Byers retreats from Railtrack charge

EMBATTLED Transport Secretary Stephen Byers is backing away from his planned successor to Railtrack. He told investors that the Government's proposal for a new company without shareholders is not necessarily the favoured option.

Shortly after Byers pulled Railtrack's funding, he said the Government's plan was to have a successor that would not need to pay dividends and could reinvest its profits in the network. The proposed structure has since been roundly criticised for being unwieldy and difficult to establish.

Powerful City shareholders put their grievances to Byers, having lost most of their money when the network operator was put into administration last month.

They were led by Fidelity Investment's Simon Haslam, and included private shareholders and the powerful Institutional Shareholders' Committee, which brings together all of the UK's major investor bodies.

Byers told them that all proposals should be treated equally by the Government and the administrator Ernst & Young, which is handling the sale. The City funds said this assurance had not allayed their concerns that the Government has a conflict of interest in its role of approving any bid, while bidding for the assets itself.

All described the meeting as 'constructive' and welcomed-Byers' statement that shareholders needed to be treated fairly.

German bank WestLB, and US finance house Babcock & Brown have expressed interest in buying the network. Ernst believes others will join the bidding once its financial position has been more clearly established. The City institutions will continue with their legal action in case talks with the Government lead to nothing.

'We are not going to allow ourselves to be stalled,' said Marathon Asset Management's Neil Ostrer.

Meanwhile, Byers attacked the Government's own rail boss.

He said Sir Alastair Morton lacked the 'vision' to revive the industry. He said the former Eurotunnel boss had spent two and a half years as chairman of the Strategic Rail Authority - and 'people will judge his record'.

Byers expressed his satisfaction that the rail chief would be replaced by someone who 'has a real vision for railways'. He said Morton clearly felt 'uncomfortable' that major decisions were now being taken to shake up the system.

The Minister revealed his opinion during an interview with BBC Radio Four's Today programme. It came after Morton, whose SRA is a part of Byers' own department, accused him at the weekend of causing 'tremendous damage' through his handling of the Railtrack affair.

He attacked Byers for ignoring his advice and ploughing ahead with the shutdown of the company last month, wiping out the value of the company's shares.

Byers has already had to face one vote of no confidence in the Commons over Railtrack's fate. He was also badly damaged when Tom Winsor, the independent rail regulator, effectively accused him of lying to the House. But Morton's attack was arguably the most wounding because the former financier was the Government's choice to head the SRA and is widely regarded in the City as a man of determination and vision.

Morton, brought in by Deputy Prime Minister John Prescott to oversee reforms of the rail network, announced shortly after the June General Election that he would step down this autumn. Since then, he has revealed, Byers has had almost nothing to do with him.

On Tuesday, the Transport Secretary was asked to answer Morton's charge that his decision to force Railtrack into the hands of administrators would deter future investors in the rail industry. Byers was also challenged to answer claims that he was giving little attention to the future structure of the railways after they emerge from administration.

Interviewer James Naughtie said: 'If you don't think big about the industry, getting rid of the albatross of the company is not going to help.' But Byers insisted: 'We are thinking big.' He said the changes he was making were bound to be controversial but they would create a railway fit for the 21st century 'which we haven't got now'.

The Minister added: 'Sir Alastair has his own views on this and he has been chairman of the Strategic Rail Authority for two and a half years. He is going to be replaced by someone who has a real vision for railways.' Naughtie asked: 'He didn't have a vision?' and Byers replied: 'Well, people will judge his record.'

The Minister added: 'What we have here are people who have been responsible for the industry who clearly feel uncomfortable with decisions that are now being made. The important thing is there will be a strategic plan for railways which will be published either before Christmas or early in the new year and that will show a real vision.'