Transport: Rail sell-off cost taxpayers pounds 6bn track sale cost taxpayers pounds 6bn

THE "MIRACLE" flotation of Railtrack, the privatised rail network operator, by the last Tory government cost the taxpayer pounds 6bn in lost profits.

A Tory-led Commons select committee yesterday castigated John Major's government for its handling of the sale and warned Tony Blair's ministers not to repeat the same mistakes in future privatisations.

Mr Blair called on the Tories to "apologise" to the taxpayers after David Kidney, the Labour MP for Stafford, claimed the report proved the sale was "a gigantic rip-off".

The Treasury raised pounds 2bn from the privatisation, but Railtrack's share value has since quadrupled, giving it a book value of around pounds 8bn, according to the highly critical report released yesterday by the Public Accounts Committee, which is chaired by David Davis, a former Tory minister.

The previous government made a mistake in selling 100 per cent of the stock in one go, instead of testing the market value by selling the shares in stages, it said. "In future flotations, departments should start from a presumption in favour of a phased sale."

SBC Warburg (then SG Warburg), which was paid pounds 10.9m for advising the government on the sale, was challenged by the committee about the failure to get more money for the taxpayer.

The firm replied that the achievement of the flotation was "a miracle" and blamed Labour for some of the loss.

The launch share price was substantially lower than it is now because the Labour Party in opposition was hostile to the privatisation, it said.

The "transformation" of Labour's attitude towards the privatisation of the rail network caused the shares to rise in value in 1996, it said.

And Railtrack's involvement in the Channel Tunnel fast link and speculation that it would be able to take a stake in the London Underground added a further pounds 6.50 to the share value.

Warburg said it was the first time the a government had sold a company that was dependent on a subsidy of around pounds 1.8bn a year and heavily reliant on regulation.