Outlook: The Fat Controller calls a halt at Railtrack

Given that the Rail Regulator John Swift cannot plunder Railtrack's revenues until 2001, the 8 per cent drop in its share price which accompanied yesterday's launch of the review of access charges looks like a short- term panic response to a longer term problem. But regulators do make the City jittery these days, and after the treatment Clare Spottiswoode meted out to poor old British Gas, there is no telling how beastly Mr Swift may choose to be.

Railtrack undoubtedly got away with a very generous regulatory regime when the access charging formula was put in place in 1995. A one-off cut of eight per cent in charges followed by real reductions for the next five years of 2 per cent hardly looked challenging for an organisation carrying the amount of excess baggage left to it by British Rail.

The share price rather tells the story. In the eighteen months since privatisation, Railtrack has more than doubled in value while the profits have been piling up at the same remorseless rate as Virgin Trains receives customer complaints. Not surprising for a business where 94 per cent of the income is guaranteed by the taxpayer via the subsidies paid to Railtrack's customers, the train operating companies.

Now Railtrack is about to pay the price, if the Regulator gets his way. Buried away in the small print of yesterday's consultative document is a paragraph inviting views on why the company should be allowed a rate of return any higher than 8 per cent. The sort of figure Railtrack has been bandying around the City is a good deal north of that.

Following in the footsteps of the laughing regulatory at Ofgas, Mr Swift has also dropped a heavy hint that the value of the regulated asset base on which Railtrack will be allowed to earn a return will be much closer to its pounds 2bn flotation price than the pounds 7.4bn figure which appears in the accounts.

Oddly enough, the one person who may slow up the Swift express as it bears down on Railtrack is the Deputy Prime Minister John Prescott. If Railtrack has its way, then very soon it will end up owning not just the rail network but also a slice of London Underground and the Channel Tunnel Rail Link, turning it into the sort of monopoly provider that old Labour so loved, albeit a privately-owned one. With so much of his integrated transport policy riding on Railtrack's investment strategy, Mr Prescott can't afford to be too beastly.