DEPUTY PRIME Minister John Prescott has accepted that he will have to increase the £1.8bn public subsidy earmarked for the Channel Tunnel Rail link, City sources said this week.
Rescue of the project now depends on the size and timing of this subsidy and on the terms under which CTRL operator London & Continental Railways will guarantee to complete the project.
Prescott told MPs that he was extending the deadline for a rescue package from 31 March to 29 May, raising hopes that an outline framework had been agreed. He said that the plan put to him by LCR makes 'material inroads into the £1.2bn additional subsidy which was sought . . . in January.'
He added that 'reducing the additional cost to the taxpayer' was one of the key areas where improvements to the package were being sought. This was seen by observers as tacit acceptance that more public money would be available.
Prescott confirmed Railtrack's involvement in LCR's rescue plan, which involves building the link in two phases. Railtrack is expected to underwrite construction work, allowing LCR to borrow cheaply on the strength of its AA- credit rating (NCE 12 March).
LCR is also understood to have put National Express and British Airways forward as preferred operators of the Eurostar train service under a sub- franchise.
But City sources warned that this part of the plan could run into trouble with the Office of Fair Trading.
British Airways already runs cross-Channel flights and could be seen to be creating a monopoly. And letting such a large sub-franchise without an open tender could also lead to prosecution under European competition laws.