Treasury risk after ‘Black Monday’

Published on Tuesday 26 March 2002 00:00

TONY BLAIR was today reeling from his personal "Black Monday" as Labour back-benchers reacted with shock to government announcements over Railtrack, as well as massive job losses at Consignia and at naval dockyards on the Clyde and south coast.

It was revealed today the measures will leave the Treasury with a massive public spending risk.

Labour MPs were horrified to see ministers defending 15,000 redundancies in the postal service and up to 750 in naval support.

They were angry as Transport Secretary Stephen Byers announced a dramatic U-turn, junking his previous pledge not to use taxpayers’ money to bail out Railtrack shareholders and contributing 300 million to a 1.3 billion package which will give them 2.50 a share.

Labour back-benchers sat in glum silence as first Industry Secretary Patricia Hewitt defended the post office job losses as unavoidable and then Mr Byers claimed compensation for Railtrack shareholders was good for the travelling public.

And they were horrified when Defence Minister Adam Ingram announced in a written answer that new "partnership" arrangements with the private sector would lead to up to 750 job losses in naval support staff at dockyards on the Clyde and at Portsmouth and Devonport. Redundancy payments could cost the taxpayer around 7.5m.

The Treasury was equally dismayed at the total cost of the bail-out of Railtrack, packages for the naval redundancies and Consignia job losses will likely top 1bn - 43 per taxpayer.

But because of the need to guarantee the new not for profit company - Network Rail - that is to take over Railtrack and requests from Consignia for the government to forego this year’s dividend from the group worth more than 60m and return the last two years’ dividends, worth 244m, the total cost could rise to 10bn - more than 400 per taxpayer.