Commentary: Danger signals for BR privatisation

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The Independent Online
On cursory examination British Rail's financial performance last year would not seem to bode well for the Government's intentions of selling off the network.

Any business that could soak up pounds 892m in subsidies and then contrive to lose pounds 144.7m despite enjoying a monopoly over its market does not sound like prime privatisation fodder.

That, however, would be to miss the point. The object of the exercise is not to maximise government revenues but to instil private sector efficiency and flair into the business of running the railway.

Certain parts of BR, such as its profitable freight business, can and will be sold off piecemeal. But for the rest, John MacGregor, Secretary of State for Transport, will have to rely on the spur of competition.

How achievable is his goal? As far as the passenger side of BR is concerned, the Government intends to franchise out services to private operators. The most obvious starting point is InterCity, yet that side of the business only just managed to break even last year on an income of pounds 900m.

The grant-aided parts of BR - Network SouthEast and Provincial, which together made an operating loss of pounds 760m - are even less enticing. One way of franchising out these services would be for the Government to award the business to the operator that bids for the lowest level of public subsidy.

Yet no operator will be given carte blanche to make a profitable return by axing services or raising prices, particularly on Network SouthEast, which possesses a captive market. Any franchisee is likely to find its fares and levels of service controlled by the rail regulator.

Under these circumstances Mr MacGregor has to generate private sector interest at the same time as ensuring through-ticketing, maintaining a national rail network and providing for the massive investment that will be needed to make and keep the railways safe and modern.

It is not an impossible task, but nor is it an easy one. Last week Sir John Banham, director general of the CBI, suggested that, unless he was very careful, Mr MacGregor could end up creating a 'poll tax on wheels'. His white paper, due to appear in the next fortnight, will be the first test of whether the Government is going down the wrong track.