Byers to defend Railtrack decision

Stephen Byers, the former transport secretary, is to fight claims in court this week that he deliberately pushed Railtrack into receivership.

He plans to cite internal transport department documents showing the true scale of the financial demands being placed on the government by Railtrack as the price for its survival. He hopes that the documents will bolster his case that he had a political duty to act to protect the interests of taxpayers.

The court case, which begins today, is being brought by retired engineer Geoffrey Weir on behalf of 49,000 former Railtrack investors. They claim that the government's action deprived them of their stake in the company by forcing it into administration.

Mr Byers is likely to face three days of questioning during the case, which is likely to last well into next month.

Some have suggested that it has the potential to become a second Hutton inquiry, revealing the inner workings of government, including emails and confidential correspondence, as Whitehall allegedly prepared a strategy to bring the loss-making Railtrack back into a form of public ownership by ensuring it went into administration.

The court case is also likely to be seen as a test case of New Labour's relationship with shareholders, revealing an unusual determination to put the rights of the public ahead of shareholders, even at the risk of depriving them of compensation. The company finally went into receivership on October 7 2001.

The case has the potential to restore or further damage Mr Byers' reputation.

Once one of Labour's brightest stars, the MP for North Tyneside has been in limbo on the backbenches for more than two years, working on projects for the prime minister behind the scenes, and offering general policy speeches to keep New Labour thinking going.

A friend of Mr Byers said last night that the Railtrack shareholders did not say a word when rail investment was at a standstill following the train crash at Hatfield in Hertfordshire in October 2000 and failed to raise concerns about a lack of investment.

The friend added: "They just sat quietly back receiving dividends worth hundreds of millions of pounds."

One internal paper sent to Mr Byers by officials in the Department for Transport at the height of the crisis suggests that Railtrack was making substantial demands on government funds.

"At the time of the crisis April to June 2001, Railtrack were making a series of regulatory and financial demands, but insisted during this period the rights of shareholders will not be affected."

It told Mr Byers: "You will still need to provide subsidies on a cost plus basis to finance losses and payment of debt."

It also suggested that Railtrack would need a further negotiation of the terms of the west coast main line, and yet further subsidies at the end of the process.

Meanwhile Railtrack shareholders have been setting out their case in advance, including the use of dismissive government emails deriding some shareholders as "grannies".

"Can we engineer the situation through insolvency - finding the balance between not having triggered it and therefore avoid compensation but enough to have seen to have acted decisively rather than reacting to a failed privatisation that we refused to see and deal with earlier," read one email from a Treasury adviser involved in transport policy.