Outlook: When privatisation fails to deliver the goods

None of the privatised train companies criticised yesterday by the rail franchising director for declining standards of reliability and punctuality had the temerity to blame the wrong sort of snow. How could they when London is warmer than Cairo, migrating birds are returning to nest and the buds have been fooled into bursting open? Even so, the list of excuses on offer would have done a BR station announcer proud. Don't blame us, blame Railtrack, the train leasing companies, the rolling stock we inherited, the power supplies, landslides, crashes, tunnel collapses. Blame anybody, but not us Guv.

To be fair, the performance figures released by Opraf are not quite the damning indictment opponents of rail privatisation would have us believe. Reliability and punctuality over the year improved on as many routes as it deteriorated and the abysmal performance on a number of services - notably Mr Branson's West Coast Mainline up to Scotland - skews the picture.

However, none of this disguises the fact that the trend is very definitely heading in the wrong direction. In the last three months of 1997 the number of cancelled and late-running trains was sharply up on a year ago. Given that the privatised rail industry costs the taxpayer almost twice as much in subsidies as the old state owned BR, this is quite an achievement.

Oddly enough, privatisation is very often followed by an initial period of declining performance. This was certainly the case with British Telecom and the water companies, all of which took some years to learn that the customer is there to be served, not exploited. In theory this should not have happened with the rail industry since it was splintered into a hundred tiny bits on privatisation to instill financial tension and deliver greater competitive efficiency. Unfortunately, this does not appear to have done the trick. Nor do the commercial incentives built into the regulatory regime to encourage standards of service.

The main cause of the problem seems to be that rail privatisation was proceeded by an investment strike and a complete freeze on new rolling stock orders. Although that has now been remedied, passengers are paying the price while the train operators sit on their hands waiting for new rolling stock to arrive. This is not an acceptable state of affairs for an industry receiving pounds 2bn of public subsidy. Yesterday's miserable figures give the Government all the ammunition it needs to act.

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