Under proposals submitted to the Rail Regulator last month, Network Rail has suggested it could take control of the management of major stations across Britain, including Newcastle, York and Oxford, while taking over the maintenance of the rest of the 2,500-strong portfolio.

The state-backed network operator wants to take back control of stations and enter the rolling stock leasing business

At the same time the government-funded body is proposing to use its debt, which is backed by the state, to go into competition against the banks to fund the financing of new trains.

Keith Ludeman, the chief executive of Go-Ahead Group, which runs Southern Trains, said: "This is something we will fight tooth and nail. Our experience is that the current system works well and any move away from it would be wrong."

In a sign of the widespread concern over the issue, the Association of Train Operating Companies is to meet on Wednesday to discuss it. Train operators are concerned that the proposals go way beyond Network Rail's original remit and will move it further into profit-making areas such as retail outlets on stations and financing.

A senior executive at a train operating company, who asked not be named, said: "This is creeping nationalisation. The train operating company community is very resistant to what Network Rail is proposing.

"We see this as empire building. We would just be putting drivers on trains and taking the revenue risk. We would have to look very closely at whether the train operating companies would want to do that."

The proposals were submitted to the Rail Regulator under the current "Control Period 4" review, which looks at the running of the railways from April 2009 to March 2014. Network Rail argues that it can use its economies of scale and cheaper debt to make both station management and train leasing cheaper and more efficient.

A spokesman said: "Our only thought behind this is to reduce overall costs to the taxpayer because we can make investment much more cheaply than others in the industry. At the end of the day we want the railways to be better and cheaper."

On the leasing of trains, Network Rail has proposed that it becomes an "integral part" of all negotiations for new rolling stock to ensure the compatibility and efficiency of new trains entering the system, while also offering to fund new stock.

The spokesman said: "It is much cheaper for us to raise money in the capital markets. It would involve us tapping into existing or new bond issues."

The issue of funding is the one that has led to most concerns about renationalisation. Although technically Network Rail is a private organisation owned by members of the public, financially it is underwritten by the Government, leading many commentators to say it is a state body in all but name.

"They are going to have to put across bloody good arguments why they should do this," said a senior railway executive. "This is British Rail in all but name."

See also:

Network Rail says not pushing to run more stations

Reuters: May 6, 2007

LONDON - Network Rail, the government-funded company that runs Britain's rail infrastructure, cited arguments for and against its operating more stations and denied reports on Sunday it was pushing to increase the number.

The Sunday Telegraph newspaper reported that the firm had submitted proposals to UK rail regulator the Office of Rail Regulation (ORR) suggesting it could broaden its remit to run more stations and to own and lease trains.

The report quoted Keith Luderman, chief executive of bus and train company Go-Ahead Group Plc, as opposing the idea, adding that he had wider support from elsewhere in the industry.

But a spokesman for Network Rail told Reuters the regulator had asked the infrastructure group for its views on operating more stations and that the company had submitted a "balanced case" in response.

"We put forward the benefits of the proposal -- and the drawbacks," he said.

Asked how the firm would like the ORR to rule, he said: "I don't think we would be upset either way. We are not chomping at the bit ... our primary focus is on tracks and signalling."

Network Rail already operates major hubs such as London Kings Cross, Manchester Piccadilly and Edinburgh Waverley but does not have control of Newcastle, Oxford and York as well as smaller stations.

It owns all UK stations but leases the ones it does not operate back to the train operators.

The spokesman said the benefits of running more stations would be that it could take a longer-term approach to financial planning. On the other side, he acknowledged that stations served mostly by one rail company could arguably be better run by that company.

Network Rail's submission on the matter is part of the ORR's Control Period 4 review, which looks at the running of the railways from April 2009 to March 2014.

The ORR and Go-Ahead Group could not be reached for comment.

See also:

Network Rail plans to lease trains to UK rail operators

AFX News Limited: 05.06.07

LONDON (Thomson Financial) - British rail infrastructure provider Network Rail plans to compete with the UK's rolling stock leasing companies to lease trains to rail operators, The Sunday Telegraph reported.

The not-for-profit group has submitted proposals to the Office of Rail Regulation (ORR) that would allow it to use its debt to fund the acquisition of new trains, The Sunday Telegraph said.

The plan would present a challenge to the UK's current three train leasing companies, owned by HSBC, Banco Santander Central Hispano's Abbey unit and Royal Bank of Scotland Group PLC.

Last month, the ORR ordered an investigation into the industry amid concerns that a lack of competition is resulting in excessive profits for the three firms and higher costs for passengers, rail franchisees and taxpayers.

'Our only thought behind this is to reduce overall costs to the taxpayer because we can make investment much more cheaply than others in the industry,' a Network Rail spokesman was quoted as saying. 'We want the railways to be better and cheaper.'

Network Rail also has suggested it be allowed to maintain all the UK's stations and to manage more in the proposals submitted to ORR under the current regulatory review, which covers the period from 2009-2014.

The infrastructure group has expressed concern that the current structure of the railways -- under which train operators with relatively short franchises and little incentive to invest and are responsible for managing and maintaining most stations on the network -- is allowing some stations to fall into disrepair.

The Association of Train Operating Companies is reportedly concerned about the plan and is meeting on Wednesday to discuss it.

'This is something we will fight tooth and nail,' The Sunday Telegraph quoted Go-Ahead Group PLC chief executive Keith Ludeman as saying. 'The current system works well and any move away from it would be wrong.'

Go-Ahead said last month that its full year profits are likely to be higher than expected thanks to passenger growth on its two rail franchises, South Eastern and Southern, despite controversial fare increases in January.