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Friday, 20 October, 2000, 17:22 GMT 18:22 UK
The great train sell-off: Who dunnit?
After the series of rail disasters in the past few years, there is a growing consensus - now shared by Tory transport spokesman Bernard Jenkin - that the complex plan to split to railways into 25 different companies was a mistake.

But who planned it?


The question now is not about whether we should privatise it, but how and when

Cecil Parkinson, 1990
Selling off the railways was the last significant privatisation carried out by the Conservatives.

Although the idea for splitting up British Rail had a long gestation period, key decisions were taken only in the last years of the Major government.

Its overly complex nature had two basic causes: a desire to avoid the creation of private monopolies, as happened with the privatisation of BT and British Gas, and a haste to complete the process before the government lost power.

In the late 1980s, several free market think tanks, including the Adam Smith Institute and the Centre for Policy Studies (headed by David Willets, now shadow social security spokesman), floated ideas for rail privatisation.

The Centre for Policy Studies proposal envisaged breaking up the state monopoly and handing it to more than a dozen independent private companies modelled on the competitive structure of Victorian times.

However, the Adam Smith approach - which proposed allowing other companies to run trains on British Rail's tracks - was the one eventually adopted by the Conservatives.

Parkinson commitment

It was Transport Secretary Cecil Parkinson who first formally committed the Thatcher government to privatise British rail.


We will end British Rail's monopoly

Conservative 1992 Election Manifesto
Speaking at the Conservative Party conference on 9 October 1990, Mr Parkinson told delegates:

"The question now is not about whether we should privatise it, but how and when."

However, Mrs Thatcher took a cautious approach, delaying the announcement several times during years of increasingly bitter conflict with her Chancellor, Nigel Lawson.

The demise of Mrs Thatcher, who was replaced as Prime Minster by John Major in December 1990, and the subsequent preparations for the general election, delayed further progress until 1992.

MacGregor in the driving seat

It was newly appointed Transport Secretary John MacGregor who published the goverment's White Paper on rail privatisation in July 1992. His advisor was Eleanor Laing, now MP for Epping Forest.

Roger Freeman was the junior minister involved in the detailed preparations.

However, it was pressure from the Treasury, which was represented on the rail privatisation working group by Stephen Dorrell, which ensured that the proposal separated the track from the operating companies - contrary to the advice given by railway bosses.

The reason for this decision was that it would to easier to privatise - and find buyers - for train companies if they did not have responsibility for track renewal and maintenance, which was expensive to repair.

The Treasury eventually agreed to write off the debts of Railtrack, which was to own the track, to help make it more marketable.

Major drive

John Major was determined to drive through rail privatisation during the life of his government, but the proposals had a chequered history.

Heavily criticised by the Transport Select Committee (chaired by the Conservative Robert Adley), the proposals were savaged in the Lords in a revolt led by former Tory minister Lord Peyton of Yeovil.

It was only in November 1993 that the Bill achieved its final Parliamentary passage.

And then government ministers had to work overtime to ensure that the complex plans were implemented before the next general election.

Two other transport secretaries were involved in that process - Brian Mawhinney and Sir George Young.

A timetable for applications for companies to bid for rail franchises was published less than four months after the bill became law, with the first franchises ( to South West Trains, Great Western and LTS Rail) awarded in December 1995 and the last (Scotrail) in April 1997 - just one month before the general election.

The franchises proved easy to sell and highly lucrative, with some operators selling on their franchises at a substantial profit later on.

Essentially, to make them attractive the government had guaranteed that they would receive subsidies to cover their losses during the franchise period - a sure way to ensure a speedly sale.

Railtrack privatised

More difficult was the question of Railtrack, which owned the outdated track and signalling systems.

One of the most controversial decisions was the plan to sell off Railtrack as a separate company, rather than retain at least some government ownership.

Railtrack was separated from the rest of British Rail on 1 April 1994 - but the new Transport Secretary, Brian Mawhinney, was determined that all of it should be offered to investors as a private company.

That was only achieved by a write-off of 1bn of Railtrack debt, leading to a successful flotation on the stock market in 1996 which raised 1.93bn for the government.

Again the motive was partly political and partly financial.

Selling off Railtrack to hundreds of thousands of private investors would make it more difficult for any future government to reverse that decision. And the sale would help ease the government's strained finances.

After the election, Labour indeed did rule out renationalisation on grounds of cost.

But perhaps ironically, the problems on the railways have meant that this privatisation, unlike many others, is unpopular with the public.

After the Paddington rail crash, in October 1999, a Guardian/ICM poll found that 73% of all voteres would support renationalising Railtrack.

Hertfordshire train crash


The investigation

Background

CLICKABLE GUIDE

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AUDIO VIDEO
See also:

20 Oct 00 | UK Politics
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