ONS puts railway back on to the public sector's books

Opposition politicians called for a review of the financial status of Network Rail after government statisticians said yesterday they had reclassified London and Continental Railways as a public sector body.

The decision to deem LCR, which owns the Channel Tunnel rail link ­ pictured at Rochester, Kent ­ as state-owned will revive speculation over a range of public issues such as pensions and PFI projects, City experts said.

The moveputs about £5bn of debt on to the Government's books and wipes £1.4bn off Gordon Brown's margin of error in meeting his golden rule. The ONS said it had decided that the power to control "general corporate policy" rested with the Government.

Chris Grayling, the Conservative transport spokesman said the decision added to the case for reclassifying Network Rail's £21bn of debt as well.

"The Government has underwritten the debt of LCR in a very similar way to how it has underwritten Network Rail's debt. There can now be no justification for keeping Network Rail's debt off the national balance sheet. "

Michael Saunders, a UK economist at Citigroup, said there was a risk of further revisions would add to the size of the fiscal deficit. "It is a reminder that the Government has been running a sizeable off-budget deficit via PFI deals and deficits in businesses that are really government-run but structured in a way that aims to technically keep them out of the public sector deficit."

But the ONS said control rather than ownership was the key issue and that there were "significant difference" between the LCR and Network Rail.

"There is no reason to look at Network Rail," Martin Kellaway, its public finance statistician said.