Railtrack threatens to ditch Tube

Talks stumble on row over station ownership

RAILTRACK is threatening to pull out of a controversial deal to run some of London's underground lines. The privatised rail operator is furious with the Government after it imposed what Railtrack sees as unfair restrictions on the scheme.

If the deal falls through, Railtrack could scupper its plans to build links between the tube network and mainline services.

John Prescott, the Deputy Prime Minister, ruled earlier this year that Railtrack was its preferred partner to take control of the network's "sub- surface" lines: the Metropolitan and Hammersmith, Circle, District and East London lines.

Railtrack would then agree to develop new rail links. Plans under discussion include connections from the East London line, which runs under the Thames, to mainline networks across London. The Heathrow service may also be extended to Liverpool Street using the Circle line infrastructure.

Other parts of the network are to be offered for tender in two lots but Mr Prescott gave in to Railtrack's insistence that it had to be given control of the sub-surface lines before it would build links with the Channel Tunnel and mainline services.

But The Independent on Sunday has learnt that the Government has barred Railtrack from owning the stations on the sub-surface lines, which include sites in some of the richest areas in London: Kensington, Chelsea and the City.

"This issue is putting a major strain on negotiations," one senior Railtrack source said. The income from offices and shops in Underground-owned property in the station complexes is currently around pounds 50m a year. But Railtrack had big plans to develop the sites and make much more cash.

"There's a lot of equity lying around those stations," said a property market source. "They make about pounds 50m each year now but if more of those stations are redeveloped, the money to be made is limitless. This is the honey that Railtrack wanted."

The Government says it made it clear from the start of negotiations that tube stations were not part of the privatisation package. "They are not part of the deal and that's all there is to it," A spokeswoman said.

Rather than hand over tube stations to Railtrack, London Underground will enter into joint ventures with property companies to redevelop and refurbish when needed. Eventually, the stations could be sold off to the private sector.

The next tranche of privatisation will take in the "deep lines": the Bakerloo, Central, Victoria and Waterloo & City. The winner will control the infrastructure, but not the operation of the trains, for 30 years. It will be paid through revenue-sharing agreements.

Bids for these lines were received last month. Bidders include ISTG, a group including Taylor Woodrow, Siemens, Innisfree and Mott MacDonald; Linc, a consortium with Adtranz, Balfour Beatty, Seeboard, Thames Water and WS Atkins; and TubeRail, which includes Alstom, Amec, Brown & Root and Tarmac.

The third group of lines includes the Northern, Piccadilly and Jubilee. Bids for this section will be invited by the end of the year.

It is believed that London Underground makes an operating profit of pounds 250m on revenues of pounds 800m.