eagerness to sell it quickly before it has an established financial record. He warned that such a low price could immediately prompt an investigation by the Commons' Public Accounts' Committee, which would be highly embarrassing for the Government.

The outspoken criticism from within the industry followed last Friday's court judgment which granted opponents of privatisation the right to apply for a judicial review of the whole franchising process early next month, threatening a vital component of the sell-off.

"Every piece of criticism about rail privatisation makes ministers even more determined," the director said.

Despite evidence that the public was overwhelmingly opposed to the sale, the Government was expediting the process so that a future Labour administration would be faced with a fait accompli.

The sale of Railtrack, which only published its first annual accounts this autumn, has long been pencilled in by the Government for next spring as a way of obtaining receipts for tax cuts.

Although ministers may feel that BR managers have an axe to grind as their organisation is dismembered, the BR director stressed that he was a strong supporter of the principle of privatisation.

However, he said that taxpayers would only receive the true value of the assets if the process were given another two or three years so that Railtrack would have an established financial basis before it was sold.

Already, in the rush to sell various smaller parts of the BR empire, such as Red Star parcels, ministers have pushed through deals on the basis that the sale could be completed quickly, rather than waiting to obtain the best price.

The BR source also attacked the recent pounds 1.8bn sale of the three rolling stock companies. He said the businesses would receive profits of over pounds 300m-pounds 450m per year of taxpayers' money during the currency of their leases, which are mostly for another seven years, but would not be obliged to invest in new engines and carriages.

The companies concerned could spend their profits in any way they desired, he said, and examples in the water and electricity industries showed that such diversification often led to massive losses.

The most recent figures showed that on a pounds 797m turnover the rolling stock companies made a pre-tax profit of pounds 308m.

Post-privatisation, the source said, the familiar British Rail logo of arrows facing in opposite directions would remain on street signs, but that the old British Railways Board "lion and wheel" sign would be resurrected. BR itself would continue to exist until the whole industry was privatised.