Mr Prescott said that a Labour government would continue the contracts, which the Government is preparing to offer for about half of the 26 train-operating companies to run private services. Some of the contracts will run for six years or more.
Rather than buy out contracts and pay compensation to the operators, Labour would allow them to run their course and then allow British Rail to bid for the business.
Asked on BBC radio whether Labour would have a publicly owned railway which allowed privately run services to operate on it, Mr Prescott replied: "We will allow those contracts to continue, so the answer to that would be `yes'. But BR will clearly be operating the major part of those services. Now, when those contracts are up, we want a publicly owned and publicly accountable railway and we are entitled then to allow BR to bid for those franchises."
His disclosure is likely to dismay unions who were reassured by Mr Prescott's commitment 24 hours earlier that Labour would operate the railways as a "publicly owned, publicly accountable" service. It could lead to renewed demands for a tougher commitment as part of the campaign by traditionalists to defend Clause IV of Labour's constitution.
Senior Labour leadership sources later said Mr Prescott was giving examples of the options now facing the rail policy group, which he chairs. "Nothing is set in concrete."
However, Mr Prescott's remarks on BBC radio showed no equivocation. How to deal with the franchise operators is one of the most pressing problems facing the group, which includes Gordon Brown, the shadow Chancellor, and Michael Meacher, shadow Secretary of State for Transport. Labour's commitments have stopped short of a pledge to "renationalise" British Rail. Mr Prescott's team is keenly aware that an incoming Labour government would not have the resources to spare to buy back assets that have been privatised.
The team's key strategy is to stop privatisation by warning franchise bidders that a Labour government would use the regulator to impose higher standards of service and safety, cutting their potential profits.
Brian Mawhinney, the Secretary of State for Transport, will tell Labour in a Commons debate tomorrow that the franchises will go ahead. He is also determined to privatise Railtrack, creating a further problem for the Prescott group. It would cost an estimated £4bn to restore Railtrack to total public ownership. The group is studying the scope for buying back a controlling share, if only 51 per cent is sold. Members of the group are confident it will not be sold before the next general election, because of the unpopularity of the privatisation.
Dr Mawhinney has told colleagues he is facing presentational difficulties in explaining the role of the rail regulator, whose proposal to cut through- ticketing stations has caused controversy.The regulator is also about to announce the rates that franchise holders should pay Railtrack, to be followed next month by a potentially contentious announcement on minimum service standards.
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