How Byers 'misled MPs' on Railtrack

STEPHEN BYERS was under pressure to resign on Sunday night after a leaked document suggested he misled MPs over his decision to shut down Railtrack.

The controversy surrounds the Transport Secretary's declaration to the Commons in a written answer that he decided to wind up the company only in early October. But his claim was undermined with the emergence of a legal document which indicated that he had decided to shut the company down at least a week before, in late September.

Railtrack has now called for an independent inquiry into the events leading up to administration. 'What we have here is the suggestion that final documents had been circulated among officials that would shortly wipe out Railtrack shareholders equity,' said chairman John Robinson. 'No public company's investors should be treated like this. We want to see an inquiry into whether a false market was allowed to exist. What is there to hide?'

The news will outrage investors because on 3 October, half of Railtrack's 250,000 shareholders took their annual dividend in shares rather than cash. The document suggests Byers allowed investors to take shares even though he knew Railtrack was going to the wall and those shares were about to be rendered worthless. Many people, often small shareholders and railway employees, lost tens of thousands of pounds as a result.

City firms will also be outraged to discover they had been duped into buying or holding shares the Government was about to wipe out. It could lead to multi-million pound compensation claims.

Officials in Byers's department said he had merely drawn up 'contingency plans' to wind up Railtrack, and did not make a firm decision to go ahead until 3 October. But the new evidence shows Byers had gone far further than this.

The insolvency order Byers served to wind up Railtrack is dated 6 October to come into effect on 7 October. However, on the top of the document there is an earlier date of 28 September, when the document was faxed, possibly between Government offices. This suggests it had been drawn up more than a week before Byers says he took his decision.

Last night senior Tories said the document undermines Byers's statement to the Commons about when he took the decision to close down Railtrack.

In the original written answer to Tory transport spokesman Eric Pickles, Byers's deputy John Spellar said: 'My Right Honourable friend the Secretary of State took the decision to refuse Railtrack's proposals for additional funding on 5 October.'

On Sunday the Department for Transport, Local Government and the Regions said it had begun contingency planning as early as 23 August. It said the leaked document was part of that process and had been drawn up the week before in case it was needed.

But City experts involved in administrations said the claim that Byers was only debating ' contingencies' before 3 October was stretching belief. They said it was highly unlikely that Byers would have had the highly detailed insolvency order drawn up if he had not already made the decision to go for winding up Railtrack.

Senior Tory sources said they believed they had caught out Byers. 'We have got him bang to rights lying to Parliament,' they said. 'He should resign.'

Theresa May, Tory Shadow transport spokesman was publicly more restrained: 'This clearly shows that the Government was on the verge of putting Railtrack into administration much earlier than Stephen Byers claimed. The Government owes it to shareholders, particularly employees of Railtrack who have had their savings invested in the company, to come clean over the events leading up to the collapse of Railtrack.'

The Government took back control of Railtrack on 7 October after Byers said he was not prepared to use further taxpayers' money to shore up the debt-ridden company. A High Court judge granted an order placing Railtrack in administration.

Trading in Railtrack's shares was suspended, effectively rendering them worthless.

Critics said the company had collapsed only because Byers had promised £1.5bn of public subsidy to keep the beleaguered firm going, and then had abruptly withdrawn the offer.