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ppp Wednesday, 6 February, 2002, 13:57 GMT
Transport's public private history
Railway track and carriage
New rail schemes could be paid for by fares
Whether it is trains, buses or planes, what were once our publicly owned, public transport services are now run by private companies. Bridges, tunnels and railways lines are paid for by the private sector too. Yet even after twenty years of privatising the state's role in transport, the controversy surrounding the policy is as strong as ever, says the BBC's Transport Correspondent Simon Montague.

This is second in a series looking at the issue of private involvement in public services.

The idea of privatising the UK's public transport services has its roots in the economic problems of the 1970s.

After the Second World War, Labour nationalised many of Britain's biggest industries, including the railways. The buses and tubes were already owned by local authorities.

Public ownership became the conventional wisdom for both parties for the next quarter century.

State investment in transport, roads and railways declined dramatically, following the international oil crisis in 1973.

The Tories' Heath government was forced to divert resources to combat rising oil prices.

Three years later, Jim Callaghan's Labour government was forced to ask the International Monetary Fund for a loan, to stave off financial disaster.

Motorway toll booth
Contractors can make their money by keeping the tolls

Sufficient money to maintain the country's transport infrastructure could no longer be found.

Thatcher revolution

When Margaret Thatcher came to power in 1979, she believed that the state should no longer be running public services.

British Airways and the British Airports Authority - now called simply BAA - were among the first major transport businesses to be sold off in 1987.

Buses and ferries went the same way, as did gas, water, telephones and electricity.

Privatisation of transport, and of the utilities, would prove to be the single most revolutionary policy of the Thatcher years.

But privatisation could not solve cracked roads, nor traffic congestion.

In the mid-1980s, studies by the Confederation of British Industry, the Federation of Civil Engineering Contractors and National Economic Development Council revealed the deteriorating condition of much of the country's road network.

Road repairs

In 1989, the Government doubled the size of the road building programme to 12bn. It also proposed a new form of "privatisation", announcing that some roads could be financed, built and operated by the private sector.

The Dartford bridge was a first example.

The contractors made their money by keeping the tolls.

Others projects followed, among them the second Severn crossing and Skye bridge.

New rail schemes could be paid for by fares, so the Manchester Metrolink followed too. Lines being developed included the Channel tunnel rail link, Heathrow Express and Docklands Light Railway extension in London.

Private finance initiative

The experience of these projects led to the Private Finance Initiative (PFI), announced by the chancellor Norman Lamont in 1992.

This was a new way for the Government to procure transport and other public services, paid for and operated by private companies, ranging from roads to hospitals, prisons and defence projects.

The advantage was that governments could avoid paying up front for expensive, large scale projects. Instead, consortiums would be offered 25 or 30 year concessions, and receive regular public payments according to their performance.

Critics argued that this was a "buy now, pay later" policy which, as with any form of hire purchase, would be more expensive in the long run.

The value for money of the PFI has long been argued.

Unlike bridges and tunnels, there are no tolls on privately financed roads. Instead, the Government pays the builders "shadow tolls" based on the amount of traffic using the road or on the standard of maintenance. This hasn't always proved good value for taxpayers.

Value for money?

A 1998 National Audit Office report on the first four schemes found that savings were 40% less than predicted, and that two of the four roads would have cost less if they had been built using public funds.

Road maintenance has also been "privatised".

UK Highways, a joint venture of the construction groups John Laing and Carillion, has a 30 year concession to maintain and operate 70 miles of the M40 motorway between London, Oxford and Birmingham.

A similar deal covers the new A55 Bangor to Holyhead expressway in North Wales.

Labour plans

When Labour came to power in 1997, it adopted broadly the same PFI policy, now known as PPP, or public private partnership.

The essential difference is that under the PPP, the Labour government has sought to maintain public sector control of transport services, while seeking private sector investment in its modernisation.

The first controversial move was the "part-privatisation" of National Air Traffic Services, the arm of the Civil Aviation Authority that employs the bulk of Britain's air traffic controllers.

Before the election, Labour had roundly declared "Our air is not for sale".

As under the Tories, the unions fought the sell-off on the basis that the profit motive would conflict with safety. As under the Tories, they didn't succeed. A group of seven British airlines bought 46% of the business on a not-for-profit basis. Staff received 5% of the shares, and the Government retained 49%.

And Labour has backed a 13bn public private partnership (PPP) for London Underground which is now Labour's flagship policy to revive public services with the help of private finance.

Transport secretary Stephen Byers has moved against the private owner of track and stations, Railtrack, refusing to pay further subsidies - but it is still unclear, with renationalisation ruled out, what Labour is planning to replace it with.

Twenty two years after privatisation was first launched by the Conservatives, this latest version of private involvement in public transport services is proving just as controversial.


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