Break­ing-up of BR

On the 25th an­niver­sary of the Act that pri­va­tised Bri­tish Rail, PHILIP HAIGH looks back at the ten­sions, ar­gu­ments and chal­lenges it caused and talks to some of the in­di­vid­u­als in­volved

Rail (UK) - - Contents -

Twenty-five years on from the Act that pri­va­tised Bri­tish Rail, RAIL looks back at the ten­sions and chal­lenges it caused.

BRI­TISH Rail ran its fi­nal train on Novem­ber 21 1997 - a date largely for­got­ten in the his­tory of Britain’s rail­ways. RAIL 319 recorded the sale of Rail­freight Dis­tri­bu­tion to English Welsh and Scot­tish Rail­way (EWS) on Novem­ber 22 with a brief story tucked in a cor­ner of page eight but not RfD’s fi­nal work­ing un­der BR, which was the 2315 Dol­lands Moor-Wem­b­ley.

An ear­lier is­sue ( RAIL 302) gave more at­ten­tion to BR’s fi­nal pas­sen­ger train - sleep­ing car ser­vices leav­ing Ed­in­burgh and Glas­gow at 2355 on March 31 1997. That was five min­utes be­fore the con­tracts were signed to trans­fer ScotRail from Bri­tish Rail to Na­tional Ex­press.

Speak­ing at Ed­in­burgh Waver­ley that night, BR Chair­man and Chief Ex­ec­u­tive John Welsby said: “The han­dover of ScotRail marks the end of al­most 50 years’ pas­sen­ger op­er­a­tion by Bri­tish Rail. The cor­po­ra­tion has achieved a great deal over the years, and the mil­lions of cur­rent and for­mer rail­way staff have much to be proud of.

“They have laid the foun­da­tions on which Britain’s new rail­way or­gan­i­sa­tion can build.”

Present at the cel­e­bra­tions to mark the switch was Blairhill sta­tion ticket clerk John Bow­den who had joined the rail­way in June 1947, just six months be­fore it was na­tion­alised. He was once more work­ing for a pri­vate rail­way com­pany but, un­like Blairhill’s 1947 owner, the Lon­don and North Eastern Rail­way, his new com­pany just ran trains. ScotRail did not own its tracks, sta­tions or sig­nalling. Bri­tish Rail trans­ferred its in­fra­struc­ture to Rail­track, which the gov­ern­ment floated on the stock ex­change in 1996 to pri­va­tise it.

Mar­garet Thatcher’s gov­ern­ment pri­va­tised sev­eral ma­jor in­dus­tries in the 1980s. Gas, wa­ter, elec­tric­ity and tele­coms all switched from state-con­trol to pri­vate share­hold­ers.

The switch gen­er­ally brought bet­ter ser­vices as the com­pa­nies paid more at­ten­tion to their cus­tomers. How­ever, not ev­ery­one wel­comed the move and com­plaints con­tinue to­day about pri­vate com­pa­nies charg­ing high prices. At least with com­pe­ti­tion, it’s pos­si­ble to find an­other sup­plier of­fer­ing a bet­ter deal, which would not be the case with a na­tion­alised monopoly.

But Thatcher didn’t touch the op­er­at­ing arm of the rail­way. In­stead, she agreed the sale of BR’s sub­sidiary busi­ness such as its ho­tels and cater­ing op­er­a­tions, wine cel­lars and laun­dries. The first ho­tels went in 1981. Sealink’s fer­ries and har­bours in 1984 and BR’s heavy en­gi­neer­ing work­shops later that decade.

These dis­pos­als put BR into a tricky po­si­tion. The cash they raised helped its fi­nances but showed that pri­vati­sa­tion was pos­si­ble and that each side could still func­tion whether or not the other was pub­lic or pri­vate.

BR was look­ing for pri­vate money and pri­vate in­vest­ment through­out the 1980s and in rail­freight it had some suc­cess, with Foster Yeo­man in­vest­ing in its own lo­co­mo­tives and wag­ons, for ex­am­ple. Pam­phle­teers and think tanks de­bated op­tions; BR con­sid­ered leas­ing the Slough-Wind­sor branch to a pri­vate op­er­at­ing com­pany and oth­ers sug­gested the Lon­don, Til­bury and Southend route would be a good can­di­date for pri­vate op­er­a­tion. There was con­sid­er­a­tion of sell­ing BR as a whole, or split­ting it into re­gional track-and­train com­pa­nies, or cre­at­ing a track author­ity on which op­er­at­ing com­pa­nies ran trains. Dif­fer­ent trans­port sec­re­taries came with dif­fer­ent ideas.

Trans­port his­to­rian and econ­o­mist Terry Gourvish notes that the big­gest hint came in 1989 from Anne Parkin­son, the wife of Trans­port Sec­re­tary Ce­cil Parkin­son. Gourvish wrote in Bri­tish Rail 1974-1997 that she “pre­sciently vol­un­teered the opin­ion, on the foot­plate of the 1550 King’s Cross-Leeds train on March 9 1989, that the best op­tion for pri­vatis­ing Bri­tish Rail would be to cre­ate a sep­a­rate track com­pany, with a num­ber of busi­nesses hir­ing space to run their ser­vices”.

At the same time, BR was re­or­gan­is­ing it­self. Un­der the ‘Or­gan­is­ing for Qual­ity’ (OfQ) ban­ner it was cre­at­ing busi­ness units - three for pas­sen­ger trains (In­ter­City, Provin­cial (later Re­gional Rail­ways) and Net­work South East) and one for freight (Rail­freight) – rather than its tra­di­tional, ver­ti­cally in­te­grated, re­gional struc­ture. These busi­ness units were split into profit cen­tres.

