All aboard] Destination unknown: As rail privatisation nears, Christian Wolmar ponders the many unanswered questions

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The Independent Online
THE TRAINS will still run on 1 April next year - probably. That is the date when the Railways Bill comes into effect, enacting changes that are the most far-reaching since rail nationalisation in 1948. The Bill, barring last minute hiccups, will complete its Commons passage today.

Although the Bill is supposed to be about privatising the railways, its first effect will be the complete reorganisation of the rail system. Of the three existing BR divisions, Network South East and Regional Railways will disappear, and InterCity will become just a brand name. BR will become a shell, a holding company for the 26 operating divisions - the new service-providers - being created for franchising to the private sector.

The trains themselves are to be handed over to three leasing companies; track and infrastructure and, at least initially, the stations, are going to Railtrack, a newly created body headed by Bob Horton, former chairman of BP. Responsibility for determining the level and scope of services will be handed to a powerful independent figure, the Franchising Director. From next year the appointee, Roger Salmon, will be responsible for allocating the entire government subsidy for rail services. As the divisions are handed over gradually to private operators, he will decide how much annual public subsidy each will get.

Another key player will be the Regulator, John Swift QC, charged with ensuring that there is competition within the industry and also with representing the interests of the passenger. Sir Bob Reid, the current chairman of BR, will be left with no trains to play with, and little to do other than supervise the dismantling of his empire.

With BR being so comprehensively gutted, the network will be split up, come what may, and it this that is causing most worry to passengers' groups.

Mike Patterson, secretary of the Central Transport Consultative Committee, the main passengers' watchdog, reckons that the network-wide benefits of the system, such as being able to buy a ticket from any station to any other, are bound to be lost in the disintegration. He points to the Gatwick Express line, part of InterCity, which last month started operating as a shadow franchise - a testing ground to establish the economics of running a particular line.

'There are both Network South East and InterCity trains between Victoria and Gatwick, and the NSE ones are cheaper. Tickets are at the moment being accepted on all trains, although NSE ticket holders have to pay a supplement if they are on an InterCity train. But if a private operator takes over the Gatwick Express, they may no longer accept the NSE tickets, and will make passengers pay over again.'

There are many lines, such as Paddington to Oxford, Plymouth to Bristol, or London to Glasgow, where services will be shared between up to three of the new divisions. Passengers will have to choose which trains they want to travel on before buying tickets.

Mr Patterson thinks it will be difficult - if not impossible - to buy tickets for long-distance journeys through areas run by different franchisees. For example, someone wanting to travel from Brighton to Newcastle may have to buy a second ticket in London while changing trains.

The complexity of this reorganisation is such that it will be some time before the private sector is able to get a handle on what is on offer, and on what terms. Seven of the 26 new divisions will be offered for privatisation within a year or so of next April, but transport ministers have accepted that it may well be a another 10 years before all the services are in private hands.

The first thing any potential operator will want to know is how much it will have to pay Railtrack for the use of a stretch of track. But despite enormous efforts by consultants the Government has not yet come up with a formula for track charges. This must put in doubt its stated intention to publish a tender document on Gatwick Express early next summer.

There are many fallacies about privatisation being touted by both critics and supporters. William James, of Theodore Goddard, a City firm of solicitors which has developed expertise in BR privatisation, says: 'There will not be total disruption, nor will there be immediate radical improvements. Services will not be slashed, nor will there be lots of extra new trains.'

In the longer term there may well be quite substantial changes. The Franchise Director may decide to concentrate his subsidies on well-used services rather than marginal lines. But expect nothing much new this side of the next general election, apart from a fanfare when the first privatised Gatwick Express departs from Victoria, probably early in 1995.

Nor will there be any real competition between operators. At one time ministers banged on about the potential for 'open access' - rival train operators coming on to the patches of existing franchisees. But the Government quickly realised that no one would be interested in the franchises if competitors were allowed on to the lines willy nilly, and ministers have stopped talking about the benefits of competition.

Nothing in the lengthy parliamentary passage of the Bill, however, has removed two long-standing objections. First, the Government is in uncharted waters, no country in the world having created a remotely similar structure. Lawyers are having a field day drawing up agreements on the relationships between all the different new organisations responsible for running the trains. On 1 April next year there will be so many new players in the game that some of them might not have learnt all the rules.

Indeed, some of the ground rules have not yet been sorted out. One leading consultant recently asked both Railtrack and the Franchising Director who would pay the track charges - the most important element affecting the profitability of a line. The Franchising Director said he would, while Railtrack said it would be up to the franchisees.

The second doubt is money. John MacGregor denied a leaked report at the weekend that next year's subsidy would need to be more than double the current figure of pounds 850m. But even supporters of privatisation now accept that the top- heavy structure will cost more to run than the existing organisation. Furthermore, profits made by private operators will no longer be available to subsidise unprofitable lines. And if a franchisee runs out of money to run the trains because of an unforeseen drop in revenue, who will pick up the bill? It will be the responsibility of the 26 companies to determine fare rises, but they will have their arms twisted by the Government not to increase them drastically in the early years of privatisation.

Unlike previous privatisations, which have boosted the Treasury's coffers, this one could yet drain them.

(Photograph omitted)

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