Michael Harrison's Outlook: After four years Network Rail has become a grown-up company. Now there's a thing

Can BP's odd couple really cohabit? LDV finds its Russian saviour

Network Rail would like everyone to know that it has ceased to be a basket case, surviving only because it enjoys a government guarantee. Four years after it rose phoenix-like from the ashes of the late and unlamented Railtrack, the owner of the nation's tracks and stations wants to be thought of as a normal company, able to make its own decisions and stand on its own two feet. You may not have noticed it, but these days nine in ten trains run on time and part of the reason is that Network Rail has come of age.

In fact, so grown-up is the company that it has decided to cut a few of the apron strings that attach it to the Treasury a little faster than planned. From late next year, Network Rail plans to begin raising new finance on its own balance sheet, without the crutch of that government guarantee. Of course the taxpayer will continue to underwrite its existing £18bn of debt, some of which stretches further into the future than the longest mortgage you can buy. But it is a start.

Why, you may ask, would a business that can borrow as cheaply as a sovereign government want to start paying commercial rates of interest? For every £1bn of new debt that Network Rail takes on, it could end up with an extra interest charge of £20m. Given that the company is planning to borrow another £3bn in the next three years and a further £8bn after that to fund improvements to the network, the sums quickly begin to add up.

The official explanation is that government guarantees come with conditions - one of which is that ministers and civil servants have to approve the borrowing. Free of that, Network Rail will be able to raise finance to expand capacity as it sees fit.

The unofficial explanation is that anything which makes Network Rail look more like a "normal" private company and less like a creature of government can only help the Chancellor to justify why those eye-watering debts do not form part of the public finances.

But even if Network Rail starts to raise money commercially, it does not necessarily follow that it will have a free hand to borrow as much as it wants. There is still the small matter of getting its expenditure plans past the Fat Controller, which, by coincidence, chipped in with a few thoughts of its own yesterday. The Office of Rail Regulation wants to know how best Network Rail can be incentivised to provide value for money because there are only two ways the railways can be paid for - by passengers through the fare box or by taxpayers in the shape of the capital grants the company receives.

When the charges Network Rail is allowed to levy on train operators are next fixed in 2009, one of the key questions the ORR will be asking is whether it really needs to borrow £8bn to upgrade the system or whether improvements in punctuality and capacity can be delivered a lot more cheaply.

One of the favourite tricks of regulated monopolies is to spend as much as possible in the knowledge that the regime allows a guaranteed return on that investment. If it is going to cost Network Rail more to borrow, then logically it is going to have to work a lot harder to justify that borrowing. Welcome to the normal world.

Can BP's odd couple really cohabit?

A cool breeze is said to blow through the Andalucian mountains, even at this time of year. That will come as a welcome relief to Lord Browne after the hottest July on record and some unusually heated moments also in the BP boardroom. The company's chief executive is holidaying there later this month with his chairman Peter Sutherland, who owns a house in the area with his Spanish wife.

As they sip their Sangria, or more likely a bottle of 2001 Valbuena, will the conversation turn to succession planning? Or will a discreet veil be drawn over the events of the past fortnight when the well-oiled BP machine blew a gasket and a look under the bonnet revealed a good old-fashioned boardroom row?

The vacation was planned a long time in advance and we are asked to believe that it proves there is no personal animus between the chairman and chief executive of Britain's biggest company. Given that they both have another two and a half years to serve and given that neither, to use Lord Browne's description, is a "pushover", let us hope so.

But is that really credible? Last week's row, and the emphatic way it ended with Mr Sutherland stamping his authority, has surely changed the relationship between the two men forever. BP's chief executive gave a rare insight into that relationship when he referred last week to the "vigorous discussion" the two had engaged in over the timing of Lord Browne's departure. He wanted to stay beyond his 60th birthday. The chairman insisted that he go, not because some arbitrary age limit had been reached, but because he would, by then, have been in the job long enough.

Lord Browne maintained that the subsequent press coverage of the affair had left him "shocked and astonished" and insisted that there was no rift with his chairman. But when friends of one man are briefing in one direction and the other feels the need to hire a firm of financial PR men to set the record straight, then what else can be surmised other than that there has been a breakdown in trust and understanding?

Unlike Mr Sutherland, Lord Browne has devoted his life to BP and will not want to throw that away lightly. But now that he is publicly committed to a leaving date at the end of 2008, what does his remaining time at the helm of the company hold? He is known not just for being a superb manager at BP but also a strategic thinker par excellence.

But with his dominating instincts, will Mr Sutherland really let his chief executive anywhere near anything vaguely "strategic" during his remaining time at the company? Won't the supposedly non-existent rift between the two men reopen at the first opportunity?

Once out, it is very hard to put a genie back in the bottle. Officially, Lord Browne stays until the end of 2008 and Mr Sutherland goes a short time after, having overseen the succession. I would bet on one of them - perhaps even both - leaving well before that.

LDV finds its Russian saviour

Oleg Deripaska, Russia's youngest billionaire, makes an unlikely White Van Man. But he emerged yesterday as the saviour of LDV, the Birmingham-based van maker that once used to belong to British Leyland.

Successive changes of ownership have done the company no favours and it has only been kept on the road in the last nine months thanks to the skills of Sun European Partners, a vulture fund specialising in what its spokesman derscribes as "fast and dirty" turnaround jobs.

At least it does still survive - unlike Ryton and Longbridge and Browns Lane, three of the names engrained in Midlands motor industry tradition. Mr Deripaska, or rather his representatives on earth, the two ex-Ford men brought in to run LDV, insist this is not just an asset-stripping exercise. LDV, they say, will not be left to rot as production is switched to Russia, leaving only its dealer network as evidence that the company ever existed. For the sake of the 850 workers remaining, let us hope so.

m.harrison@independent.co.uk