BR franchise bid ruled out

The Government has dressed up the first three rail franchises to make them more attractive for sale by promising to underwrite the costs of future regulatory and tax changes.

It has also rejected an attempt by British Rail to bid for the franchises because it fears a public sector competitor would deter private companies from bidding to take on the franchises.

Roger Salmon, the franchising director, has tried to eliminate much of the political risk faced by potential bidders - and the financial consequences - by taking on the burden of VAT if the Government decides to impose it on rail travel for the first time.

Mr Salmon, who works under the direction of the Transport Secretary, has also agreed to meet any extra costs arising from unforeseen regulatory changes that result in increases in track charges.

Under the system announced by the rail regulator, John Swift, charges are determined by a formula which means they should go down by 2 per cent in real terms each year until 2001.

The guarantees substantially reduce the scope for an incoming Labour government to reverse any of the contracts agreed before a general election.

Mr Salmon has also ruled British Rail should not be allowed to bid because a "considerable number of bidders would not wish to compete".

BR was given the opportunity to bid, subect to the franchising director's consent, in a last-minute amendment to the Railways Act promoted by Tory peers in the summer of 1993. A BR spokesman said last night: "We had applied to pre-qualify for all franchises."

Mr Salmon is also minded to rule BR out of bidding for the next five franchises.

Philip Snowden, group executive of Badgerline, the bus company that has expressed an interest in bidding, said the timetable was very demanding: "The management teams have a big advantage and it is easy for them to put in bids in time. But we have been given little information until now and we have a lot of work to do."

The Passenger Rail Industry Overview issued by the Office of Passenger Rail Franchising with the tender documents yesterday, is the most detailed guide to rail finances ever published. It alerts potential bidders to the political stance adopted by the Labour Party, quoting John Prescott, who has said Labour wants to ensure "a publicly owned, publicly accountable railway".

For the first time, bidders have some idea of the business they will be seeking to run. Over half the costs, not counting those met by subsidy, are fixed, with track access charges and train leasing the biggest components.

Income is hard to increase, after this week's announcement that fares will be linked to inflation for three years and below it thereafter, except for particularly good performers.

Therefore their best hope for healthy profits, which will not be regulated in any way by Mr Salmon, is through subsidy and by reducing costs in an industry still thought to be overmanned.

However, employees will initially be protected by the Tupe rules which prevent new private employers altering the terms of existing workers.

Other warnings issued in the Overview are the lack of any "track record" or relevant accounts, the lack of proper computer systems, several issues where disaggregation is still not complete and the fact that non-privatised parts of the railway have no guarantee of subsidy, which may have a damaging effect on railways generally.

Originally, 37 companies applied for pre-qualification for the first eight franchises. Yesterday Mr Salmon refused to say how many had passed the first hurdle but a source at Opraf suggested that half-a-dozen "railway buffs and eccentrics" had been weeded out.

Several of the potential bidders have subsequently merged and, with eight MBOs and BR applying, about 20 companies remain in the race. At least six are thought to want to bid for the London, Tilbury and Southend line, the smallest of the first three franchises.

Suggested Topics
Voices
The Sumatran tiger, endemic to the Indonesian island of Sumatra, is an endangered species
voicesJonathon Porritt: The wild tiger population is thought to have dropped by 97 per cent since 1900
Arts and Entertainment
Beast would strip to his underpants and take to the stage with a slogan scrawled on his bare chest whilst fans shouted “you fat bastard” at him
musicIndie music promoter was was a feature at Carter gigs
News
news
Arts and Entertainment
Story line: Susanoo slays the Yamata no Orochi serpent in the Japanese version of a myth dating back 40,000 years
arts + entsApplying the theory of evolution to the world's many mythologies
PROMOTED VIDEO
News
Performers dressed as Tunnocks chocolate teacakes, a renowned Scottish confectionary, perform during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
news
Life and Style
Popular plonk: Lambrusco is selling strong
Food + drinkNaff Seventies corner-shop staple is this year's Aperol Spritz
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Shake down: Michelle and Barack Obama bump knuckles before an election night rally in Minnesota in 2008, the 'Washington Post' called it 'the fist bump heard round the world'
newsThe pound, a.k.a. the dap, greatly improves hygiene
Arts and Entertainment
La Roux
music
Arts and Entertainment
Graham Fellows as John Shuttleworth
comedySean O'Grady joins Graham Fellows down his local Spar
News
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Ross Burden pictured in 2002
people
News
Elisabeth Murdoch: The 44-year-old said she felt a responsibility to 'stand up and be counted’'
media... says Rupert Murdoch
Arts and Entertainment
tv
Extras
indybest
Sport
Arsenal signing Calum Chambers
sportGunners complete £16m transfer of Southampton youngster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Java Developer - Banking - London - Up to £560/day

£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...

HR Business Analyst, Bristol, £350-400pd

£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...

Account Manager - (Product & Account Management, Marketing)

£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on