Railtrack promised an extra £2.6bn in taxpayers' money

The government is bailing out Railtrack with a massive £4bn handout of taxpayers' money to renew the flagship London-to-Glasgow line.

The government is bailing out Railtrack with a massive £4bn handout of taxpayers' money to renew the flagship London-to-Glasgow line.

Soaring costs of the scheme to upgrade the west-coast route mean the company will receive an extra £2.6bn from the Treasury - three times more than the original figure.

After a series of private negotiations between ministers and Railtrack directors, the taxpayer is expected to pick up the lion's share of the £5.8bn price tag now placed on it by the company. Railtrack, which made a profit of £360m last year, originally estimated the cost at £2.2bn. The state aid for the west-coast line is part of a total of £30bn the Government intends to pour into the network over the next 10 years

It was expected that ministers would need to grant a bigger subsidy to the scheme, but the scale of the state subvention will astonish the industry.

The figure will also surprise the Rail Regulator, Tom Winsor, who believes the true cost of the scheme is nearer £4.8bn and will be keen to minimise state help before the final figure is agreed at the end of the year.

John Prescott, the Deputy Prime Minister, is expected to face angry questioning on the issue next week when delegates at the Labour Party conference debate transport policy.

Vernon Hince, the assistant general secretary of the RMT rail union - one Labour's largest affiliates - said the situation brought home the "foolishness" of rail privatisation. "It is outrageous that the Government is being forced to subsidise a private company which makes millions of pounds in profits and distributes millions in dividends to its shareholders. Privatisation was sold on the basis that private companies would run the railways cheaper. This calls into question that process and the plan to part-privatise London Underground." Mr Hince said that Railtrack should be brought back into public ownership or the Government should take a controlling share.

Robin Gisby, the Railtrack director in charge of the west-coast main line, said the company would not receive the £4bn of taxpayers' money immediately. "Although it seems a lot of money, we have to pay for the work upfront, build the project, demonstrate that it works before we receive anything in return."

Much of the increase in costs was caused by the company's decision to scrap a state-of-the-art safety system which would have done away with the need for signals. Under the revised plan, Railtrack will have to replace ageing signals along the route. Railtrack argues that Mr Winsor added to its difficulties by demanding that the company cut costs by 4.2 per cent a year.

The company has also faced a skills shortage. Technicians from America, Germany, Sweden, Turkey and India have been recruited to complete the west-coast project and the "multinational" workforce is being offered up to £700 for working shifts over the Christmas and new year holidays.

Mr Gisby said the Government's new roads programme had made the shortage of skilled personnel worse.

High employment also meant that workers were able to pick and choose. Tony Fletcher, the Railtrack manager for the west-coast project, said: "In one case, 14 operatives just walked off the job. Perhaps its was because the sun was shining or that it was the start of the football Premiership."

Mr Fletcher said the project to upgrade the whole line was 35 per cent complete - a few percentage points below its target. He predicted that Virgin's new Pendolino trains would be running at up to 125mph on the line in 2002 as expected.