Friday, October 14, 2005

A peculiar derailment

How sad to hear that the Railtrack shareholders have lost their case against the government.

It's a long story, and I'll try my best to be brief. It all began when the Conservative government privatised the rail network in the '90s. Some bright spark came up with the goofy idea of packaging and selling the rail tracks separately from the train routes which ran along them.

A company, imaginatively named Railtrack, was set up to look after the rail tracks, and other companies bid for the franchise to run trains on the routes. The public enthusiastically took up the invitation to buy shares in Railtrack. The company subsequently did very well in the market, posting record profits year on year.

This arrangement had problems, not least the fact that the route operators had no control over the punctuality of their trains in cases where delays were caused by problems with the track.

Then disaster struck. There was a train accident at Hatfield and four people died. The accident was caused by the poor state of the tracks. As a result of the publicity generated by this tragic event, Railtrack was forced to spend a lot of money repairing all the tracks across the country. Its productivity suffered, and profits fell. The government ended up ploughing millions of public money into the company to keep it afloat.

Sick of the increasing demands for even more public money, the Department of Transport and the Treasury hatched a plan to force Railtrack into administration. Documents exchanged between both departments (which were produced in the court case) revealed the disdain with which Railtrack shareholders were regarded. An official queried whether public money should be used to compensate these investors in the event of Railtrack being forced off the rails, and there was a sneering remark about worrying about 'grannies losing their blouses' when the company went belly up.

The company was eventually put into administration by the Secretary of State for Transport. It was replaced by a not-for-profit entity. The 'grannies'and other enterprising persons who had bought shares in Railtrack lost all their money. They took the government to court, alleging misfeasance of public duty. At the time he put Railtrack into administration, the Secretary of State had claimed that he had no other option as the company could no longer support itself. However, evidence was adduced at the trial to show that the company would not have gone under if it had not been so spectacularly derailed. The Secretary of State even admitted to the court that he had not told the truth to Parliament about conversations he had had about plans for the company.

Sadly, the shareholders lost their case. The court held that malice on the part of the government had not been proven. In order to succeed, the shareholders had to prove that the Secretary of State put Railtrack into administration with the intention of injuring their interests. This is a tall order, so the ruling should have come as no surprise. However, the judge dismissed the reasons given by the Secretary of State for lying as 'little above gibberish'.

A moral victory, if nothing else, for the shareholders. For me, it raises questions as to why we should believe the government when it claims that it wants to foster an 'enterprise culture'. The sneering disregard for people who have invested their money in a company, having been invited to do so by the government, is stunning. We used to talk about nationalisation by the back door, but this is a straightforward battering-ram job. We should be concerned about a government that has no compunction about mounting such a raid on private property. Admittedly Railtrack sat in an ambiguous position as a private company receiving government handouts, but that does not justify the government's actions. I am sure you will not be surprised to hear that when the Secretary of State announced his assault on Railtrack, he was cheered to the rafters by the Old Labour brigade. These people, with their raging waves of self-righteous cant, foaming out their own envy, can always be relied on to resist sound capitalist progress. Armed with an ideology that has been shown to be withered from the roots, they have managed, for the past eight years, to block economic progress in this country. To give Tony Blair credit, he has occasionally managed to face them down. However, if Gordon Brown does become the next Prime Minister, we could be in for a lot worse.
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