Outlook: Railtrack keeps regulator on track

WHAT WOULD you make of this Doctor Beeching? Tilting trains all the way to Newcastle, Waterloo to Heathrow direct, a new Midland Railway linking St Pancras to Glasgow and a new lease of life for some of those lines you so famously but cruelly axed in the 1960s. All this for pounds 27bn, John Prescott and the new Rail Regulator willing.

Railtrack's latest Network Management Statement, all 348 pages of it, dropped like a railway sleeper on the Deputy Prime Minister's desk yesterday inviting him to embrace its vision of a rail renaissance for Britain.

The numbers look impressive but Railtrack isn't being quite as generous with its money, or rather its bankers' money, as its wish list of projects would have us believe. Of the pounds 27bn it plans to spend over the next 10 years, pounds 17bn was already in last year's plan.

Of the pounds 10bn of "new money" a further pounds 1.8bn has been recycled from last year. Much of the rest will depend on public sector partners stumping up taxpayers' money, or someone else coming along and employing Railtrack as a contractor.

Nevertheless, these are still big sums and Railtrack's chief executive Gerald Corbett knows he has got the Government over the proverbial barrel. Since privatisation, passenger journeys have grown by 25 per cent. At the same time, however, network capacity has hit the buffers meaning that every new service introduced by the train operators merely results in an exponential increase in passenger delays.

Everyone agrees that the capacity of the system needs expanding. Yet the extra pounds 10bn of investment Railtrack has identified will only enable it to stand still, supposing passenger traffic grows at its anticipated 30 per cent in the next decade. Even that may prove a conservative estimate.

Faced with the prospect of rail passengers getting grumpier and the road network getting still more congested, it looks hard not to share Railtrack's vision. The question then arises of how to pay for the upgrades. The old Rail Regulator wanted to beat up Railtrack, cut its cost of capital and salami slice the regulatory asset base on which it could earn a return.

His successor, Tom Winsor, does not arrive until July. But he already knows what Railtrack will say. If we want a modern railway then Railtrack must have a regulatory settlement which gives it the incentive to invest. In any event, who else has the will, the capacity or the credit rating to do the job?

If the regulator refuses to play ball, Mr Corbett can always produce his trump card - which is to threaten not to build the second half of the Channel Tunnel Rail Link. But it probably won't come to that.