At a stroke, Labour has put at risk the trust of the private sector. They have imperilled the billions of pounds in private sector finance needed to reform and repair Britain's crumbling public services

Michael Howard, shadow chancellor

The government agreed on Wednesday that Railtrack would be given access to �370m in assets frozen by the company's bank as part of the administration process.

This will be divided up amongst shareholders once a new, not-for-profit trust has been established to take over track and signals from Railtrack.

City backlash

Meanwhile Railtrack shareholders in the City have swung in behind the Railtrack group's board of directors, giving full backing to their efforts to secure a fair payment for shareholders.

They have written to the government warning of possible legal action over the decision to put the company into administration.

Railtrack has also criticised the transport secretary Stephen Byers, accusing him of prevaricating over the group's request for an urgent meeting for further talks.

Loss of confidence

The Railtrack debacle has put a question mark over the government's much-vaunted campaign to increase private funding of public services.

Shadow chancellor Michael Howard said: "At a stroke, Labour has put at risk the trust of the private sector.

"They have imperilled the billions of pounds in private sector finance needed to reform and repair Britain's crumbling public services.

"Capital markets are now learning that they cannot trust the government."

He added: "The shareholders in Railtrack, who include thousands of workers in the industry and thousands more pensions, have had their shares confiscated.

"This is a return to Old Labour at its worst.

"What appeared to be a carefully-staged coup by Labour ministers is now in disarray and threatens the future of public service funding."