There are going to be no heroes in the Railtrack shareholders’ case which opened on June 27 and lots of villains. Ministers and their advisers will be shown to have plotted to avoid paying compensation to the shareholders, the Railtrack board will be exposed for not having defended the company properly, and the shareholders will come out looking as purely self-interested trying to screw taxpayers money for having taken a bad punt.
If nothing else, the case highlights the whole crazy idea of having privatised the infrastructure of the railways and got the the company listed on the stock exchange. Railtrack was an inherently unstable construct that suffered from two mishaps. First, the panic within the company in reaction to the Hatfield train disaster led to billions being spent on the railway infrastructure, much of which has been wasted. In the immediate aftermath of the disaster, thousands speed restrictions were placed on suspect sections of track around the network and virtually every one proved unnecessary. As a result, however, the railway system ground to a virtual halt and passengers deserted the railways in droves.
The second problem was the mounting estimated cost of the West Coast Main Line refurbishment which, at the time, was passing £10bn and heading firmly north. The combination of these two events meant that the company was effectively bankrupt even if, as the shareholders point out, there was still some money in the coffers.
The shareholders may complain that the ministers pulled the plug, but the very fact that Railtrack was so dependent on what the government was prepared to pay towards the rail infrastructure showed that the very concept of having a private profit-maximising company at the heart of an old and decrepit network was flawed.
So while the shareholders are technically right that the government was rather too eager to push the company into bankruptcy without having to pay them the notional compensation to which they were entitled, they did ultimately get what the shares were worth at the time of the company’s demise and it is difficult to feel much sympathy for them. They had bought into a dud company which was badly run and which was ultimately doomed.
However, the contempt shown by ministers and their advisers to the shareholders in the various emails that have come to light as a result of the case is very revealing. There is no doubt the case will damage the City’s view of New Labour, but, by gum, it is all going to be great fun to watch.
Read more about the sad short life of Railtrack and much else in my forthcoming book, On the Wrong Line, how ideology and incompetence wrecked Britain’s railways, the fully revised and updated version of Broken Rails, which is due to be published in September. To reserve a signed copy, email me through the contact page.