The end of Railtrack offered Britain a "golden opportunity" to create a rail network that answered to passengers and not to shareholders, the Transport Secretary, Mr Stephen Byers, said yesterday.

And as he outlined plans for the future of the rail network, Mr Byers indicated further negotiation was required before an announcement on Railtrack Group's £400 million sterling (€637 million) rights to part of the Channel Tunnel Rail Link. If confirmed the rights could be sold to provide some compensation for Railtrack shareholders.

In a statement to MPs in the House of Commons, Mr Byers defended the government's decision to put Railtrack into administration on October 7th, insisting it would have been irresponsible to give the company a "blank cheque" of additional public funds. The government is proposing a private not-for-profit firm takes over Railtrack's responsibilities and any operating surplus raised from track access charges is reinvested in the rail network.

"With no shareholders we would remove the conflict between the need to increase shareholder value with the interests of rail passengers," Mr Byers said.

Such a company would have the needs of the travelling public and other users as its priority, Mr Byers said, but it was unclear when the new firm would begin operation, prolonging the uncertainty for Railtrack's 250,000 shareholders.

The Conservatives said the plans would ensure funding for the railways was frozen for at least a year and called for Mr Byers's resignation.

Railtrack executives have accused Mr Byers of failing to inform them he was considering administration, but Mr Byers told MPs it was Railtrack's advisers and not his department that first raised the prospect of insolvency.

The difficulties began, he said, after the government confirmed £1.5 billion in additional funding in April and Railtrack came back several times during the summer seeking more money. It was clear that, unless extra financial assistance was forthcoming, Railtrack would be unable to declare it was "a going concern" when it delivered its financial report next month. "The effect of this would have been disastrous," he said.

Railtrack then asked the government to cover all its costs and profits and a four-year suspension of the rail regulatory system. Negotiations continued until October 3rd but Mr Byers said they failed to resolve Railtrack's financial crisis.

"In the end it was obvious that the firm could not continue unless we offered to fund whatever losses they might have for a period of several years. I took the view that I simply could not responsibly enter into such a guarantee on behalf of the British taxpayer. But no way out of the dilemma could be found. Either we gave the guarantee on money or the company became insolvent," Mr Byers said.

Earlier, Railtrack insisted that administration was not "actively considered" during any meeting with the government and it denied reports that its financial situation declined considerably during the summer, insisting it remained "broadly the same" as last year.