British Rail privatisation White Paper: Sparse document signals rail revolution: The White Paper on BR privatisation: many promises but few details on how the new system will work

THE White Paper sets out a framework which the Government hopes will enable large parts of BR to be privatised but it provides few precise details about how the new system will work.

The paper is a thin document, covering 21 sparse pages. No financial information on the cost of privatisation is set out.

The timetable for some of the more radical changes is, however, fairly rapid given the complex nature of the task. Within the lifetime of this Parliament the Government says it will sell off BR's freight and parcels businesses and give private operators rights of access to the network.

A franchising authority will be created and the Government promises that within this timescale a 'substantial number of passenger services' will be franchised. Simultaneously, a regulator will be created to protect the interests of travellers. Stations will also be put up for sale or leasing. The first franchises are expected to be allocated in 1994.

The starting point for the reorganisation is the division of BR into two sections, whose work will be overseen by two regulating bodies, the Franchising Authority and the Rail Regulator. The first section, to be called Railtrack, will have responsibility for operating all track and infrastructure. The other, yet to be given a name, will become a residual operating company responsible for operating passenger services 'until these are all franchised to the private sector'. When franchising is completed, 'BR's only function will be to provide track and associated infrastructure'.

The White Paper starts from the premise that a total privatisation as one entity is not possible 'because its financial losses are too great'. Given that, the Government 'wishes to involve the private sector' with the aim of 'introducing competition, innovation and the flexibility of private sector management'. The new track authority, Railtrack, will not be subsidised apart from a few specific grants for new investment. The regulator will ensure that train paths are allocated fairly and excessive charges are not made.

The franchising authority will have responsibility to franchise services. There is no blueprint of a franchise contract, partly because details have not been worked out and partly because of the heterogeneous nature of passenger services. The way that franchises are set out will also partly be determined by the necessity 'to respond to the interest shown by the private sector'.

Because there are fears that few potential franchisees are likely to come forward, 'flexibility will be preserved in all aspects of franchising, to take full account of the private sector's views on how it can best bring its skills to bear'.

There will be no standard duration for franchises, but it is expected they will last at least five years. BR will have to create a series of 30 to 40 companies, which will match the franchises to be offered and then it will put these out for tender. These may be for individual lines or groups of lines. Services which fail to attract any satisfactory private bids will continue to be run by BR.

In most cases, franchisees will be paid a subsidy to take on services and will have to fulfil 'broad objectives for service levels, service quality and fares'. Minimum service levels will be set by the franchising authority.

The Government says it is 'committed to continuing investment in rolling stock but hopes to pass as much of this as possible to the private sector'.

The White Paper expresses the hope that new companies would be able to lease rolling stock or that a secondhand market can be developed to enable new operators to overcome the barrier facing new entrants.

InterCity is the most profitable part of the network, but the Government has decided 'not to move to outright sale of its services at this stage'.

Again details are scanty as 'the precise manner in which InterCity services will be franchised will have to be decided in the light of private sector interest', but the main idea is to franchise them 'on a line of route basis, such as the East Coast main line and the Midland main line'. As InterCity is profitable, these franchises will have to be bought rather than coming with a subsidy.

Although Railtrack will not be directly subsidised, it will be able to finance new lines by charges to operators, which, of course, will be an indirect subsidy as most of these operators will be in receipt of government money.

Stations will not necessarily be separated off from services. In some cases, the Government expects that franchisees of services will take responsibility for stations for the period of their franchise. In other cases, stations will be sold or leased.

BR's freight sector is to be entirely transferred to the private sector. The two existing businesses, Trainload Freight and Railfreight Distribution, are to be broken up because the 'Government believes that little would be gained by maintaining a monolithic structure for privatisation'. It expects some services to be bought by existing customers.

Legal restrictions which currently make it difficult for independent operators to run trains will be removed and a right of access will be granted, subject to regulation. The White Paper recognises the complexity of the issue of the level of charges for the use of lines and says these remain to be resolved. A major consultancy study has been commissioned to resolve these problems.

The Government has commissioned another study on the safety implications of the proposals, which is to be undertaken by the Health and Safety Commission.

Privatisation will not affect the pension rights of employees and concessionary travel arrangements will be safeguarded

The Government recognises that travellers currently benefit from dealing with 'a single railway operator' and operators will have to make arrangements to accept each others' tickets.

New Opportunities for the Railways - The Privatisation of British Rail; HMSO; pounds 5.40.

KEY POINTS

MOST of these changes are to be implemented within the lifetime of this Parliament:

BR is to be divided into a track authority, Railtrack, and a service operator.

A Franchise Authority will determine what services or groups of services are to be put out for competition and organise the tendering.

Franchisees will, where necessary, be given subsidies to run the services.

An independent Regulator will be created to supervise access to the lines by operators, promote competition and promote the interests of consumers.

There will be new rights of access to the rail network for rival operators.

Many stations will be leased or sold.

Rail and freight services should be transferred entirely to the private sector.

A safety study is to be carried out with Railtrack expected to take primary responsibility for safety.

Pension rights of employees will be safeguarded.

Operators will not be obliged to accept each other's tickets but will have to co-operate in providing 'through ticketing'.

Leading article, page 20

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