Railtrack 'holding back pounds 1bn for sell-off'

CHRIS BLACKHURST

and DONALD MACINTYRE

More than pounds 1bn that could be spent immediately on improving the condition of Britain's cash-starved railways has been set aside, to boost the balance sheet of Railtrack, the owner of the rail network, as it nears privatisation.

Labour last night called on the Stock Exchange to investigate the accounts of Railtrack before a prospectus is issued to investors. Brian Wilson, the party's transport spokesman, has written to Michael Lawrence, the Stock Exchange's chief executive, asking him "to ensure a full analysis of Railtrack's accounts before the release of any prospectus to potential investors is authorised".

In November last year, the Government announced that Railtrack would be privatised in the lifetime of this Parliament. The timetable may be slipping, however, and could be pushed back from the spring, when the company was originally due to be sold. Analysis of Railtrack's accounts reveals four items which when added together produce a total of pounds 1.14bn which bolsters its long-term financial position.

Two independent experts on railway finances have confirmed the money could be used now to refurbish track, signalling, bridges, tunnels and stations.

Professor Bill Bradshaw, of Wolfson College, Oxford and the former director of operations at British Rail, said: "My concern is that Railtrack is not spending sufficient money to maintain the rail infrastructure and properties. I am disturbed that money I would expect to be used on renewing track, signals and structures has not been spent but has been squirrelled away in the balance sheet. I am very anxious that all the money is spent and is used to bring the railways up to scratch."

Richard Hope, special adviser to the Commons Transport Select Committee, said it was "scandalous that money could be invested now and is not".

Railtrack inherited British Rail's track, signalling equipment, stations and trackside buildings in April last year. In its first financial year, up to April, it made an pounds 305m operating profit on turnover of pounds 2.275bn, largely from charging the rail operators for using Britain's track and stations. But included in costs of almost pounds 2bn, deducted from turnover, were four items which could benefit its future owners.

In the1994-95 accounts:

t: pounds 450m is set aside for "property maintenance back-log accrual". Yet, of that sum, only pounds 18m is forecast to be spent in 1995-96.

t: pounds 403m of loans are shown as having been repaid in the past financial year. The money could have been used to tackle the refurbishment backlog.

t: pounds 483m is earmarked for a 10-year "asset maintenance plan". Of that sum, pounds 333m was spent in 1994-95, leaving pounds 150m for future years - despite the need for it all to be used now.

t: pounds 156m has been deducted to cover a fall in value of fixed assets and provision for future environmental liabilities.

Mr Wilson accused Railtrack of putting money on one side to guarantee profits after privatisation. "I believe that this amounts to a systematic attempt to create an artificial level of profitability for Railtrack in the period immediately following privatisation. As far as the taxpayer is concerned, it really is a billion pound sting."

However, Richard Aitken-Davies, Railtrack's director of privatisation, said the pounds 1bn was "to do with setting up the balance sheet of the company so it can meet it commitments in the future. In preparing for privatisation we have identified the sort of obligations we are going to have".