Last month the Office for National Statistics decided that London & Continental Railways, the privately owned company building the high-speed link from the Channel Tunnel, would be reclassified from the private to the public sector.

Now the pressure is growing from a range of senior figures in Whitehall and the rail industry to take a fresh look at the much larger question of whether Network Rail, the not-for-profit company that owns the rest of Britain's rail network, should be reclassified in a similar way.

Such a move would be political dynamite. The decision to shift LCR into the public sector had the unwelcome effect for the Government of adding the company's £5bn of borrowings to the national debt.

With Gordon Brown, the chancellor, already struggling to avoid breaching his self-imposed "golden rules" on government borrowing, the addition of Network Rail's vast debts would probably break his sustainable investment rule - that borrowing should not exceed 40pc of gross domestic product.

"LCR's debt is a tiny dollop. Network rail's is a huge amount," one industry executive said. Network Rail currently spends around £5bn a year operating, maintaining and renewing the railways and its debt is expected to peak at more than £20bn over the next few years.

The decision on whether those debts should be brought onto the public balance sheet ultimately rests with Karen Dunnell, the recently appointed National Statistician. Some Whitehall insiders say a Faustian pact existed between the ONS under Len Cook, Dunnell's predecessor, and the Treasury, with the Government promising more independence for the ONS in return for a conservative stance on classifying national debt.

Cook has always rebutted such assertions and maintains that he was impervious to political attempts to influence the work of his office. The ONS remains a department of government but the Treasury is shortly to launch a consultation on granting the body greater independence.

However, Dunnell remains an unknown quantity and the reclassification of LCR looks to some dangerously like a shot across the Government's bows. One person familiar with the situation says that logically the shift in stance over LCR is the start of a slippery slope.

"There is a wider order of issues here, such as why all the Government's PFI [private finance initiative] deals aren't on its balance sheet," he said. "You could -suddenly find yourself with a national debt that is looking much more like Italy's."

The ONS says the key factor in classifying an organisation is the level of influence that the Government can exert over it. In the case of LCR, it concluded that the level of influence amounted to control of the company, through rights given in its articles of association and a special share in the company.

The rights date back to a publicly backed refinancing of LCR in 1999 and include the ability to force the sale or flotation of LCR at any time with a clawback arrangement giving the Government 90 per cent of the proceeds.

The Government also has vetoes over any dividend payments and over the sale of any shares, the right to appoint a non-executive -director and the right to approve LCR's budget.

So how do these provisions compare with the controls and influence that the Government has over Network Rail? In theory, the rail operator is accountable to its 113 "members". But they have no economic interest - apart from a liability to pay £1 each should it go bust - in this vital national asset with an enterprise value approaching £40bn.

If Network Rail were ever sold the government would get 100 per cent of the proceeds, more than the 90 per cent in the case of LCR.

In fact, Network Rail only has its assets because the company was granted them by the secretary of state for transport, who could just as easily take them away again. The assets were granted under the terms of a strict licence, which can be withdrawn for reasons including serious breaches of safety guidelines and, crucially, any change of control of Network Rail.

These provisions give the Government complete control over the sale of the company, just as it has in the case of LCR.

The licence also contains strict rules relating to Network Rail's finances. The company's debt is capped at 90 per cent of the value of its assets but the licence says the company must use "reasonable endeavours" to limit the ratio to 85 per cent.

The last reported figure was 77.2 per cent. But when the company reports its figures for the year to the end of this month the amount of borrowing is expected to be above 80 per cent.

Nor is it fanciful to suppose that the company could ever breach its safety obligations. Following the Hatfield rail crash it emerged that Railtrack, Network Rail's predecessor, had neglected to replace rails as it should have.

Network Rail's management is hailed as a vast improvement over Railtrack's but the emergence of a similar issue could arguably give grounds for the licence to be revoked. And it is the existence of these powers rather than their exercise that is crucial in determining national accounts classification.

Indeed, by forcing Railtrack into administration the Government has already demonstrated that if it wants the railways back then there are means of achieving it without bothering with the niceties.

On top of all these powers, last year the Department for Transport (DfT) abolished the Strategic Rail Authority and took its powers as well. The SRA was a "special member" of Network Rail with the power to terminate the membership of all other members if the company got into financial difficulties. The SRA also had the power to appoint a non-executive director. Both these powers now reside with the Government.

Network Rail's Articles of Association reveal that the "special member" has some pretty special powers, including a veto over any alteration to the articles.

The other main function of the SRA was to "stand behind" debt issued by Network Rail; this role also passes to the DfT. Four years ago the ONS argued that "because this support is considered a contingent liability and is unlikely to be called on" it does not constitute government debt.

However, Chris Grayling, the shadow transport secretary, says: "The Government has underwritten the debt of LCR in a very similar way to how it has underwritten Network Rail's debt. There can now be no justification for keeping Network Rail's debt off the national balance sheet."

As well as standing behind the company's debt, the DfT also funds it with direct grants, of £1.8bn this year, rising to £2.8bn for the next two years. The other source of funding for Network Rail is charges paid by the train operators, which are also supported by grants from the DfT, totalling £5.3bn over the next three years.

"I discovered that the Government has no security over Network Rail's assets, even though it is underwriting the company's debt. What sane person or organisation would provide £20bn of unsecured debt to a private company it had no control over?" Grayling asks.

"The only explanation is that the Government regards Network Rail as a state company."