A confidential report on Railtrack has revealed widespread financial mismanagement and costs soaring out of control in the chaotic early days after its separation from British Rail.
The leaked document casts fresh doubts over the organisation's sell-off, scheduled for May. It reveals the lack of a coherent "approach to commercial management" and spiralling costs in Railtrack, which was created in April 1994.
According to the report, there was a "well-developed system of manipulating funds" and cost savings tended to be used to enhance projects rather than retained. Expected costs for the 108 largest projects soared from pounds 930m two years ago to pounds l,3bn now - an increase of 40 per cent.
The document, called "Review 96" examines the management systems in Railtrack's Major Projects Division, the department which oversees large-scale repair work and new projects. A series of leaks last summer, criticising safety in MPD, led to the recent publication of a Health and Safety Executive report which was highly critical of the way Railtrack had failed to ensure that its safety systems were properly monitored.
"Review 96", produced just over a month ago, also lists a catalogue of failures over the handling of Railtrack's tax affairs. Most notably, Railtrack had claimed only about pounds 8m in tax relief, when this "could be increased to around pounds 40m".
Some expenses by employees were not properly monitored, allowing them to charge to charge for sums incurred by their partners and even their children.
Brian Wilson, Labour's transport spokesman, latched on to the report, arguing that the privatisation plans should be shelved. He was particularly concerned about the revelations over tax. "It seems that they are deliberately allowing the tax situation to look worse than it is so that after privatisation they can make extra profits."
These revelations are an embarrassment to Railtrack, but the company said yesterday that the review, carried out in the winter of 1994-95, had meant the problems had been sorted out "quickly". A spokesman added: "The costs of major projects rose because we did a review and our new figure is a much more realistic one."
However, Mr Wilson, who will today raise the matter in the Commons, questioned whether management improvementswould allow privatisation to proceed and pointed to a recent Health and Safety Executive report, highly critical of safety.
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