Privatisation costs help push BR into red: Losses mask impressive final year's performance, writes Christian Wolmar (CORRECTED)

CORRECTION (PUBLISHED 7 JULY 1994) APPENDED TO THIS ARTICLE

THE COST of privatisation and a sharp fall in the number of passengers pushed British Rail into the red last year, according to its annual report published yesterday.

The accounts, the last before BR was divided into about 60 companies and its infrastructure handed to Railtrack, show that in the year up to 1 April, it lost pounds 108m, pounds 75m less than in the previous year. BR spent pounds 92m on privatisation, about half of which was reimbursed by the Government, and at a press conference yesterday, James Jerram, the BR board member responsible for finance, said BR will have spent pounds 200m by the end of March 1995 on privatisation.

The report discloses that Sir Bob Reid, BR's chairman, last year received an increase of pounds 38,527 on his 1992-93 salary of pounds 305,294, a rise of 12.6 per cent. Sir Bob yesterday urged the signalmen to accept a payment worth 3 per cent on their total earnings.

Jimmy Knapp, the RMT union's general secretary, said it was 'outrageous if he is advising key staff to take a lower increase than he is getting himself. Signalmen who are responsible for the lives of thousands of passengers are entitled to a decent wage.'

The number of passenger journeys fell from 744.8 million in 1992-93 to 713.2 million, a drop of 4 per cent, caused partly by the loss of two days to strikes. Because of fares rises, however, revenue from fares increased slightly to pounds 2,165m.

The losses as a result of privatisation and the loss of passengers mask an impressive financial performance by BR which has managed to reduce operating costs from pounds 13.86 per train mile to pounds 12.69, a cut of 10 per cent in real terms. This improvement has been achieved largely by cutting the number of staff from 133,000 to 115,500. Ironically, privatisation may result in extra staff being employed to regulate the new system.

The performance of Network South-East in making a profit of pounds 71m without any government subsidy apart from investment grants, is thought by BR managers to be unique among commuter railways in the world.

Sir Bob, in his last year as chairman, warned that investment, down from pounds 1.5bn to pounds 1.2bn, must be maintained and that responsibility lay increasingly with the private sector.

Senior BR managers are now wondering how the proposed early privatisation of Railtrack, which is being mooted by the Treasury because it would net pounds 3bn, will affect the sale of franchises for the 25 train operating companies. One said: 'They can't possibly proceed with both the franchising and the sale of Railtrack at the same time. And they have yet to resolve the key issue of where the financial risk will lie . . .'

The Government is committed to having 51 per cent of train operations in private hands by April 1996.

The ambitious pounds 3bn Crossrail project for London was yesterday killed off for the foreseeable future amid angry Commons protests. A motion to get a private Bill sent back to committee failed when Michael Morris, the deputy Commons speaker, ruled out a debate.

CORRECTION

In yesterday's later editions, Sir Bob Reid, chairman of BR, was quoted as urging the striking RMT signalmen to accept a payment worth 3 per cent on their total earnings. BR has asked us to clarify that Sir Bob said he wanted to see the strikes suspended to enable further talks and called upon the RMT to think again about extending industrial action.