Railtrack 'was doomed by a trick'

TRANSPORT Secretary Stephen Byers is facing new allegations that he tricked Railtrack into going bankrupt. Leaked letters show his department promised the rail network operator £162m it was owed. But the cash was never paid and within a week Byers had closed the company, complaining it had run out of money.

Senior Tories said Railtrack was tricked into thinking it had a breathing space while Byers secretly planned its downfall. The documents will form the spearhead of an onslaught against Byers in a Commons debate today. His Tory shadow Theresa May will accuse the Minister of an elaborate financial deception to lull Railtrack into a false sense of security.

Ahead of that debate, Railtrack was lining up with shareholders who are considering legal action against Byers. Chief executive Steve Marshall said: 'We are actively considering a number of legal options, one of which may well be misfeasance [acting improperly] in public office.'

A draft letter dated 28 September reveals that the Strategic Rail Authority promised the cash as part of a scheme to help Railtrack rebuild its shattered finances. It said: 'We will pay you £162m on Monday 1 October.'

But the money was never paid, and on 5 October Byers summoned Railtrack chairman John Robinson and told him he was putting his firm into administration. In the meantime, on 3 October, half of Railtrack's 250,000 shareholders took their annual dividend in shares rather than cash, never suspecting they were about to become worthless.

The Tories' May said:: 'Stephen Byers should resign. This is yet more hugely damaging evidence that he played fast and loose with Railtrack and the shareholders. He was stringing Railtrack along in the expectation that they would be getting the £162m. Then he deliberately did not pay it, so he could say the company had run out of money. It shows that it was a political decision to pull the plug.'

Byers' version of events has already been publicly challenged by Railtrack's Robinson. And last week Rail Regulator Tom Winsor said he was threatened with the loss of his powers if he tried to save Railtrack. Byers has denied issuing any threat.

The Institutional Shareholders' Committee, the powerful City body representing major investor bodiess, joined the fray on Monday, calling on Bank of England governor Sir Eddie George to intervene. The ISC also urged its members to join the effort being mounted by law firm Lovells on behalf of several City institutions.

Railtrack has also released some of the thousands of letters sent by devastated shareholders. Edith Knowles, 81, from Preston, told how she had paid more than £13,000 over the years to buy 1,218 shares she hoped would cover any nursing care she may need. 'Now all I have left is my pension,' she said. 'We aren't the fat cats Mr Byers and MPs think we are.'

The Government has set a deadline of 14 December for Railtrack's creditors to back its proposed 'standstill agreement' allowing a transfer to Railtrack's successor. Bondholders will meet before this.