EU clears railway rolling stock sale

Neil Kinnock, the European transport commissioner, has approved the sale of three BR rolling stock leasing companies, which the commission has been vetting to ensure no illegal state aids are involved, writes Peter Rodgers.

It also emerged that Hambros, the bank handling the sale for the government, has negotiated a final price pounds 20 to pounds 30m higher than announced last month, taking the proceeds from pounds 1.78bn to pounds 1.81bn.

Last month, the Labour Party suggested Mr Kinnock could throw a serious obstacle in the way of the sale during his check on whether illegal state aids were involved.

The Brussels decision clears the way for completion of the deals, two of which are expected to go through this month and the third probably early in January. After scrutinising guarantees provided by the government to the three buyers the Commission said the UK had properly followed privatisation procedures.

The guarantees included a promise of government payments if there is a default of one of the leasing companies' customers. Two of the buyers are management buyouts, and the third is a consortium including Nomura International.

Separately, it is believed Racal is set to pay up to pounds 150m for British Rail Telecommunications, which is developing the railway communications system for outside commercial use. Racal is thought to have beaten bids by other companies including Nynex and NTL.

It also emerged that the Rosco sale proceeds - of which pounds 800m will be paid this financial year and pounds 1bn next April, - will be used to offset directly the Department of Transport's pounds 1.6bn a year subsidy to the railways. But proceeds from the Railtrack flotation will go direct to the Treasury.

This accounting treatment has led to claims that the government is intent on concealing the true bottom line figure for what it will receive from the sale of the railways, after an expected increase in subsidies..