Railtrack collapses as minister refuses more aid
Britain’s troubled privatised rail infrastructure company, Railtrack, last night finally collapsed after the government refused to hand over any more state subsidy.
On Sunday the High Court in London appointed Ernst & Young, the accountants, as administrators for Railtrack after the company accepted it could no longer pay its bills.
The government said this would continue until plans to create a not-for-profit company representing the government, industry and passengers have been put in place. “Railtrack is finished,” said Stephen Byers, the transport secretary. “The court’s decision is the beginning of the end of Railtrack.
Mr Byers said government would meet the costs of Railtrack’s trade creditors and servicing loans of £3.3bn ($4.89bn) until the new company is set up. No jobs are expected to be cut as a result of the move, although there are ongoing plans for an estimated 1,000 management redundancies.
However, investors are unlikely to get any compensation for shares. “I can say for certain there will be no taxpayers money made available to support shareholders,” said Mr Byers.
There was also huge doubt cast over the future of the Virgin Trains west coast route modernisation contract, which has spiralled from £2.3bn to more than £7bn as of Sunday.
“The government will stand behind the rail system . . .What I am not prepared to do is to fund the poor performance of individual companies,” said Mr Byers.
Gordon Brown, chancellor of the exchequer, has ruled out further public bail-outs for the company being set up to succeed Railtrack, the Treasury said last night. Mr Brown hopes to avoid an extra drain on state funds at a time when economic prospects are uncertain and the war on terrorism is likely to cost hundreds of millions of pounds.
The Treasury has agreed to provide short-term loans to keep the company operating during the period of administration. These will be at commercial rates and will eventually be repaid.
However, the government confirmed that it would keep its commitment to invest £30bn in the railways over the next 10 years.
Don Foster, the opposition Liberal Democrats’ transport spokesman, said Sunday’s shake-up removed some of the question-marks that had been hanging over the 10-year transport plan. “The credit rating status of Railtrack was falling through the floor it was never going to be able to achieve the west coast and east coast upgrades. Now at least with a new vehicle it has a better chance, and it’s a vehicle we should have had in the beginning.”
Eric Pickles, opposition Conservative transport spokesman, said the government was partially responsible for Railtrack’s demise. “They are responsible for creating an adversarial climate by setting Railtrack, the Strategic Rail Authority and the regulator at each others’ throats.”
Financial Times
