ERNST & YOUNG paid Railtrack’s senior engineer nearly four times his salary out of taxpayers’ money after the collapse of the company, according to Network Rail’s first report and accounts published today.

E&Y, which was appointed as administrator for Railtrack in October 2001 by Stephen Byers when he was Transport Secretary, took the decision to pay Richard Middleton £700,000 for six months’ work to prevent him from leaving the troubled rail group.

Mr Middleton was one of three directors responsible for the network’s safety. E&Y feared that, without his expertise, the network could be plunged into chaos.

The engineer, who was involved in the disastrous upgrade of the West Coast Main Line, received a pay rise that included a doubling of his salary of £168,000, a hefty retention bonus and a year’s salary for loss of office.

Tim Collins, the Shadow Transport Secretary, said: “This is yet further evidence that Stephen Byers’s decision to force Railtrack into administration wasted a lot of taxpayers’ money.”

Further details of the costs of administration are likely to emerge later this week, as E&Y’s fees go to a High Court judge for approval. E&Y is thought to be asking for consent to fees worth £20.4 million.

However, the final bill, including other bankers’ and lawyers’ fees, is expected to come in at £70 million, well ahead of earlier estimates.

Under the Special Railway Administration Order, E&Y needs High Court approval both for its own fees and for a further £29.8 million, payable to its advisers. These include Deutsche Bank, which has submitted a bill for £14 million, and Slaughter & May, the law firm, whose fees are £8 million.

There is also a £2.5 million payment to Citigate Smith Barney, the advisers to the Department of Transport, and a £2.5 million bill for Simmons & Simmons, another law firm.

Costs on the railway have soared since Railtrack was placed into administration, despite efforts by the new management team to bring them under control. Network Rail, the not-for-profit company that replaced Railtrack, has been forced to ask for an extra £2 billion a year.

Further controversy is likely over the details of a revised incentive plan for Network Rail executives, also published today. It is expected to say directors could get performance-based extra payments for the year to March 2004 of up to 18 per cent, based on this year's targets, and a maximum of 60 per cent if they hit future targets early.

Payments will be based on three criteria: punctuality, or the percentage of trains running on time, and indexes measuring financial efficiency and asset management. The punctuality target is 82 per cent, compared with 79 per cent last year.

Network Rail is also publishing details of bonuses paid last year. However a company source said the payments would be “negligible”.