Plans to turn the bankrupted Railtrack into a not-for-profit trust have received a lukewarm reception from the opposition parties.

As a handout to shareholders, embattled transport secretary Stephen Byers announced the beleaguered company will be allowed to run the channel tunnel rail link and raise its own funds in the marketplace.

During the first day of debate following the summer recess, the Conservatives called for an inquiry to see if the laws which make it a legal requirement for shareholders to be informed of events were broken when Byers wound the company up.

The Tories said the embattled minister should resign in the wake of the Railtrack announcement and the now-notorious "bad news" e-mail from his special advisor Jo Moore.

Tory shadow Transport secretary, Theresa May, said: "Stephen Byers is now a lame duck minister. His refusal to dismiss his disgraced spin-doctor, Jo Moore, has revealed his preference for spin and presentation over action and delivery. His decision to destroy Railtrack has left the rail industry in tatters with no hope of getting the much-needed billions of private investment.

"This is a man who goes for short term headlines over long term prudence. He is the embodiment of everything that New Labour stands for. He should step down now."

For the Liberal Democrats, Don Foster accused the government of mismanagement and botching the Railtrack announcement.

"It is the right decision to turn Railtrack into a public interest, not-for-profit company. It will ensure that no more taxpayers' money goes to shareholders. At last the obscene conflict between shareholder profit and passenger safety is at an end. It is amazing that the transport secretary has created yet more confusion. Botched Tory privatisation has been followed by botched Labour administration," Foster said.

He accused Byers of creating confusion over who actually runs the country's rail network.

"The transport secretary should have followed a clear process to turn Railtrack into a public interest company. Instead he has created more confusion over who is in charge of what, and what belongs to whom. Labour have seriously mismanaged implementing a policy which appears to have been months in the planning. It is hardly the best start to restoring public confidence in the railways," Foster said.