Railtrack chief says prospect of Blair victory may cut sale price

Selling the railways: Admission that 'political judgement' has key role could tempt Labour to adopt renationalisation policy
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Transport Correspondent

The prospect of a Labour victory at the next general election could reduce the amount of money the Government will receive from selling Railtrack, its chief executive, John Edmonds, said yesterday.

Mr Edmonds, speaking as Railtrack announced its first annual financial figures, said: "Political judgment may have the most significant impact on the sale price of Railtrack."

Labour has so far refused to commit itself to renationalising Railtrack but is preparing a policy statement on the issue for publication in the autumn. Mr Edmonds' statement may provide ammunition for those seeking to bring Railtrack back into public ownership, should it be sold before the election.

The amount the Government will receive for Railtrack has been estimated at between pounds 1.5bn and pounds 3bn but Mr Edmonds said several other factors would affect receipts, including the levels of debt and earnings.

Mr Edmonds said new targets for minimising train delays "would be at least as good as existing passenger's charter targets or better". Investors, who are expected to be largely City institutions, will have to be convinced that Railtrack will be able to meet these targets as otherwise its profits will be reduced.

In its annual report, Railtrack announced a profit of pounds 305m for the year ending on 1 April this year but the figure is largely meaningless since this was the amount it was expected to raise through the increased level of subsidy received from the Government. However, Mr Edmonds said Railtrack's performance was "very good in view of the fact that we lost pounds 140m through the 1994 strikes and yet we managed to achieve all our targets". He denied that investment, which totalled pounds 400m, was cut back to make up the shortfall.

Mr Edmonds said Railtrack was confident it could meet the Government's timetable for privatisation, which is to sell it this spring. However, further doubts have emerged about the separate privatisation of the 25 train operating companies. A leaked memo from the Office of Passenger Franchising (Opraf) suggested the quality of submissions "were of variable quality which reflected bidders' immature understanding of the businesses concerned".

Sir George Young, the Secretary of State for Transport, insisted yesterday that the bids were of good quality and that the Government would reach its target of franchising out half of the railway by 1 April next year. No one in the railway industry believes this is achievable.

One bidder for the first set of three franchises, which are likely to be the only ones privatised by then, said: "It's just a matter of time before they have to accept the target is unattainable."

Last night, another leaked memo suggested the sale of one of the three franchises, LTS, the commuter line from London to Southend, will be delayed because of doubts over whether it would receive new rolling stock in time for the bidding process to be completed.

A spokesman for Opraf accepted there were doubts about the rolling stock, but said : "By the time the bids are due in, we will have told bidders what trains they will have."

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