Privatisation of British Rail will cost at least 200m pounds

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THE PRIVATISATION of British Rail is set to cost the taxpayer at least pounds 200m. The figure emerged yesterday as BR announced a pounds 144.7m loss for 1991-92 and government sources confirmed that the White Paper setting out plans for the sale of the network would be published in the next fortnight.

BR is understood to have earmarked spending of pounds 100m to prepare itself for the private sector and the Department of Transport is expected to have to spend a similar amount or more.

Last year's loss at BR compares with a deficit of just pounds 11m in 1990- 91 and was blamed on the recession, a steep fall in profits from property sales, higher interest charges and increased costs associated with safety improvements and the Channel tunnel rail link.

Sir Bob Reid, chairman, declined to comment on the effect BR's mounting losses might have on the Government's privatisation plans. But he warned that if privatisation was to succeed the Government would have to sanction increased spending on the network to the order of pounds 1.6bn a year.

One of the key criteria against which the privatisation plans had to be judged was whether they allowed for uninterrupted investment in the railways, Sir Bob said.

'The move from deterioration to dilapidation to danger comes all too quickly and must be prevented. That is why it is so vital that there should be no damaging hiatus in providing the necessary investment.'

BR's plunge to an operating loss last year of pounds 101.4m before interest and property sales - more than double the 1990-91 loss - may not augur well for its privatisation.

Operating losses at Network SouthEast rose from pounds 155m to pounds 182m while Regional Railways recorded a loss of pounds 583m - forcing the Government to increase subsidies by pounds 290m to pounds 892m.

Meanwhile InterCity's profits shrank from pounds 50m in 1990-91 to just pounds 2m and income from property sales fell by more than half to pounds 54m.

Despite the increased losses, Sir Bob ruled out any big increase in fares and insisted that the industry was in 'good shape'.

But the results demonstrate the toll taken by the recession. Two years ago BR made a profit of pounds 270m - in large part due to income from property lettings and sales. Last year the economic downturn bit into its income with a drop of 23 million in the number of journeys undertaken and a revenue increase of only 2.4 per cent.

In addition BR was forced to spend an extra pounds 225m on safety measures recommended in the report into the Clapham rail disaster, taking total investment to just over pounds 1bn - a 21 per cent increase on the previous year.

The White Paper, due to be published before Parliament rises for the summer recess in mid-July, will set out proposals to sell BR's freight business, which made an operating surplus of pounds 67.5m, and parcels, which recorded an operating loss of pounds 34.7m.

Passenger services and mainline stations will be franchised out to private sector operators. Richard Branson, chairman of Virgin Group, said he would submit plans to BR in the next two weeks to operate on four or five routes. 'If BR and the Government give us the go-ahead we feel we could be up and going in nine months,' he told Radio 4's World at One.

But Derrick Fuller, general secretary of the train drivers' union, Aslef, said: 'Past neglect and current recession have reduced British Rail to a financial state in which only a mug would want to take out a franchise.'

(Photograph omitted)

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