Leaves on the MacGregor line: Christian Wolmar argues that the watered-down privatisation Bill will do nothing to get the trains running on time

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The Independent Online
With the publication of the rail privatisation Bill today, John MacGregor, the Secretary of State for Transport, may regret that he was not hoicked off to the Treasury in the autumn reshuffle that never was. He now has no hope of rescue until at least October, when the Bill is due to be passed, and probably not until the first franchises are operating.

When he took over the transport brief after the general election last year, he was seen as just the solid, loyal chap needed to oversee the long-delayed privatisation process. The proposals as they stand, however, have proved so unpopular and attracted such a breadth of opposition, even from within the Tory party, that they will test the safest pair of hands.

The plans look no more coherent than when they were first set out in a White Paper last July. Publication of the Bill, originally planned for November, was delayed because many issues remained unresolved. But a large number of them will still not be answered today: the Bill is expected to offer a broad structure rather than a detailed scheme.

The key document, which will outline the track-charging regime and so give potential private operators some idea of whether they will be able to turn a profit, has been delayed, with no date set for its publication. This week's report by the Tory-dominated Commons transport committee highlighted the 'absence of full details or sufficient time for an informed public debate', and noted the large number of 'unresolved issues'.

The central idea - to separate track maintenance from the operation of the trains - lies at the heart of much of the criticism. A new quango, Railtrack, would take over the track and signalling, and be expected to finance its operations from the charges it levied. Lines, or groups of lines, would be bundled into self-contained units to be franchised out to private operators. BR would not be allowed to bid for the franchises but would be expected to continue to run services that failed to attract suitable private operators.

The track-train separation and the method of financing have been questioned. Geoffrey Freeman Allen, editor of Jane's Modern Railways, quotes 'most railway experts' as arguing that the operations and the infrastructure should remain in the same hands: 'They are too interdependent to separate out.' As Sea Containers - one of the few companies to have expressed a firm interest in privatisation - has noted, private rail operators would be at the mercy of Railtrack.

Self-financing of Railtrack, critics say, would lead to high charges that would deter operators from running unprofitable trains and thus reduce services. It is difficult to see how the Government's commitment to expanded use of the railways would be served by requiring Railtrack to charge enough not only to service the existing infrastructure and earn perhaps an 8 per cent return, but also to finance new infrastructure.

There is, too, the wider question of whether BR is fit to be privatised. As a result of years of underinvestment, it is heading for more than double its pounds 145m loss of last year - and no loss-making business has yet been privatised by the Government. In addition, BR managers say they are spending a third of their time on privatisation, which distracts them from improving existing services.

It is not surprising, therefore, that hostility has come not only from predictable sources such as the Labour Party and the unions but also, more ominously for Mr MacGregor, from within the Tory party. A clutch of peers - Lords Ridley, Young and Whitelaw - have publicly vented their doubts, while Robert Adley, Conservative MP for Christchurch and now chairman of the transport committee, has embarked on a crusade to convince the Cabinet and the Prime Minister that they are heading for disaster.

It is, indeed, difficult to see what the Government is going to get out of rail privatisation. The supposed benefits are a better service born of competition, the attraction of private investment, and assimilation of private-sector methods of work. But the present proposals seem unlikely to achieve any of these aims, or the Government's objective of reducing carbon emissions - which would require a transfer of passengers and freight from road to rail.

The competition issue is already crumbling. Earlier this week Mr MacGregor made the first of what may become a series of retreats. It always seemed fanciful that several operators could provide competing services on the same tracks: private operators would have been reluctant to take franchises if rivals were allowed to 'cherry pick' the best times for their own services. On Tuesday Mr MacGregor admitted that many franchises would be allocated on an exclusive basis.

Competition, therefore, will now be only sequential: when a franchise runs out, other operators will be allowed to bid. But again the scope is limited. There is talk of franchises lasting as long as 15 years to allow operators to finance any investments, and that would effectively kill competition.

It is also hard to see how private investors will be interested in the present scheme. Operators would need a huge incentive to invest in new rolling stock. New trains, even for a short line, cost tens of millions of pounds. Yet the immediate return would be marginal.

In any case, potential operators will be more interested in franchising lines that have modern stock. The railway equipment supply industry is worried: late last year the director of its association said his members were 'staring annihilation in the face'.

As for private-sector methods of work, BR clearly has not yet produced the standard of service passengers have become accustomed to on the better airlines. Beyond injecting private-sector know-how, however, the privatisation model by itself will do little to help services plagued by breakdowns, signal and points failures, or leaves on the line.

The doubts about privatisation were summed up in the foreword to the latest issue of Jane's World Railways: it is 'a dogma- driven exercise, utterly irrelevant to national need of a well-balanced, multi-modal transport system, and a damper of any further technological exploration of rail transport's potential'.

Why, then, is Mr MacGregor pressing on? It is not difficult to detect the heavy hand of the Treasury. It sees privatisation, in the long term, as a way of reducing the subsidy and public-sector borrowing, which currently amount to about pounds 2bn. In the short term, however, it recognises that privatisation will need extra money to provide the new bureaucracies required to make it work and, perhaps, for sweeteners to attract bidders. Then fares would rise and services be reduced.

With little popular support for privatisation and growing opposition, the Government seems to have few options, apart from total abandonment of the scheme - and that is politically unpalatable. The best option would be to change the recipient of the subsidy.

Under current plans, much of the money that private operators would receive from the Department of Transport would be transferred to another government agency, Railtrack. That is ludicrous, and, as Lord Ridley has pointed out, operators would soon complain that they were not receiving enough cash and would threaten to reduce services.

The DoT should disregard the Treasury's concerns and pay the subsidy direct to Railtrack, as a pamphlet by the Tory Bow Group will suggest next week. This would reduce the marginal cost of running trains and encourage use by passengers and freight. It would also help the Government to meet its pollution targets.

BR privatisation requires a radical rethink. It is developing all the features of the poll tax fiasco, which in its early stages attracted the same breadth of opposition and appeared similarly to be driven more by ideology than common sense.