One signal could stop the train

Rail privatisation is under way, albeit delayed. But it may yet be halted, argues Christian Wolmar
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The Independent Online
The unpopularity of rail privatisation has masked the fact that it is going ahead. This week sees the disposal of the six maintenance depots, which are being sold to two engineering companies and a management buy-out team. While this may not be earth-shattering, it is of great symbolic importance because it means that the break-up of BR has begun.

Until now, the 100 or so companies into which British Rail has been split have proved difficult to sell. Only a quarry and a small electronics firm have been privatised; Red Star, BR Telecommunications and Freightliners were all brought to market only to be withdrawn. The stumbling blocks have ranged from a lack of accounts to the reluctance of the private sector to take on what appear to be loss-making businesses. And, of course, the very uncertainty caused by the privatisation process.

The franchises for the train services are also proving a difficult nut to crack. Steven Norris, the junior transport minister, went on the radio yesterday to dismiss speculation that the franchising process, which should have been well under way by now, would be further delayed. Whatever Mr Norris's blusterings, further delay is certainly on the cards. The Government is very unlikely to achieve its aim of having 51 per cent of the railway in the private sector by 1 April 1996, the ridiculously exact - and exacting - target set by John MacGregor just before he was sacked as Transport Secretary last July.

The first-stage bids for the initial three companies, representing about 20 per cent of the railway, are due in by the end of July, and tenders for the next four or five will not even be published until late summer. It is doubtful whether these seven or eight companies can be sold off quickly enough to meet the 1996 target, especially as there are added complexities over some of the companies such as Midland Main Line (its terminus, St Pancras, is part of the tender for the construction of the Channel Tunnel Rail Link) and Gatwick Express (there are joint bids for it with neighbouring franchises). The West Coast Main Line, which needs complete renovation, is also unlikely to be privatised in time.

The complexity of the franchise process has led to inevitable delays. According to one potential bidder, "They have asked for indicative bids, before proceeding to ask for full bids. That's ridiculous and shows they have absolutely no idea how much they expect the private sector to bid for the franchises. No company is going to show its hand fully at the indicative bid stage. People selling their houses don't ask for 'indicative bids' because they know approximately how much they are worth."

The problem is that nobody has ever tried to sell a rail franchise before and the process is one of testing the market. The Government wants seven- year franchises, but this may not be long enough for bidders because of the risks of being left with rolling stock that has a much longer life when the franchise ends. If seven years turns out to be unacceptable to the market, the Government will have to go back to the drawing board.

But in a sense the April 1996 target is an irrelevance, albeit a politically embarrassing one. Mr MacGregor's brash promise was foolish bravado but there is only one key date: the day of the general election. The only important questions are how much of the railway will have been sold by then - and what would an incoming Labour government be able to do about it?

The most realistic date for an election is not until early 1997, by which time 10 or even a dozen of the 25 franchises will have been let. There is tremendous pressure on Roger Salmon, the franchising director, to ensure that the process is begun as speedily as possible, and once the way has been cleared with the initial lines, the others will be much easier.

From the passengers' point of view, it is difficult to assess the overall impact of franchising, other than a guaranteed proliferation of logos and uniforms. The constraints imposed by the requirements of Mr Salmon to run certain levels of services, the control of fares by the Rail Regulator and the costs they have to pay for using the track and leasing the trains leave the franchisees with very little room to manoeuvre. And the benefits of the input of private sector skills will be balanced by the disadvantages of the break-up of the rail network.

More interesting is the fate of the lucrative parts of the railway: the three rolling stock companies and Railtrack. The former, valued at around pounds 1.5bn, are due to go to the private sector before the end of the year, while Railtrack, which may bring in as much as pounds 4bn (though possibly much less), has been earmarked to be sold by 1 April next.

The sale of the rolling stock companies is uncontentious, especially as John Prescott, Labour's deputy leader and former transport spokesman, has long advocated a similar scheme to attract private finance into the railways. It is the fate of Railtrack that is crucial.

The Government is determined to sell Railtrack off before the election, partly because of its centrality to the whole rail exercise, and partly because the sale will help fund tax cuts. Equally, Labour is still hoping that it can stave off the threat to Railtrack, mainly by making a lot of noise about it.

Labour has promised to fight privatisation tooth and nail and to ensure that there is a "publicly owned and publicly accountable railway". Earlier this year, after the Labour Party's no-policy zone became exposed in the row over rail privatisation, it set up a committee under the chairmanship of Mr Prescott to try to work out exactly what it could do. Since then, total silence. All a Labour Party press officer was able to say last night was that the committee met "several times" and that it would report before the end of the year.

The lack of urgency in Labour's deliberations is surprising. If Labour is to retain any initiative on rail privatisation, other than a bare oppositionist stance, it must announce its policy on Railtrack.

In the complex financial system for the railway created for privatisation, Railtrack is the big recipient of subsidy, gaining around pounds 600m per year profit, which will be distributed to its shareholders. If Labour announces that it will renationalise Railtrack, the sell-off price will fall, making renationalisation feasible. If Labour demurs, and Railtrack sells for pounds 3-4bn, renationalisation would be impossibly expensive.

Labour's policy on rail privatisation is a benchmark of its intentions on a much wider front. A commitment to renationalisation would certainly lead to criticism that new Labour is no different from old Labour. But it would also show that the new Clause IV was not merely a fudge. Without control of the track and infrastructure, a Labour government would be able to do little other than preside over a broken-up rail network with little opportunity to achieve any transport goals, such as a shift to rail, a better integrated transport network or an improved and possibly expanded rail system. Any policy short of renationalisation will be a fudge and will not meet the party's promise of a "publicly owned" railway.