Labour scheme will derail BR privatisation

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The Independent Online
Labour leaders are planning to use tighter regulations to halt British Rail privatisation by warning operators their potential profits would be cut to pay for service and safety guarantees under a Labour government.

The use of regulation to tackle utilities that are already privatised, such as gas, electricity and water, marks a shift away from Labour's commitment to "Clause IV'' public ownership.

The abandonment of plans to return privatised industries to public ownership by buying back a "golden share'' is part of Tony Blair's strategy for updating his party's constitutional commitment to nationalisation at a special Labour conference in London next spring.

The details are unlikely to be spelled out before the conference, to avoid the party leadership being accused of a sell-out on social ownership by the party's left wing. But insiders say that a tougher regime by regulators of the privatised industries would give a Labour government the power to benefit consumers.

It could lead to more curbs on price rises by the utilities. Brian Wilson, a member of the shadow Trade and Industry team, which is drawing up the policy, said regulators should have the power to cap boardroom pay rises, such as the 75 per increase for Cedric Brown, chief executive of British Gas.

Mr Wilson is also pressing Gordon Brown, the shadow Chancellor, to follow his commitment to a windfall profits tax on the utilities with a pledge to give regulators the power to cap the dividends of the utilities. That would prevent the utilities avoiding Labour's tax net by passing their profits to their shareholders, but it would also hit pension fund investors and would be highly controversial.

Mr Wilson told the Independent that operators seeking franchises to run services on Railtrack would be warned that under a Labour government the regulator would impose strict demands on service frequency and safety requirements, which would probably include communications equipment in the cabs of all automatic trains, following the fatal accident at Cowden, Kent.

Regulation could frustrate the Tories' attempts to find private companies willing to invest in franchised British Rail services before the general election.

Leading article, page 13