11.06.06
Labour’s relations with big business have been
undermined following the release of minutes of government meetings about Railtrack
entering into administration.
Minutes of a series of high-level meetings con-ducted by Stephen Byers,
then transport secretary, released under the freedom of information act (FOIA),
raise fresh questions about the way in which the Labour government killed
off Railtrack in 2001.
And they are bound to shake the financial city of London’s trust
in the government at a time when it is being asked for financial support for
various projects, including those run under “private finance initiatives”.
According to the minutes, Railtrack’s then chair-man, John Robinson,
met Byers in July 2001 to seek more funding from government. Robinson told
Byers that he doubted that Railtrack would be a “going concern”
without additional government support.
Byers decided on October 5, 2001 to reject Rail-track’s plea
for £1bn extra funding. He would replace Railtrack with the state-run
Network Rail to run the railway lines in the UK. He sought Railtrack’s
agreement for it to go into admin-istration.
Before he was due to tell Robinson that day of the decision, Byers
met Tom Winsor, then the rail regulator.
Winsor is recorded in the minutes of that meeting as predicting that
Robinson would seek an “interim review”, meaning that Railtrack
might be able to secure more funding from the regulator.
The minutes state: “The secretary of state said he had authority
to bring forward a short bill, if need be, to enable him to give instructions
to the rail regulator as to the exercise of his functions, which could be
used to prevent an interim review from being granted that would undermine
his decision not to provide additional public funding.
“Tom Winsor said he assumed government would prefer not to take
this course; in his view it ran counter to the face of government statements
about other regulators. Such action would run the risk of raising the cost
of capital in other regulated utilities.
“The secretary of state said he would pursue this course of action
if it became necessary to do so.”
Winsor was warning Byers that the threat to over-rule him would undermine
the independence of all industry regulators from government. This would worry
the City, increasing the cost of borrowing for all regulated industries, including
privatized sectors.
Despite this warning, Byers successfully petition-ed a judge at an
emergency court hearing, held on a Sunday night, to put Railtrack into administration.
The court was not told of the regulator’s powers to grant Railtrack
more funding.
A High Court judge last October rejected a class action claim for compensation
from the government by nearly 50,000 Railtrack shareholders.
The shareholders failed to show that Byers was guilty of “targeted
malice” in pushing Railtrack into administration and intended to harm
their interests. However, government documents emerged in the case showing
that shareholders were dismissed as “grannies”.
Winsor provided a statement on behalf of the shareholders in the case,
but he was not called to give evidence.
He stated that he had not been shown the doc-umentary evidence that
led to the collapse of Railtrack until after it went into administration.
“If I had seen the papers in advance, I would certainly have intervened,”
he said.
Winsor has also blamed Railtrack’s management for its “disastrous
error” of giving up in the face of the government’s threat to
over-rule the rail regulator.
He said: “They were satisfied that a threat by former transport
secretary Stephen Byers to undertake emergency primary legislation to take
my office under direct political control was as good as passed. It was not.
It would have taken a year to pass.”
Another version of this article first appeared in the Sunday Express.
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