Just the ticket for whom?: An alarming possibility is that the strikes will benefit only the privatisers, says Brian Wilson

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The Independent Online
WHO BENEFITS from prolonging the nine- week old signalmen's dispute? Certainly not the travelling public or the users of rail freight services. Not the signalmen, who have lost money, whatever their gain from an eventual settlement. Not the RMT, which is scarcely the union best-equipped for a long war of attrition.

The Government may still hope to win political advantage if the public turns againt the strikers. But where does the dispute leave its rail privatisation programme? Further discredited and in disarray - but not necessarily dead. Indeed, the alarming possibility is that the dispute will move Railtrack to the top of the privatisation agenda, with incalculable consequences for the future of the railways.

Until now the Tories have envisaged franchising the actual running of trains to train operating companies (TOCs) while - in the short term at least - keeping the tracks, signalling and most stations in the public sector under the ownership of Railtrack. This unloved organisation is the most conspicuous product so far of the restructuring on which privatisation is supposed to be based.

The chairman of Railtrack, Robert Horton, was parachuted into this position by his St Andrew's University contemporary, the former Transport Secretary John MacGregor, as an ideological supporter of privatisation. However, ministers have insisted all along that they had no early intention of privatising Railtrack.

Mr Horton has openly dissented from this approach. From the moment of his appointment he made clear that he wanted to see Railtrack privatised sooner rather than later. It is well worth considering whether the current dispute might not have advanced that ambition - if only as a substitute for the Government's own ailing strategy.

The present conflict has made one thing certain: the TOCs will not be privatised this side of a general election. The potential liabilities are simply too great. Even before the strikes, passenger franchises had singularly failed to excite the interest of investors, who saw three very basic flaws.

First, the profitability of each franchise would depend on a political decision about the level of subsidy. Second, because operators would not own either trains or tracks, their principal costs and risks would be largely outside their control. Third, there is no clarity about whether competition would be allowed to appear once the franchises had been awarded.

The subsidy objection highlights the basic differences between the railways and all previous privatisations. Under the present system the railways cannot survive, let along make a profit, without subsidy.

The system of charging for 'track access' introduced by Railtrack on 1 April only exacerbated the problem. Initially the charging is on a 'shadow' basis, since the TOCs are still in the public sector and part of British Rail. The charges were based on a Treasury valuation of Railtrack's assets at pounds 6bn and the requirement to provide a rate of return on that highly notional figure. Overnight, the costs of running the railway doubled and so did the amount of taxpayers' subsidy required to meet them.

At present the system is nothing more than a circular paper transaction - the Treasury pays more to the train operators, who pay Railtrack, which pays the Treasury. But the vulnerability of TOCs to any future cuts in subsidy once they are in the private sector is self-evident. Indeed, it would be difficult to imagine a system of financing the railway that could have been more effectively designed to deter investors. And it had precisely that effect.

Further, the dispute has served to emphasise as nothing else could have done the argument that key costs and risks are outside the control of service operators. The TOCs have stood by for eight weeks as mere spectators while their balance sheets - on which decisions about privatisation are supposed to be based - are plunged into the deepest red.

While Mr Horton and his lieutenants disport themselves across the public stage, the people who run the trains have to keep paying wages to their own staff but cannot influence the course of a deeply damaging dispute. At best, the TOCs will receive rebates to cover the strike days, but there is no likelihood of them being compensated for loss of revenue.

In a move that went almost unnoticed because of the strikes, the Rail Regulator, John Swift QC, last month published an extraordinary document which cuts through to the heart of the Government's privatisation timetable. It says, in effect, that the whole system of access charges, which is less than four months old, should be torn up and rethought.

Mr Swift, too, has reached the conclusion that privatisation of the TOCs is impossible on the basis of these access charges. He does not expect to formulate his own proposals until next spring. That effectively puts franchising of TOCs on hold until then for the simple reason that no potential operator now knows what their principal costs would be. The whole thing is back in the melting pot.

But if the TOCs cannot be privatised before a general election, what can? If Mr Horton has anything to do with it, the answer will be none other than Railtrack. While Railtrack, too, has lost revenue due to the dispute, it differs from the TOCs in that it actually owns assets - pounds 6bn worth of them, if the Treasury is to be believed.

The bulk of those assets have little to do with the tiresome business of running trains; they are based on Railtrack's massive property portfolio. If the price was knocked down far enough, there would probably be takers. So the privatisation of Railtrack remains an option for Mr Horton to promote in Whitehall, while the TOCs count only the costs. To return to the original question - who stands to gain from prolonging the dispute?

We may be faced sooner rather than later with the proposal that the nation's railways be privatised under the stewardship of Mr Horton and the management that has given us the signalmen's strikes. Such a turn-around would be bitterly resisted by all who care for the railways and there would be a high political price to pay. Brian Mawhinney, the new Transport Secretary, would be well advised to take a long, cool look at the damage that has already been inflicted through the fragmentation of railway operations and responsibilities - then return rail privatisation to the ideological siding from which it should never have been allowed to escape.

The author is MP for Cunninghame North and Labour spokesman on transport.

(Photograph omitted)

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