pounds 400m shaved off high-speed rail link

JOHN PRESCOTT, the Deputy Prime Minister, confirmed yesterday that the high-speed Channel Tunnel Rail Link could be built in two phases with the taxpayer footing the extra cost of the project.

It is understood the additional subsidy required by London & Continental Railways, the consortium charged with building the link, is pounds 400m less than pounds 1.2bn which executives asked for earlier this year.

Mr Prescott also extended the deadline for the decision on the rail link for another 60 days The future of the 68-mile link into St Pancras station, London, was thrown into doubt in January when Mr Prescott turned down a request for a further pounds 1.2bn of public subsidy on top of the pounds 1.8bn already agreed.

Although Sir Derek Hornby and Adam Mills are likely to lose their respective jobs as chairman and chief executive, LCR will be retained as the vehicle used to build the line - in order to avoid a lengthy re-tendering process.

Under the new plans, Railtrack will own the high speed link, Bechtel, one of the original shareholders in LCR, will be the prime contractor and a consortium of National Express, British Airways and the French railway SNCF would take over the Eurostar service.

The phased construction on the link would see the first section from the Channel Tunnel to Ebbsfleet in North Kent built without public subsidy. This section would then be "bought" by Railtrack from LCR. However under this plan, there is no guarantee that the second more expensive line with a terminus at St Pancras would be built.

Mr Prescott said that the new proposals "do not yet meet the Government's requirements". He added both LCR and Railtrack agreed further "significant improvements" can be made in reducing the cost to the taxpayer, increasing the risk borne by the private sector and providing "sufficient incentive to ensure the construction of the whole of the rail link".

If the second section is completed, LCR would only finish the entire link from the Channel Tunnel via Stratford to St Pancras in 2008, five years after the scheduled start of services.

The failure of the original bid has also meant that the Eurostar service could return to public hands. However, LCR would like ministers to franchise the operation to a consortium of National Express, British Airways and SNCF, the French national railway.

However, Virgin is also bidding to run Eurostar trains, raising the possibility of Richard Branson facing another tussle with BA. Eurostar is likely to lose pounds 600m until 2001, when it is projected to be profitable.

Railtrack's plan would see the company recouping its costs by charging large access fees to Eurostar. At present, the train company pays about pounds 35m a year to use the tracks. The fees could be up to pounds 250m.

The original LCR plans would have cut about 25 minutes off the 65-minute journey time into London for commuters from outer Kent. This will not happen if only the first stage of the CTRL is completed.

Sir Derek and Mr Mills are on one-year contracts and these will be honoured when the two men leave. Mr Mills is thought to have been paid around pounds 200,000 last year and Sir Derek about pounds 100,000.