The Government promised last night that the £30bn of public investment promised for the rail industry over the next decade would go ahead, as would high-profile projects such as the high-speed Channel tunnel rail link and the modernisation of the west coast main line.
However, the actual financing of the network will be fundamentally changed. Instead of a publicly owned company raising equity capital from shareholders and paying dividends, Railtrack will become a limited liability company, raising money for investment from the debt markets. The successor company will also receive direct grants from the Government and access charges paid by the train-operating companies, financed partly by subsidies from the taxpayer and passenger-fare income.
Where Railtrack once made a profit, fixed by the regulator, to pay interest charges on its loans, the successor company will have no shareholders and make no distributable profits, instead using its "surplus" to pay its interest bill.
Nevertheless, in one crucial respect things will not change ultimately, the taxpayer and the Government will still stand behind the "new Railtrack", pumping billions of pounds into the system to ensure that the trains continue to run, the track is maintained and enhancements of the network such as the proposed £2.5bn upgrading of the east coast main line and the long-delayed Thameslink 2000 project to ease commuter bottlenecks through London can go ahead. The Government will also make much more use of so-called "special purpose vehicles" to fund major enhancement projects, such as the west coast main line.
Railtrack requires about £3bn of revenue a year to operate the network. Of that, about £1.5bn comes in the form of subsidies and a similar amount from passenger fares. Under the new arrangements, the Government will provide the same level of subsidy, and possibly more, so that Railtrack is able to pay the interest bill on its borrowings.
Investors will be lucky to receive much more than £1 a share. The Government will not use any taxpayers' money to compensate shareholders.
John Robinson, the chairman, has pledged that the 12,000 jobs are safe and added that he will remain at the helm of the new company.
But all that may change since the Government is actively looking at "vertical re-integration" of the rail network so that the regionally based train-operating companies take over responsibility both for providing rail services and for maintaining the tracks on which their trains run. Train operating companies will be represented as "members" of the new not-for-profit trust.
Two weeks before the Labour Party conference, National Express, the biggest train operator, was approached by an intermediary on behalf of the Government and was asked whether it would be interested in taking over the parts of the network covering ScotRail, Midland Mainline and Anglia Trains. FirstGroup, whose franchises include the Great Western inter-city service, and Stagecoach, which operates South West Trains, are understood to have received similar overtures.
William Rollason, the finance director of National Express, said: "We have always said we would be interested in this sort of arrangement. We have the balance-sheet strength to do it and we are certainly prepared to look at it."