The blanket coverage awarded the London bombers over the past week passes all reason, justice or sense of proportion. Terrorism never wins. But it almost does. The terrorist creates an event, then publicity for the event, then the leverage that comes with publicity. He creates the first himself. For the rest he needs outside help. And how we give it.
The one thing the bomber craves is fame. So why offer it on a plate? Why does BBC news ghoulishly retrace the Thameslink “trail of terror”, or Newsnight explain exactly how to make a Tube bomb, or a radio reporter declare that “race relations in Leeds will never be the same again”? Who is writing these scripts — Osama Bin Laden? I have been a journalist all my life and am aware of the “duty to report” and the danger of suppression. But terrorism demands particular sensitivity. The media are its weapon of mass dissemination as well as its recruiting sergeant. For the past week I have sometimes wondered whether Bin Laden himself were not controlling the British media.
Meanwhile, the normal processes of democracy are left to atrophy. For 10 days all other news has been driven from public attention. Vanished, in particular, has been the story that would otherwise have led every bulletin and consumed acres of print. The High Court has been witness to the biggest and most sensational class action in British history, a suit for “misfeasance” (dishonest abuse of power) brought by 50,000 Railtrack shareholders against Her Majesty’s government.
The case is of massive significance to the integrity of British politics. It is the common man against Leviathan, the evidence portraying squirming ministers, bullying officials, money beyond dreams of avarice, chicanery and lies. Laid bare have been the inner workings of Tony Blair’s courtier style of government. The Scott inquiry into arms-for-Iraq was small beer in comparison. The case tells us more about Whitehall’s view of the world than ever did Hutton. It deserves a Spielberg movie to itself.
On Thursday the fall guy in the case, Stephen Byers, finally admitted that he had lied on the central issue: whether or not there was a Treasury conspiracy, Project Ariel, to renationalise the old British Rail infrastructure company, Railtrack. The conspiracy involved denying 250,000 shareholders, despised as “grannies”, compensation of some £4 billion.
Compensation is normal when democracies nationalise private firms. Gordon Brown’s Treasury refused to acknowledge this. Its memos oozed contempt for ordinary citizens. It apparently hoped that by manoeuvring Railtrack into bankruptcy, it could get Railtrack for nothing. And this from a man who last month lectured African governments on their probity.
Under intense City pressure Byers in effect offered shareholders a bribe to vanish, with 250p for stock worth almost twice that at flotation and £17 in 1998. The banks and pension funds decided to cut their losses and take the money. Byers duly acquired Railtrack for just £500m. But independent shareholders, including railwaymen who had been encouraged by ministers to invest in their own company, sued. The government hoped to deter them by threatening astronomical legal costs. They raised £3m and called the bluff.
Two weeks in court have seen the government case plummet. Its central thesis is that the company was forced into insolvency only when ministers felt it was past salvation in October 2001. Court papers and Byers’s own admission prove this to have been untrue. Indeed in 2002 Byers bragged to a colleague that Project Ariel had long been his own idea.
The case reveals a remarkable change that has taken place in Whitehall under Blair, through the prism of the destruction of a once-great British industry, the railways. The context was a macho culture of feuding ministers, political aides, press advisers and fee-rich “parastatal” bankers and accountants. Accountability is nowhere. Parliament is nowhere. Were it not for bold shareholders we would know nothing of it.
Having created Railtrack just six years earlier, the Treasury came to loathe its baby with an appetite for money more voracious than ever was British Rail’s. Documents depict Brown as desperate for renationalisation, but on the cheap. His favourite aide, Shriti Vadera, on secondment from UBS Warburg, duly took charge.
“Can we engineer the solution through insolvency,” she e-mails Byers in July, “and therefore avoid compensation under the Human Rights Act.” In September Byers reports to Blair, regretting that, as yet, “our advisers have unearthed no killer facts which I could use to force the company into railway administration”. Vadera seemed unconcerned by the grannies but it is “the American investors we have to worry about”. She also wants a scheme complex enough “to lose the tabloids”.
Vadera, Byers’s puppeteer, is the star performer in absentia, though how she and Brown are escaping a court appearance is a mystery. Also architect of London’s Tube privatisation, she emerges from the welter of documents as typical of Brown’s Treasury, a bossy, assertive and apparently unsupervised denizen of that lush Blairite no man’s land between Whitehall, consultancy and banking.
Her own bank, Warburgs, earned £45m floating Railtrack and held 3m of its shares. Unlike 250,000 other shareholders it offloaded them before insolvency. It then reappeared as adviser on Railtrack’s replacement, Network Rail. For an undisclosed sum it even handled the new body’s £9 billion bond issue the following year. Another Warburg employee seconded to the Treasury in 2001, Robert Jennings, was this year intriguingly awarded a CBE for “services to the transport industry”.
The government claims it bore no malice to Railtrack shareholders. What then of the evidence of the former rail regulator, Tom Winsor? He asserted forcefully that he could and would have restructured Railtrack’s finance, operating under his statutory authority. Byers threatened to sack him if he did, warned by Vadera that Winsor would “rob us of a cleaner insolvency trigger”. Winsor must be silenced, she said, or “we are up the creek”. His written evidence was so damaging to the government’s case that its counsel, Jonathan Sumption QC, apparently dared not cross- examine him lest worse come out.
Privatisation theory holds that anyone who buys shares in a private company must take some risk and there was no “open-ended cheque” to the railway. But there was. Railtrack was a company formed under statute with government, in the form of the regulator, as ruler of its revenue. It did not operate in any market. Winsor determined how much Railtrack could charge train operators to run over its tracks. The government had to pay up. That was the law and basis of the shareholders ’ security.
In 2001 Railtrack’s finances had been wrecked by the Hatfield crash, constant political intervention and soaring safety requirements. It may not have been a well run company, but that was largely because of its Treasury design. Either way it had a reasonable expectation of continued subsidy. If the government wanted to resume ownership, Railtrack’s value should embrace that expectation or, if not, at least reflect the open market value of its estate.
When Byers replaced Railtrack with Network Rail, subsidy instantly resumed. In my view Byers had indeed discriminated against Railtrack’s shareholders.
No reasonable person following the trial could doubt the Treasury wanted Railtrack back in its clutches and schemed with Byers to cheat shareholders of their money. Both rode roughshod over the legal power of the regulator, Winsor, to rescue the company. Indeed there must now be a giant caution sign over any regulated private utility: “Beware of government theft”.
Ministers are not being accused of fraud, merely of deceit and cheating the public of their property. If they lose, as in my view they deserve to do, the big institutions have said they will renounce the 250p deal and sue. More billions will vanish into the great British railway catastrophe. If ministers win, the message will go out that the government has, in effect, a licence to steal.
Byers’s old department said of September 11 that it was a good day to bury bad news. This past week has been a good one to bury an astonishing tale of Whitehall skulduggery told to the High Court. It must not be ignored. The case, which has a while to run, is a classic test of judicial authority over a corrupted executive. I am sure Mr Justice Lindsay is up to the task.
