Prescott pledges to scrap rail franchise deals

A commitment to reverse the Government's semi-privatisation of British Rail by scrapping the franchises for private operators to run services was given last night by John Prescott, Labour's spokesman on transport.

He said Labour would be prepared to pay compensation for breaking the franchise agreements signed before the general election. But he served notice on potential operators that they would lose the contracts if Labour took power.

Last night, Tory strategists said Mr Prescott's speech would be used to reopen the rows over Labour's renationalisation plans in the 1980s, which the party had hoped to put behind it on Tuesday with the publication of its document on trade and industry policy. 'John Smith will have to disown him, because they could never afford to pay the compensation for these contracts. They will have to run for 10 years at least to make them viable,' one senior Tory party source said.

John MacGregor, the Secretary of State for Transport, is determined to have some private rail operators running by the election, to reassure the voters that semi-privatisation will not destroy rail services.

Mr Prescott said the compensation would be very limited, because the contracts would be taken up by 'a few cherry-pickers running old trains' before the election.

He used a speech to businessmen, industrialists and accountants in Sheffield last night to reaffirm Labour's commitment to public ownership, in spite of the omission from the document, Making Britain's Future, of Labour's historic pledge to nationalisation.

'I have no hesitation, and neither has the party, in reasserting our commitment to a publicly-owned railway system. If there are franchises, they will be returned to the public sector. It is quite easy. There will be no problem about compensation since, by the time of the election, there will only be a few cherry- pickers who will be operating services with old trains at the expense of the network,' he said.

Plans to privatise the Scottish water industry are likely to be blocked by Ian Lang, the Secretary of State for Scotland. One Tory source said: 'The Treasury wants it . . . but Ian Lang is trying to stop it, and it looks as though he will win.'