BR chief admits sell-off plans are harming service

Sir Bob Reid, the British Rail chairman, admitted yesterday that services were deteriorating because of upheavals caused by privatisation and the reorganisation of the railway.

Giving evidence to the Commons transport select committee on the first day of its inquiry into rail finances, he said the new system - involving tens of thousands of contracts - was "taking time to bed down".He said: "Under the old system there was no chance of alibis when something went wrong. I do not have the same confidence as the rail regulator that the contractual structure will be better than the command structure."

Under the command structure, Sir Bob emphasised, there had been enormous productivity gains with half a billion pounds wiped off annual costs. Now, he accepted, there had been considerable additional costs as a result of the privatisation process.

BR's immediate financial crisis had been averted. After intense negotiations with the Government, it would be able to keep broadly to its existing timetable for next year but faces drastic cuts in investment spending. Negotiations had led to an extra £350m of subsidy for the current year to pay for a number of unexpected extra costs. These included £170m caused by the signal workers' dispute, £80m as a result of the late opening of the Channel tunnel and £80m in redundancy and privatisation costs.

However, on investment, most of which is no longer the responsibility of BR but is now the responsibility of Railtrack, a paper presented by BR said of only £100m available for investment in the forthcoming year, £70m had been allocated, leaving £30m. That would go on safety.

Answering questions from Keith Hill, Labour MP for Streatham, who pointed out subsidy to the railway would be doubled after privatisation from £1bn a year to £2bn, Sir Bob said there were possible benefits because taxpayers would no longer be responsiblefor the capital investment programme.