Donald Macintyre: How Labour could have prevented the rail crisis

'By promising to take Railtrack back into public ownership, Labour could have prevented it being sold'

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Donald Macintyre: How Labour could have prevented the rail crisis

When it comes to the railways, there has has been just a whiff of recantation of Labour's own past in the air. Stephen Byers, who made his ministerial reputation as an ultra Blairite, now suggests there were "flaky" edges to the assumptions in the Third Way that business always knew best. But, despite advance billing that Blair would, in his Breakfast with Frost interview on Sunday, admit to losing his "gamble" on keeping Railtrack in private hands, he didn't quite do that.

Instead he said: "When we came to into office in May 1997 it is possible we could then have said: well, we're going to change the whole of Railtrack, get rid of privatisation, renationalise and so on. I simply point out that, had we done that at the time, there would have been an outcry that we were acting dogmatically, that this was old Labour back; it was perfectly sensible for us to try and make the system work."

Of course. If it hadn't, the Government would have faced, early in its first term, an impossible dilemma over whether to fleece the new shareholders or to spend vast sums compensating them. Either would have confronted a fledgling Labour administration with a barely containable backlash.

But this isn't quite the whole story. For neither Blair – nor for that matter Byers – have touched on the decisions made before the 1997 election, when Labour was in a unique position, as an opposition party everyone expected to win, to influence events. For by promising to take Railtrack back into public ownership, Labour could almost certainly have prevented it being sold.

Which happens to be exactly what John Prescott consistently argued it should do. The best accounts of railway politics in the run-up to the 1997 election are in Ian Jack's post-Hatfield anti-privatisation Granta essay, The Crash that stopped Britain, and Colin Brown's biography of John Prescott. Brown recounts how Prescott, with the backing of the then deputy transport spokesman Brian Wilson, fought for an "...explicit threat to renationalise Railtrack" after Prescott had gone "to the City and obtained assurances that, given [a] Labour threat to buy back Railtrack, it would never be floated". While the negotiations were carried out with Gordon Brown, it's clear that the shadow Chancellor's resistance to the idea was fully shared by Tony Blair, as well as by Peter Mandelson.

Indeed Prescott and Wilson were pretty well isolated; Colin Brown recounts how, by the time the government was preparing to float Railtrack, Blair and Brown had "privately agreed that if Railtrack was sold, Labour would not commit billions to buying it back". And when the shadow minister Andrew Smith, deputising for Brown in his absence in the United States on party work, agreed to Prescott's demands, "Blair called in the deal and ordered it rewritten for the [Railtrack] prospectus". Clare Short, outstanding as a cabinet minister now but less so as opposition transport spokesman then, fell in with the leadership. So did pretty well everyone else.

The arguments for defeating the Prescott proposal are no doubt very easy to understand. One factor in Labour leadership minds, as Ian Jack implies, was that the timing of rail privatisation meant that the Tories would suffer from its unpopularity while Labour would reap any of its benefits. More importantly still, most Blairites would even today argue that it would have been too electorally dangerous to Labour's new found reputation for prudence, and for being private-sector friendly, to commit itself to take Railtrack back into public ownership. They didn't know for sure that their majority was going to be so big that it wouldn't have mattered, particularly since the privatisation did not appear to be popular. It may not have been heroic, the argument goes, but it was sensible politics.

Maybe. Nevertheless there is a counter-case. The whole point about the Prescott notion – one which the Deputy Prime Minister has been too loyal to refer to even on the several occasions when attempts have been made to blame him for the chronic rail crisis – was that it was a gamble certainly, but a calculated one. There was every likelihood that, by the time voters came to the ballot box, the flotation would have been called off. Accused of sabotaging a privatisation, Labour could have made a number of points: that Prescott – and for that matter Gordon Brown – had already shown a real commitment to private-public partnership; that Labour was agreeing to privatisation of operations as distinct from infrastructure; and that Margaret Thatcher, no less, had been wary of full-scale rail privatisation.

As a result, Railtrack was sold. It was even arguable that Labour created the worst of all worlds – its assent ensured the flotation, but its grumpiness depressed the price. But, in any case, it was indeed stuck with making the system – which it now recognises as unsatisfactory – work for the next few years. It's true that there have been some exaggerated claims; despite the high-profile crashes since privatisation and the serious degradation of maintenance exposed after Hatfield, the overall safety trend has continued to improve. Nor were the problems of long-term under-investment a function of privatisation; they had been chronic during nationalisation. But as a huge stakeholder in the railways, the Government discovered that the system left it with huge responsibility and too little power.

Secondly, even if you accept the unprovable proposition that the Prescott policy was electorally damaging, that doesn't make it objectively wrong. Indeed, given the flak that Labour has had to put up with over the necessary decision to put Railtrack into administration, it looks very much as if it would have been better off had it taken Prescott's advice in the first place. Even the pro-Blair Third Way guru Anthony Giddens, no less, argues in his latest tract that privatisations "should probably always be partial in the first place. Mistakes can be corrected before they become too serious".

As Blair also pointed out on Sunday: "Hindsight is a wonderful thing." So why, given that all this is history, does it matter at all? Not, I suspect, because it shows that it's all over for New Labour. Or for use of the private sector in public services. Or even, in some cases, Mr Byers's claim yesterday that the Railtrack decision was a "major rolling back of the Thatcher-Major legacy of privatisation". Giddens is surely right when he argues that the Byers Railtrack decision does not presage "a general return to statism", the "weaknesses [of which] have become so apparent".

What it does show, however, is that the admirable Blairite principle of "what works" is a two-way street. It does, indeed, and quite properly, justify the growing use of the private sector by a dogma-free Labour government. But at times it can also underpin putting limits on privatisation. Railtrack, in its post-Major form, wasn't what works. And whether necessarily or not the purity of that excellent principle was contaminated by Labour itself back in the run-up to the 1997 election.

d.macintyre@independent.co.uk