Discussions within the Department of Transport are almost certain to result in some services being franchised on an exclusive basis to private operators. Rival companies would be barred from running trains on the same track.
Critics will argue that the move would create privatised monopolies, as did the sell-off of British Gas and British Telecom. Ministers now acknowledge that some lines, particularly on Network SouthEast commuter routes, will probably be run as monopolies. John Prescott, the Labour transport spokesman, said rail privatisation was dead and the Government had made 'the first U-turn of the New Year'.
The change is the latest in a string of setbacks which have beset the sell-off of BR. The Prime Minister, who took a detailed interest in the formulation of the privatisation plans before last April's general election, is said to be concerned.
On New Year's Day Mr Major appeared to be preparing the ground for a softening of government proposals by describing the plans as a 'semi-privatisation'.
Yesterday, John MacGregor, Secretary of State for Transport, struck an even more defensive note on BBC Radio 4's Today programme.
He said his department did not intend 'a classic privatisation'. It was, he said, 'a commercialisation of the passenger services'. He added: 'We do recognise the important social role of the railways and we have said we shall maintain subsidies to maintain socially necessary lines.'
After a long and bitter Whitehall battle, the Conservatives went into the general election committed to franchising out passenger services 'in such a way as to reflect regional and local identity'. The Government is committed to splitting BR into two, with a new authority, Railtrack, taking charge of the track and signalling.
To counter charges that they would create private monopolies, the Tories' manifesto also promised to ensure that 'all companies have fair access to the track'. But ministers and officials are coming round to the view that this would deter companies from bidding to operate franchises. The operators would be unable to rely on projected revenues because rivals might move in to cream off the profitable parts of the service.
The 'open-access policy' is expected to be criticised heavily by the influential Transport Select Committee, which is bringing its report out this month in the hope of influencing the draft of the privatisation Bill.
Unease about the practicality of the plans has grown in Tory ranks after public criticism by Lord Ridley, the Thatcherite former secretary of state for transport.
Mr MacGregor yesterday emphasised his commitment to bringing in private operators. They would begin in April, May or June 1994, he said. But at first, ministers say, only a few services will be operated privately; more will be introduced in an 'evolutionary process'. Mr MacGregor remained non-committal about the timing of the Bill, which was originally expected last November but then delayed until this month.
Mr Prescott said Mr Major's use of the term 'semi-privatisation' had 'sounded its death knell loud and clear'. He added: 'What we hear is that three or four private franchised passenger services will come in with guarantees of no competition, financed by public subsidies in order to guarantee profits - and solely to provide newly-painted old trains.' The Government was 'reducing the profile and expectations' of BR privatisation.
The rethink over the BR plans comes amid growing criticism and speculation over the future of Sir Bob Reid, the BR chairman. Mr MacGregor is furious about a series of criticisms of privatisation plans from Sir Bob.
Whitehall increasingly sees Robert Horton, former chairman and chief executive of BP and now a non-executive vice-chairman of BR, as the most important driving force behind privatisation. Mr Horton could be put in charge of Railtrack, pitting him directly against the BR chairman. Sir Bob's contract will run until 1995 and he is on record as saying that he will see it through to defend BR's interests.
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