Public pressure forces rail renationalisation inquiry

The Government's spending watchdog has launched a probe into the renationalisation of Railtrack as a result of "Parliamentary and public concern" over the deal.

The National Audit Office (NAO) said that the study was to establish whether the creation of the new infra-structure company, Network Rail, would address the problems that bedevilled its predecessor.

However, the investigation is expected to intensify the row over Network Rail. The Government, through the Strategic Rail Authority (SRA), has agreed to guarantee £21bn of loans to Network Rail. Chancellor Gordon Brown has refused to put this on the national balance sheet. But the head of the NAO, Sir John Bourn, believes that the debt should be included in the Government's books.

An NAO spokeswoman said that this issue would feature in the investigation.

The NAO will also look at Network Rail's ability to control costs and manage the network. The auditor is likely to assess whether the creation of Network Rail will help to address the problems of a fragmented rail network.

The separation of the infrastructure owners and train operators is widely seen as being at the root of the network's problems. Critics of the Government believe that Network Rail has little power to address this issue.

Another area of interest will be the cost of regulation. When the Government placed Railtrack into administration in October 2001, it hinted that the Office of the Rail Regulator would be merged into the SRA. However, the plan was shelved and the regulator is now asking for a £2.8m increase in its budget to £13.1m to fund its 2003 business plan. Privately, some train operators are concerned about this.

The NAO said the scale of the project to renationalise Railtrack meant it warranted a probe. But it added that the "Parliamentary and public concern" surrounding the way Railtrack was put into administration had provided an extra impetus for the investigation. The results will be published in the autumn.