The Department of Transport is fiercely resisting any change to the range of 350p to 390p a share announced on Wednesday.
National Westminster Bank is already advising customers that, even at the present range, they should not buy Railtrack shares because of the "high" political risk - the danger that a Labour government would take the company back into public ownership or reduce its capacity to make profits by tightening regulation.
On the present prices, Railtrack, which owns all the track and signalling of the old British Rail, would fetch only pounds 1.75bn to pounds 1.95bn - a fraction of the proceeds originally envisaged.
The Treasury has been surprised by the level of interest in the flotation. Nearly two million private individuals, for whom 30 per cent of the shares have been reserved, have registered an interest in subscribing. Demand from institutional investors - big pension funds and insurance companies - has also been stronger than expected. Investors have until 15 May to apply for shares.
The Treasury has been anxious that recent tax revenues have been lower than expected and it will see the privatisation as an opportunity to increase the flow of money into Government coffers, possibly paving the way for tax cuts in next autumn's budget.
However, advisers at SBC Warburg, the merchant bank advising the Government on the flotation, are split. Some believe raising the price would demonstrate the Government's confidence in the value of Railtrack and its prospects. But others think the embarrassment of a late change would be politically damaging.
The Government has sweetened the share offer with several perks, including a 10p-per-share discount for small investors. There is also the highly unusual promise of a bumper dividend to be paid out of profits earned before the flotation - when Railtrack was still state-owned.
The Department of Transport is likely to use NatWest's advice as an argument against the Treasury's attempt to lift the price range. In a letter to clients, one of the bank's investment managers says: "In the circumstances, we consider the stock to be high-risk." Clare Short, the shadow transport secretary, had provided "a clear indication of what could be expected under a Labour government". Labour had referred to its objective of creating "a cohesive and responsible public railway service"; that would involve regulation, subsidy and a gradual increase in public ownership.
The letter continues: "The flotation represents a higher level of immediate risk [than] the more recent privatisations."
The bank's directors include Douglas Hurd, the former Foreign Secretary, and Baroness Young, former Lord Privy Seal.
A NatWest spokesman said the advice had been addressed to "selected customers with existing portfolios of over pounds 70,000". He emphasised that, given the political uncertainty surrounding the Railtrack offer, the letter advised these customers of potentially attractive short-term returns "as well as the risks inherent to them". Dividends payable in the early years were attractive, "accepting that there are political risks".
Clare Short said yesterday: "We have been warning investors that the Railtrack flotation will be no gravy train under a Labour government. It would seem that one of Britain's major banks is of the same opinion."
She accused the Government of being so desperate to sell Railtrack that it was prepared to mislead potential investors. The prospectus "did not give a clear picture of the company's liabilities and financial regime". Railtrack needed to make substantial investments in track and signalling and it faced "a potential profit wipe-out in the event of severe weather, structural breakdowns or industrial action".
She added: "It is important that investors fully understand Labour's intentions when considering buying shares."Reuse content