Hard road for the train man

THE MONDAY INTERVIEW ROGER SALMON; A tough rail franchise timetable is taking its toll on the driver

Roger Salmon, the rail franchising director, is looking a bit weary. At last week's presentation to launch the sale of the first three rail franchises to be offered to the private sector, he snapped at a group of journalists who were comparing notes: "Can we have one meeting only, please."

This tetchiness from the normally mild-mannered and pleasant Mr Salmon betrayed the strain he had been under for the past few weeks. Drawing up the documentation for the first three franchises was an awesome task and Mr Salmon's team worked the kind of hours more expected of City high- flyers than the assorted bunch of former British Rail staff and consultants who make up most of the 75 employees of the Office of Passenger Rail Franchising and are public sector employees.

He admits he would have liked more time, but says: "If you have all the time you need, nothing ever gets done."

Mr Salmon is being driven by a timetable which all but the most optimistic politicians reckon is unattainable. In a moment of bravado, John MacGregor, the transport secretary until last July, committed the Government to franchising out 51 per cent of the railways by April 1996. Even Mr Salmon says: "It's a challenging target".

The next round of invitations to tender will not be sent out until "the late summer" and clearly there will be some more long hours at Opraf's Old Queen Street HQ in Westminster.

Mr Salmon's bad humour was also a result of a rather public humiliation last week. On Monday, he announced the fares regime which, nominally, he has drawn up for the railways. Fare increases are linked to the RPI for three years and 1 per cent less than inflation for the following four years. These fare caps apply to a broad range of season and standard tickets, amounting to an estimated 60 per cent of journeys.

However, it was not Mr Salmon's plan. He had previously stated that he only planned caps on commuter fares in areas where rail travel is for many people the only viable method of getting to work.

However, just before he was due to issue his scheme a fortnight ago, John Major got wind of it and ensured that the fares regime looked more passenger-friendly. Unlike the rail regulator, John Swift, who only has to "take into account" ministers' guidance and then only until the end of 1996, Mr Salmon is a creature of government and works under the strict control of the politicians.

There is an obvious tension between making the franchises benefit the passenger and ensuring that they are saleable. The train operating companies, of which eventually 25 will be put on the market, unless a Labour victory stops Mr Salmon in his tracks, are a unique business.

Their main costs - leasing charges for rolling stock and track access charges - are fixed. Revenue is very difficult to increase, especially with the fare caps, although there is some scope for imaginative marketing. Putting on extra trains is virtually impossible, except at off-peak times, because of the lack of additional rolling stock.

The potential risks are set out with remarkable frankness in the Passenger Rail Industry Overview published last week by Opraf. Mr Salmon says it was essential to set out the problems: "I want bidders to produce bids quickly and this will help them do so. This is the beginning of a long- term relationship and I thought honesty was essential".

Among the deterrents are lack of a track record, the need to take on staff with existing pay and conditions, and the dependence on Railtrack to provide reliable and punctual service. However, Mr Salmon has ensured that many risks outside an operator's control, such as imposing VAT on rail travel or an attempt to raise access charges, have been removed.

While he will try to be as parsimonious as possible in handing out subsidy - and the bidder asking for the lowest amount will get the franchise - there is considerable scope for a private operator to reduce costs.

Labour relations have been set by national agreements and there will be room for local deals tailored to the needs of an individual line. Part-time drivers, split shifts and other flexible arrangments could be beneficial to both sides, although unions will initially clearly be resistant.

Mr Salmon also sees potential in reducing maintenance costs and possibly fleet sizes too. He said: "These businesses are very different, ranging from commuter lines to inter-city services. The scope for profits is different. In some, such as the latter, there will be scope to boost business, while in others they will be looking at reducing costs.''

Mr Salmon reckons the four pages setting out the performance regime in the Overview are the most important part of the agreement. "Good performers will be rewarded first with extra subsidy and then by being allowed to increase fares. And both passengers and the railways generally will benefit."

Mr Salmon is no train expert - not even a commuter now the Government provides the car that picks him up at his Dulwich home every morning for the four-mile drive to his Westminster office. His background is as a merchant banker, an expert at stitching up "complex multi-party transactions".

This experience, he claims, has been invaluable to his present job which, so far, has involved overseeing myriad contracts between the various players in the new railway, known by a host of acronyms - Roscos (the rolling stock companies), TOCs (train operators), and even, with apologies to the supermarket chain, Tescos (train engineering companies).

In finally bringing to market the first three rail franchises to be offered to the private sector, Mr Salmon has made rail privatisation seem, for the first time, a reality. It has not been an easy process. Despite ministers' constant references to other privatisations, rail is different in two ways - its services are dependent on subsidy and will remain so even after privatisation, and it is not a monopoly.

So far Mr Salmon has managed to attract about 20 potential bidders, in addition to management buyout teams. He says he does not want to sell the franchises to ``A N Other conglomerate'', but anyway expects almost all the bidders to be transport or service companies.

Critics and sceptics still outnumber privatisation supporters by the kind of majority with which the Tories have been losing by-elections. But at least for Mr Salmon, the process is now under way.

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