Railtrack: City in plea to George

THE Institutional Shareholders' Committee, which represents every investing body in the City, has piled the pressure on Transport Secretary Stephen Byers as it suggested there was a clear legal case for pursuing the Government over its handling of Railtrack.

The ISC also called on Bank of England Governor Sir Edward George to intervene in the situation to prevent lasting damage in relations between the City and the Government. The committee said it had written to George 'to explain its concern over the need for a stable and productive relation between the Government and the City'.

It said the letter 'urges the Governor to use his good offices to promote a solution that alleviates this concern and will allow the City to continue financing projects of vital importance to this country'.

The traditionally cautious and conservative ISC is the umbrella body for the Association of British Insurers, the National Association of Pension Funds, the Association of Investment Trust Companies, the Fund Managers' Association and the Association of Unit Trusts and Investment Funds. The committee has recommended its members give serious consideration to joining the Railtrack Shareholders' Action Group if they are keen on litigation.

The action group includes such large institutions as Fidelity and Morley as well as numerous small shareholders. The ISC reached its conclusion following independent legal advice from solicitors Ashurst Morris Crisp.

The committee said it believed a negotiated settlement between Government and shareholders was the best way forward. But the implication of its recommendation to members is that they should be ready to take legal action if officials are not prepared to talk sensibly.

'The ISC remains of the view that a negotiated solution of the issues raised would be in the interests of all concerned...This is the best way of preventing lasting loss of trust between the City and the Government, which would impair the ability of the private sector to fund the railway network in future as well as other public projects and services,' it said.

The veiled threat to the Government comes at the beginning of a difficult week for Byers and reflects continued City anger at his unexpected expropriation of Railtrack shareholder funds last month. ISC suggests two solutions, the first being a bid for Railtrack assets and the second being some kind of equity for debt swap.