Labour set for rail buy-back

Labour has taken an important step towards a firm promise to restore Railtrack to public ownership, in response to what it argued were "black propaganda" stories that it had abandoned the plan, writes John Rentoul.

Railtrack will be floated on the Stock Exchange in May and John Prescott, the deputy Labour leader, is believed to be close to finalising a plan to acquire the company gradually in return for public subsidy.

News of the move emerged after Clare Short, Labour's transport spokeswoman, condemned stories in Saturday's newspapers that she had told Railtrack boss John Edmonds that Labour had scrapped plans for renationalisation.

"Railtrack chief executive John Edmonds phoned me to apologise about black propaganda that appeared in Saturday's papers and he pledged he was clear no such statement has been made," Ms Short said.

Philip Dewhurst, Railtrack's director of communications, denied planting the stories. He said, of journalists who ask him about Labour policy: "I refer them to Clare Short."

Ms Short's deputy, Brian Wilson, accused Railtrack of planting the story in order to influence a meeting today between the Government's advisers Warburg and potential City investors. Equally, however, Labour is keen to disrupt May's flotation without promising to spend large sums of money in government.

It is understood that a committee chaired by Mr Prescott favours a plan to divert some of the taxpayers' subsidy from the train operators to Railtrack. But the plan also opens the possibility of the Government acquiring shares in Railtrack in return for subsidy which would have gone into the railway system in any case.

Labour urgently needs to resolve its detailed position on the sell-off in the next few weeks, because prospectuses for the sale, to be published in March, will include a statement of the party's intentions.