Public Sector Management: Selling off the rails: Stephen Pritchard examines fears that privatisation will damage the partnership between BR and local authorities

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THEY MAY not have the glamour of InterCity, nor the sheer size of the London Underground, but last year metropolitan rail networks served some 13.6 million people outside the capital, with over 938 miles of track. And most of this network is a product of a partnership between British Rail and local authorities, acting through passenger transport executives (PTEs). But the Bill to privatise British Rail, published on Friday, means the PTEs may soon have to take on a radically different role.

The PTEs were created by the Transport Act of 1968. They are able to draw up requirements for services, set fares and subsidise networks, through capital investments and revenue support. Lines with local involvement are covered by Section 20 of the 1968 Act and are often referred to as 'Section 20 lines'.

There are seven PTEs in England and Scotland: Strathclyde, Greater Manchester, South Yorkshire, Tyne and Wear, West Yorkshire, Merseyside (Merseytravel) and the West Midlands (Centro). The last decade has seen considerable investment by PTEs in urban rail projects, notably the Manchester Metrolink. South Yorkshire PTE's supertram is due to come into operation this year. Local authority / BR co- operation also exists in areas without PTEs including Gwynedd, East Anglia and the east Midlands.

The privatisation Bill states that passenger transport authorities and their executives will continue after 1994. But in administrative terms, privatisation could cause many difficulties. According to Bill Tyson of Greater Manchester PTE, local government stands to lose its current one-to-one relationship with British Rail. 'This will be replaced with a much more complicated system. Over the last few years BR restructuring has given us a simple communication channel with Regional Railways. This is under threat.'

Certainly, co-operation between BR and the PTEs will have to change. PTEs currently specify requirements directly to Regional Railways, who then run services on their behalf. The Department of Transport states that franchise winners will be required to pay attention to the wishes of the PTEs and that franchise contracts will still state minimum service levels. However, this will have to be done via the franchise authority, and this could mean a lot of extra bureaucracy.

The PTEs currently need only consider their requirements and resources, and any effect of their proposals on British Rail services. For its part, the franchise authority will also have to assess how proposals fit in with other franchises, consult Railtrack (the proposed track authority) and allow for the commercial needs of the franchise operator. Such obstacles may yet stifle local initiatives.

The scale of this local partnership should not be underestimated. Last year passenger transport authorities and Strathclyde Regional Council invested pounds 96.6m in rail infrastructure and paid pounds 132m to support services, according to Signals for a Better Future, a report by Regional Railways and the Association of Metropolitan Authorities. Any threat to this funding would prove a major setback to plans to reduce car dependence; local government funding through the PTEs subsidises up to 150 million passenger journeys a year.

The PTEs had hoped to ensure continuity by becoming franchising authorities themselves. However, the Government holds the view that smooth implementation of privatisation can only be ensured via a national rail franchise regulator. The PTEs feel this ignores the expertise they have built up over 25 years, and especially their ability to look at wider issues such as congestion and the environment.

David Howard is director- general of Tyne and Wear PTE and also chairs the PTE Group, the forum for PTE managers. 'We've been playing the game for a long time,' he explains. 'We have the ability to set railways in a total transport context. There are all sorts of social and economic considerations that say it might be best to put some money into transport, to get people on to rail and off the roads. We also have experience of dealing with railway operators, and of specifying and monitoring services. There is no one else with that experience in the country.'

Now that the option of becoming a franchise authority has been blocked for the PTEs, the Government can expect them to offer the central regulator their services as agents. 'The PTEs have already invested pounds 600m in British Rail. We are determined that our investment is protected and that assets are used for their original purpose: for local communities,' Mr Howard adds.

A more radical option that is still open is for management buyouts by PTE staff. The Bill does not allow BR to apply for franchises. PTEs which currently operate rail services include Tyne and Wear and Strathclyde. In fact, the Tyne and Wear Metro includes 26 miles of track - the North Tyne Loop - bought from BR. But the PTE Group has reservations about such moves. 'If we are going to be involved with franchising - and that should be our role because the PTEs can represent the wider interests of urban transport - then the roles of operator and franchise authority must be entirely distinct. If, for example, the Tyne and Wear PTE were to act for the franchise authority we would have to set up the Metro as a separate company,' Mr Howard says.

The biggest problem facing local authorities is the uncertainty rail privatisation is causing. It is a barrier to further investment. Putting money into rolling stock, for example, will only be considered if local authorities can be sure that stock will be used for services in their areas. Improving stations can only be justified to council tax payers if the council or PTA can be sure that, if the station is later sold to the private sector, the authority will receive its share of the proceeds.

Bill Tyson suggests the sooner the situation is clarified the better. 'The passenger transport authorities are very wary about investment,' he says. 'If we put money into the rail network, what will happen to our investment? We have just finished the Manchester Airport rail link so Greater Manchester has nothing fully prepared that's had to be delayed. But if it goes on much longer, I can see future projects being sucked into the uncertainty.' And the Secretary of State for Transport, John MacGregor, admitted in the House of Commons that privatisation could take up to 12 years.

Some of this uncertainty has been removed now the Bill has been published. And it is already clear that the passenger transport executives will be fighting to maintain their input into railway planning and management, with the advantages of a more co-ordinated transport system for our cities.

As David Howard points out: 'The benefits of local government involvement in rail have been enormous. We would not have had the Tyne and Wear Metro, Manchester's Metrolink or the Sheffield Supertram. Nor would we have local BR services performing as well as they do now. We would not have the investment that local government has put into Section 20 lines.

'We have been very strong partners with BR. In doing a lot for local railways we have done a lot for local communities.'

(Photograph omitted)