Row over Railtrack's 'lost millions'

An embarrassing row over Railtrack's investment plans broke out yesterday on the eve of the deadline for registering for shares, amid accusations that the prospectus paints an over-optimistic view of the state of the railway.

A report into the state of the railway leaked to Channel 4's Dispatches programme due to be shown tomorrow night suggests that pounds 11bn needs to be spent over the next 10 years on repairing and replacing bridges and other "route structures" rather than the pounds 1.4bn suggested in the Railtrack prospectus. The report, by a subsidiary of British Rail, Civil Engineering Design Group, was rejected by Railtrack which commissioned another report by WS Atkins, the consulting engineers.

Although WS Atkins initially produced an even higher figure, thought to be pounds 50bn, the figure was "refined", according to Railtrack, using a statistical probability theory called Bayesian and the estimate contains in the prospectus sanctioned by WS Atkins is that pounds 1.4bn needs to be spent in 10 years.

Clare Short, Labour's transport spokeswoman, said: "It appears that there has been a deliberate misrepresentation of the true cost of investment and important information concealed from investors."

However, opponents of privatisation received a setback last night when Save our Railways, the group campaigning to keep railways in the public sector, dropped a planned challenge to the Railtrack flotation because of insufficient evidence that it breaches European law.

Railtrack first issued a statement saying that the CEDG figure was not based on a 10-year estimate but was a full-life figure, but later yesterday it withdrew that statement.

Instead, Railtrack contends that the CEDG was excessive because it assumed that its 40,000 bridges had a certain fixed life while WS Atkins figures were not calculated in that way.

Brian Davis, a former chief engineer for the East Coast main line, said that Railtrack's planned replacement of about 50 bridges per year implies that they have an average life expectancy of 400 years.

"The Railtrack prospectus says that the railway will be maintained in a steady state of repair. Its plans for bridge replacement suggest this is not true," he said.

Labour suggests that the row raises long-term questions over the profitability of Railtrack and its ability to maintain the rail network after it is privatised. However, a City investor said: "This may have some impact on the flotation, but not a big impact. The offer is going to be priced competitively to sell."

The Dispatches programme also raises doubts on vetting procedures for staff ensuring safety on the track. A researcher for the programme managed to obtain a job as a look-out using false papers and was not properly vetted by the employment agency.

Sir Bob Reid, the former chairman of British Rail, speaking on the programme, expresses doubts about Railtrack's safety role in the new privatised structure. He argues that there should be "an independent authority" looking at safety.