Ah, there was the Fat Controller. He worked for Railtrack now. He'd know who was right. He'd understand how the Government's new model railway would work - and who would pay for it.
"What you've got to understand, Thomas, is that all these lines you steam up and down on are worth a small fortune. Just think of them - thousands and thousands of miles of track."
"How much are they worth?"
Thomas gasped. He'd never been very good at figures, but that did sound like an awful lot of money. "How did they work that out?"
"The Government used a method called `modern equivalent asset valuation'. It's a fancy term for working out, more or less, what it would cost to replace the railway as it stands. They came up with the answer only this year."
"But how come there's all this talk now about closing down lines, if they're worth so much?"
"Well, £6.5bn worth of capital assets needs a lot of money spent on it to keep it up to scratch. And then the Treasury wants Railtrack to earn a respectable rate of return on all that money."
Now Thomas was even more puzzled: "There's something I don't get here. How come Railtrack is worth all this money if the railway makes such big losses?"
"Ah, that's the beauty of it. You see, what Railtrack does is to work out the charges it has to levy to make that valuation right."
"But who pays the charges?"
"The new operating companies that BR has been split up into - like Scotrail and South West Trains."
"But they make big losses at the moment, don't they?"
"Virtually every part of the network does. Even former InterCity lines need subsidy under the new charging system."
"So where will the operating companies get the subsidy from?"
"Most of it will come from nice Mr Roger Salmon. He used to work at Rothschild so he understands all about money. Now he's the franchising director and he's got pots and pots to dole out. The railway operators will bid for his money - eight of them as early as next year."
"Like the TV franchises? Will some top executives become millionaires like at LWT?"
"No such luck. The TV companies were bidding for a licence to print money. The train operating companies will be bidding for a licence to lose money."
"Yes, the least money. The company that calculates it will lose less money than all the others will be able to bid less, and it will get the licence."
"Sounds like a Dutch auction."
"More like a double-Dutch auction."
Thomas frowned. This was getting complicated. "This Roger Salmon sounds rather important. Where does he get the money from?"
"From the Treasury. You and me."
Thomas let out a big puff of smoke. "So it's taxpayers' willingness to subsidise the network that explains why Railtrack is worth so much."
"Exactly. In fact, since Railtrack was valued at £6.5bn, the flow of subsidy has doubled to £2bn a year."
"Wow. How come the railways are in such a financial crisis, then?"
"Well, that money's just a statistical fiction at the moment. Railtrack charges more and gets back more. So the Exchequer doesn't lose out for the time being. It's a financial merry-go-round. The actual railways are getting less because of the effect of the signal workers' strike and the cost of privatisation."
"So let me get this straight. What the Government will really be selling when it privatises Railtrack is this flow of subsidy."
"You are a clever tank engine, Thomas."
"Doesn't that mean that if there was less subsidy, Railtrack would be worth less?"
This time it was the Fat Controller's turn to frown. He hadn't thought about it that way. "I suppose so."
"So doesn't that mean Railtrack isn't worth £6.5bn at all - that it's only worth as much as the flow of subsidy from nice Mr Salmon? I mean, surely the valuation has to be based on what people are willing to pay for railway services, not some notional assessment of what the network might cost to rebuild. Particularly since no one would recreate the railway system in its present form if you had to start all over again."
"You've got a point there," conceded the Fat Controller grudgingly.
"So why did they value it at £6.5bn?"
The Fat Controller relaxed. He was back on home ground. "Think of it as an opening bid, Thomas. If you're going to sell something off, you don't give your hand away at the outset."
"So it's not worth £6.5bn."
"Of course not. It's worth what the City thinks it will be worth."
"Which is the amount of subsidy the Government will provide in the future. Doesn't that make the sale of Railtrack a bit like borrowing money?"
"With the interest payments taking the form of the subsidy flows in the future," agreed the Fat Controller. "Except the City can't be sure that future governments will be committed to those subsidies. Which is why many people think the Government will behard-pressed to raise more than £3.5bn. Mind you, that's still a nice little earner - enough to pay for 2p off income tax."
"But surely it can't be a cost-effective way of borrowing," persisted Thomas. "I thought the Treasury was always insisting it could get the finest terms in the market. If we have to pay for Railtrack's profits as well as the cost of running the system, the sale will be a very expensive way of borrowing. Particularly if it's then used to pay for tax cuts."
"Will be. That's the whole point, Thomas. When is Railtrack going to be sold off?"
"Before the next election."
"So who d'you think is to pick up the bill?"
Thomas let out a huge puff of smoke. Now he understood what was going on.
Hamish McRae returns next week.