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New track operator should take a leaf out of housing book

RAILTRACK'S SUCCESSOR should be run and financed like a housing association, a senior banker told MPs last week.

The new track operator could then be funded by a mixture of government loans and bank debt, he said.

The proposal was put to the Commons transport sub-committee by Royal Bank of Canada (RBC) managing director Adrian Bell. RBC has arranged more than £2bn of finance for the British social housing and education sectors.

Bell's plan corresponds closely to transport secretary Stephen Byers' proposal to have Railtrack taken over by a not for profit company.

Bell said that in the housing sector subordinate government loans to housing associations were a way of attracting private finance from banks.

Byers also suggested the new rail network opera - tors should be partly financed with subordinate loans 'To gain the trust of the funding markets, the public sector must be incentivised to look after other creditors' interests along with their own, ' says evidence put to the committee by RBC.

'As subordinated debt provider, government is at risk of first loss if the regulatory system fails, ' it says.

In social housing, the sector is regulated by the Housing Corporation, which has to ensure the government's subordinated loans are repaid.

In doing this, the corporation protects the interests of private banks which also lend to housing associations.

'We see this as the key to the funding of New Railtrack and would encourage the select committee to look at the not for profit housing sector as an exemplar of successful regulation, ' the evi - dence concludes.

www. housingcorp. gov. uk

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