British Rail sell-off Bill 'unworkable': Lords amendment leaves Tories in dilemma on franchises. Christian Wolmar reports

THE BILL to privatise British Rail has been rendered unworkable by an amendment passed in the House of Lords on Monday night, supporters and opponents of the sell-off agreed yesterday.

The Government faces two options on the amendment which will allow BR to bid for franchises rather than, as previously, only allow bids from the private sector and management buy-outs when BR is broken up into franchises.

It can either attempt to reverse the amendment in the House of Commons when the Bill returns there in October, or it can retain the new clause. The Department of Transport intimated yesterday that no early decision would be made.

Both options are fraught with danger. A group of rebel Conservative MPs only held off from pushing a similar amendment in the Commons earlier this year after winning major concessions on railcards and fares.

Now, with those victories already in the bag, the rebels, led by Sir Keith Speed, could muster sufficient numbers to embarrass the Government. Their confidence will be boosted if the Conservatives lose the Christchurch by-election, where rail privatisation is certain to be a big factor.

However, to accept the amendment also creates difficulties. If BR was allowed to bid, few doubt it would win virtually all the contracts, effectively nullifying the whole privatisation process.

Private bidders have already been put off by the concessions on railcards and on fares which will now be tightly controlled.

William James, a solicitor with Theodore Goddard, who has studied the Government's plans in depth, said:

'There are two problems with the amendment. First, it will make it difficult for management buy-out teams to bid. And secondly, potential private-sector bids may be deterred from bidding.'

The amendment places BR managers, whom ministers privately accept will be a necessary part of any successful bids, in a very difficult position. One senior manager said: 'We won't know whether to stay with BR or join a management buy-out.'