Railtrack: Morton contradicts Byers

STEPHEN BYERS' version of events leading to the shutdown of Railtrack has suffered another setback. Only 24 hours after he assured the Commons he had not pushed the company into bankruptcy, a leaked letter from the chairman of the Strategic Rail Authority, Sir Alastair Morton, bluntly contradicted him.

The revelation came as Labour MPs expressed outrage at the news that a German bank - state-owned WestLB - was under consideration to run the successor to Railtrack. The consortium backed by the bank may offer more than £4bn for the rail network operator.

The latest row centres around allegations that the Transport Secretary withheld a crucial £162m the Government had promised to pay struggling Railtrack on 1 October. Byers had been warned by the company's bosses that without it they could not persuade the City to lend Railtrack enough additional money to keep going.

On Tuesday, Byers claimed his department was never bound to keep the promise but only use its 'best endeavours' to come up with the money. But, in a startling development, a previously confidential letter - written on the day the £162m should have been paid to Railtrack - undermined his words.

In it Morton, whose Strategic Rail Authority is a wing of Byers' department, angrily protested at his refusal to pay up. Morton directed his protest at fellow civil servant, Sir Richard Mottram, head of Byers' department.

Accusing Byers and the Treasury of foot-dragging and incompetence he wrote: 'We have now arrived at 1 October, when all should have been implemented. A wide range of advisory firms in the City have had every opportunity to form a view of the competence displayed on the Government side of this episode.'

He complained that 'for months now' his authority had been trying to launch a financial reconstruction of Railtrack. 'We have explained again and again how all this must work...I do not suggest that the Treasury is blameless in this matter, but...the primary responsibility must lie with your department.'

In a rebuttal of Byers's claim that he had no role in blocking the payment, Morton gave the clearest indication that he did - and he demanded this situation be ended. 'The SRA needs to have satisfactory delegated authority rather than be placed under the direct, point-bypoint-control of your department.' Morton wrote. Four days after Morton's letter, on 5 October, Byers forced Railtrack into the hands of administrators.

Morton quit last month, and has been succeeded by Richard Bowker, co-chairman of Virgin Rail.

The letter emerged as Byers faced the Commons Transport Select Committee. Tory MP Anne McIntosh demanded to know if Morton was correct and that his department did positively intervene to stop it happening. Byers declared: 'The £162m was using best endeavours. We certainly did not block a payment of £162m to Railtrack.'

He said that, compared with the 'financial meltdown' Railtrack was going through which would leave it with a £700m deficit by December, the issue was a 'red herring.' A Railtrack spokesman rejected this, claiming the £162m would have allowed Railtrack access to further bank loans.

Byers attempted to make light of Morton's letter, declaring that he sometimes used 'colourful language' and accusing him of unproductive backbiting.

Byers confirmed to the Commons committee that the WestLB consortium SwiftRail had made a bid. No exact offer has yet been put on the table as the consortium does not know the full extent of Railtrack's liabilities or its assets. But a source said: 'SwiftRail's bid holds the possibility of shareholders getting some return.' SwiftRail wants to divide Railtrack in two. A not-for-profit company would manage safety, while a profit driven company would take control of the track. Both would be financed by debt.

Committee chairman Gwyneth Dunwoody expressed her outrage that WestLB was under consideration to run the successor to Railtrack. She told Byers: 'Were it to be the case that we end up with the railways run by the Deutsche Bundesbahn, some of us might think it mildly ironic. I simply leave you with this thought.'