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Mr. Spellar: Is it the hon. Gentleman's argument that Railtrack was solvent and had good prospects and that its managers would have been able to make a statement to their half-yearly meeting that it was able to continue trading solvently?
"we could choose to go down it as an interim step to an eventual solution. It is clear that we ought not to contemplate taking Railtrack into administration, which we could achieve by withdrawing Government support, without being equally clear about how we would like it to come out of administration".
Then, we have the infamous minute provided to the Secretary of State by Mr. Rowlands, now the permanent secretary at the Department for Transport and then the No. 2 in the Department, on 31 August 2001. He deals with how to take out Railtrack using the mechanism of railway administration. He writes:
Clearly, the Government wanted the company to collapse and were disappointed that it might not. He goes on to explain, "risk RT"that is Railtrack, and then there is a reference to the rail regulator
Mr. Darling: I wish to intervene because, contrary to all the evidence, the hon. Gentleman is trying to make a case that Railtrack was solvent, was a going concern, that there was nothing really wrong with it and that there was a conspiracy to bring down a healthy company. As I shall demonstrate shortly, that is not quite the case. I am wondering how the hon. Gentleman can square what he says with a letter that was sent to the Department in March 2001 from Railtrack, which states that on its own analysis, on the day when its shares were trading at 800p a share, the company thought that they were worth 60p a share. Does that not suggest that there was something wrong with the company?
Mr. Duncan: Again, that is irrelevant to the case that we are making. The fact that it was a fairly lousy company in the eyes of the Secretary of State does not excuse him from the conduct that I am demonstrating.
Mr. Duncan: The right hon. Gentleman says that he has his answer. I shall let him intervene in a moment. I want to present my case. The right hon. Gentleman has forgotten one crucial ingredient and that is the rail regulator. A clear picture emerges of the Government
Mr. Darling: That was not my assessment; that came from Railtrack. It said that at a time when people were being allowed and encouraged to buy shares at 800p a share, the company thought that the value of the company meant that they were really worth about 60p a share. That is not my judgment but the judgment of Railtrack.
Again, the Secretary of State is missing out a crucial ingredient in the propriety of Government conduct, which is the relationship between the regulator and what they said to the court. As I have already begun to build up in the casethere is more to come, which will make the right hon. Gentleman even less comfortablea clear picture has emerged of the
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Government's intention to engineer insolvency, combined with an understanding of the regulator's power to stop it.
We can see also that there was another aspect. The Renewco deal, which was to bring £1.5 billion in Government grants to Railtrack in 2001 instead of 2006, presented problems for the Government because they were committed to using their best endeavours to set it up. Mr. Linnard says in the meeting:
On 14 September 2001, Mr. LinnardNo. 3 in the Departmentwrites a further note to the Secretary of State discussing taking Railtrack out and replacing it with what he refers to as a "non-equity solution", a euphemism if ever there were one. He writes that
So we see railway administration being used as a means to an endthe end being seizing Railtrack's assets and taking out a FTSE 100 company by the back door. That was political assassination writ large.
"A Railtrack note, prepared for John Robinson (the new chairman) in June 2001 stated that the situation was worse than expected. Neither the Regulator nor Railtrack could estimate the costs of running and maintaining the infrastructure with any certainty, the assumptions on which the [prior financial] settlement with the Regulator were completely unworkable, major cost over-runs . . . were still not under control, Railtrack's bloating operating costs were not being addressed. If the subsidy and pricing regime was left unchanged, the company was heading for liquidation."
Is the hon. Gentleman not building his case on very unsure foundations? He is trying to demonstrate that this creation of a Tory GovernmentRailtrackwas solvent when its own people were telling it that it was not.
Mr. Duncan: The right hon. Gentleman's argument goes crashing to the ground when we realise that the independent rail regulator estimates that the Government's administration programme for Railtrack has cost the taxpayer £14 billion, which is eight times the Government's worst estimate of Railtrack's deficit.
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