Virgin wins ?106m for slowdown of trains

The taxpayer will foot the bill for a £106m payment to Virgin trains as compensation for long-running track problems set to slow down the company's new high-speed tilting rolling stock.

Following months of negotiations, the government's strategic rail authority has agreed to hand over the money by March, to make up for Railtrack's failure to upgrade the west coast mainline.

But there was a row brewing last night between the SRA and Stagecoach, the Perth-based minority shareholder in Virgin trains, about whether there would be any more compensation. Stagecoach's Graham Eccles, who runs the group's rail business, said he has calculated a worst-case scenario, in which the company would need £465m compensation.

An SRA source yesterday denied that any more taxpayer money would be used to bail out the company. He dismissed the figure of £465m as "fiction".

"I have read my daughter more credible bed-time stories," he said.

The west coast upgrade is running years late, with costs rising from an initial £2.2bn to an estimated £10bn-£13bn. Virgin's new tilting Pendolino trains, which will carry their first paying passengers today, will be unable to tilt until the upgrade is complete.

Trains on the line, from London to Birmingham, Manchester and Glasgow, travel at up to 110mph at present. Virgin had hoped its new trains would run at 125mph this year but this has been postponed to October next year. An increase to 140mph, scheduled for 2005, has been indefinitely postponed.

Last night an SRA spokesman said the authority felt the payment was necessary for stability on the network. "Virgin has put very heavy investment into the new trains. The revenue on which they based the investment anticipated higher running speeds and more frequent services. They are now looking at a much less stable business environment than they had every right to expect."

Railtrack said the upgrade was a legacy programme inherited from British Rail which underestimated the complexity involved and over-estimated the condition of the track. The programme includes replacing the ballast, sleepers and rails, installing new points, lengthening platforms and improving signals.