TRANSPORT SECRETARY Stephen Byers last week defended the decision to give £300M of taxpayers' money to Railtrack shareholders, saying it would lead to a longer term saving.
Byers told the transport sub committee last week that the deal offered to Railtrack shareholders to ensure they accepted the bid from Network Rail (NCE 28 March) was a good one for the taxpayer. If they accept the offer, Network Rail will be able to take Railtrack out of administration.
Network Rail would, Byers insisted, meet efficiency targets of up to 3% set by the Rail Regulator that Railtrack could not meet, leading to an additional £50M for every £1bn of expenditure.
Penalty payments of up to £1bn a year to operators for poor performance would also be saved by a more efficient infrastructure owner, said Byers.
As a company funded by debt rather than an equity model like Railtrack, Network Rail would also be able to borrow money at a much cheaper rate as well as not having to pay out dividends to shareholders. This, Byers estimated, would save an extra £58M a year.
Byers also told the committee that the provision of a £9bn bridging loan from the Strategic Rail Authority to Network Rail to guarantee the new company was 'standard' government procedure.
He cited government export credit guarantees to British companies working overseas as an example of how government money is used to aid British business.
Financial experts reacted sceptically to the claims. One analyst questioned why Network Rail, which will inherit the Railtrack network, staff and debts, will be any more efficient than Railtrack.