Railtrack plans £40bn spend on upgrading

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Railtrack will this week signal that it is giving in to rail tsar Sir Alastair Morton and increasing its projections of how much it has to spend upgrading Britain's railway network to £40bn over 10 years.

The increase, which is nearly 50 per cent more than the £27bn forecast put out by Railtrack last year, will come with a rejection of Sir Alastair's plans for the group to use Special Purpose Vehicles, a version of the private finance initiative, to speed up its investment plans.

Sir Alastair, who ran Eurotunnel before being appointed as head of the Strategic Rail Authority, said that Railtrack should adapt the ideas being used to regenerate the London Underground and hive off part of the rail network to private consortia, which would take over the running of the lines from Railtrack.

He suggested that this may be a way of getting around potential problems in financing the work, which have been exacerbated by a collapse in the group's share price from a high of over £16 to just 560p last month, before a recent rally took it to 710p on Friday.

But Railtrack has rejected the idea. "We would consider Special Purpose Vehicles in some cases - say the building of new stations or spur lines with only one user - but not for mainline track used by more than one train operating company," said a spokesman.

Sir Alastair said that he thought, given projections of growth of up to a third in the number of passengers using the railways, that Railtrack might have to spend £45bn. The company will not go this far, but is expected to say it will spend £40bn.

The new investment targets are aimed at persuading Tom Winsor, the rail regulator, to give Railtrack a favourable review in his assessment of the company, which is due to be published in July.

Mr Winsor, a former lawyer, has taken a hard line against Railtrack since being appointed by John Prescott, the deputy prime minister, one year ago.

The Railtrack spending forecast will be published the day before the bidders put in their offers for the £14bn Public Private Partnership to regenerate London Underground.

Four consortia - including companies such Amey, Amec and BICC - are expected to make bids for the two contracts to run the deep-line tube network, while a similar number are expected to bid for the sub-surface contract when bids have to go in next month.

Originally, there was a fifth consortium, but that pulled out when one of its team, Taylor Woodrow, decided to close its civil engineering side.