KEY STATEMENTS issued on April 2 have altered significantly the relationship between the government and Railtrack, the company that owns and manages Britain’s national rail infrastructure. Payment of a £1·5bn subsidy agreed with the Rail Regulator as recently as January will now be brought forward from the 2006-11 period to boost track charges paid by train operators from now until March 2005.

Part of this extra cash is required to fill a hole left by the cost of replacing since last October’s derailment at Hatfield more than 700 km of rail plus 840 sets of points suffering from rolling contact fatigue cracks, which Railtrack had failed to manage properly. But the company also claims to have discovered that the cost of maintaining its network is substantially higher than had previously been apparent.

It might seem remarkable that the Regulator and the government should prove so ready to provide extra funding, bearing in mind the escalating cost of the West Coast Main Line upgrade. This jumped from £2·3bn to £5·8bn in December 1999, and Railtrack now puts the figure at £6·3bn. But Railtrack says the extra funding ’will ensure that a credit rating within the A category is maintained.’ The government simply cannot afford to let Railtrack become insolvent.

Another reason why Railtrack needs a cash injection now is the mounting bill for compensation demanded by train operators because of the unprecedented disruption since Hatfield. As delays due to cracked rails are eliminated, it has become evident that the re-railing programme has taken a heavy toll on routine maintenance. Temporary speed restrictions due to cracked rails may have been reduced to around 300, but another 800 have been imposed for other reasons.

In March, revenue earned by inter-city operators such as Virgin, GNER and First Great Western was 21% below where it should have been if Railtrack had maintained the network in good order. Virgin Trains faces a cash crisis, and plans to pursue Railtrack through the courts to recover past and future revenue losses of £150m, only half of which is recoverable through existing performance contracts.

As the government’s paymaster, the Strategic Rail Authority has forced Railtrack to accept a more limited role as maintainer and ’integrator’ of the network, while major enhancements are developed by train operators, the SRA and professional project managers. Hence Phase 2 of the Channel Tunnel Rail Link is to go ahead for completion in 2006 with Railtrack allocated only a bit part.

To drive this process forward, the SRA called upon Virgin/Stagecoach and GNER to submit fresh bids by April 17 for a 20-year East Coast InterCity franchise, while accepting in principle an offer from Stagecoach to invest £1·7bn over 15 years in trains and infrastructure on its South West Trains franchise. It has to be said, however, that the SRA has yet to complete the process of awarding a single replacement franchise under its current programme.

Key facts

n Railtrack to get £1·5bn early

n Joint ventures to fund enhancement

n Hatfield leaves inter-city operators in financial trouble

n Section 2 of CTRL goes ahead

n East Coast franchise bids revised