OfQ kept the link be­tween track and train with each busi­ness unit re­spon­si­ble for the track on which it was the ma­jor­ity user. So In­ter­City looked af­ter long-dis­tance main lines and NSE the com­muter routes around Lon­don for ex­am­ple. Clearly, some tracks were shared in use but not in main­te­nance.

While OfQ was BR’s at­tempt to re­form it­self rather than be re­formed, it did not si­lence those who wished to see it pri­va­tised. John Ma­jor had re­placed Mar­garet Thatcher as Prime Min­is­ter (top­pled by Con­ser­va­tive in­fight­ing over Europe) and Mal­com Rifkind re­placed Parkin­son as Trans­port Sec­re­tary, but not be­fore Parkin­son had pledged pri­vati­sa­tion at the Tory con­fer­ence in au­tumn 1990.

Rifkind strug­gled with his op­tions of sell­ing BR as a sin­gle con­cern, dis­pos­ing of it by re­gion (the Ja­panese model), or busi­ness unit or cre­at­ing a track author­ity and train op­er­a­tors. It was not a sim­ple choice and some parts of BR were bet­ter suited to one op­tion than an­other. Sell­ing BR’s freight arm out­right was the sim­plest part but In­ter­City and NSE of­fered no clear ad­van­tages be­tween re­main­ing ver­ti­cally in­te­grated or be­ing split be­tween track and train. The track op­tion would more eas­ily al­low com­pe­ti­tion be­tween op­er­a­tors but it made it much harder to plan ma­jor in­vest­ments that needed both sides to be co-or­di­nated and de­liv­ered to­gether.

BR was plan­ning ma­jor in­vest­ments. In 1991, it said it was work­ing on four ma­jor schemes that would “re-draw the map of Lon­don’s rail­ways”. They were a Padding­tonHeathrow line (a joint project with Heathrow Air­port owner BAA), Cross­Rail with Lon­don Un­der­ground to pro­vide a new east-west line link­ing Liver­pool Street and Paddington, Thames­link 2000 to pro­vide greater ca­pac­ity and more con­nec­tions through the City, and Kent Ex­press which would use a new main line through Kent from the Chan­nel Tun­nel to pro­vide fast com­muters ser­vices. Twenty seven years later, Heathrow Ex­press is long-es­tab­lished and Kent com­muters have been us­ing ex­press ser­vices to St Pan­cras for a decade, but Thames­link 2000 is only just be­gin­ning to de­liver its prom­ises. Pas­sen­gers must wait un­til next year to travel un­der Lon­don on Cross­rail (which BR coloured

pur­ple on its 1991 map, just as to­day’s maps use).

BR was also turn­ing its mind to up­grad­ing the West Coast Main Line ( RAIL 839). This was to show the dif­fi­cul­ties of split­ting track and train. The train side de­liv­ered the 140mph stock it promised but the track side failed and even­tu­ally de­liv­ered a 125mph line. But that’s to jump into the fu­ture, in 1991, there was no clar­ity from gov­ern­ment about what op­tion it would pur­sue.

In July 1991 the Euro­pean Com­mu­nity pub­lished Di­rec­tive 91/440 which called on mem­ber states to split in­fra­struc­ture from op­er­a­tions and cre­ate open ac­cess for in­ter­na­tional ser­vices. Rifkind took this fur­ther and an­nounced he wanted to see open ac­cess for do­mes­tic pas­sen­ger and freight op­er­a­tions.

Many doubted Ma­jor’s Con­ser­va­tives would be in a po­si­tion to de­liver any­thing. His gov­ern­ment was strug­gling on many fronts and was widely ex­pected to lose the elec­tion that was likely in 1992. Mean­while, Labour was promis­ing to halt all moves to­wards pri­vati­sa­tion.

There were ex­per­i­ments with pri­vate ser­vices on BR lines. In ad­di­tion to Foster Yeo­man, and later ARC, Char­terail un­der Manag­ing Di­rec­tor Robin Gisby leased ‘pig­gy­back’ wag­ons to carry lorry trail­ers and hired lo­co­mo­tives and crews from BR. It started in 1990 but be­came un­happy with the re­li­a­bil­ity of BR’s Class 47 lo­co­mo­tives and the price BR was charg­ing. The ven­ture folded in 1992.

The same year Stage­coach took to the rails by tag­ging day coaches leased from BR and painted in Stage­coach colours to sleep­ing car trains be­tween Lon­don and Scot­land. It lasted just five months.

Against ex­pec­ta­tions, Ma­jor won April 1992’s elec­tion. He might have lost 41 seats, and Labour gained 42, but Ma­jor re­turned to 10 Down­ing Street with an ab­so­lute ma­jor­ity. The in­evitable reshuf­fle of cab­i­net min­is­ters re­placed Rifkind with John MacGre­gor. He pushed quickly to pub­lish a White Pa­per three months later that ruled out sell­ing BR as a sin­gle en­tity.

In­ter­City Manag­ing Di­rec­tor Chris Green re­calls the shock. “In­ter­City’s eu­pho­ria at be­com­ing a true busi­ness on April 6 was dashed by the elec­tion re­sults just three days later on April 9 when John Ma­jor won with a man­i­festo which com­mit­ted them to pri­vatis­ing the rail net­work,” he told RAIL in 2018.

At just 24 pages, MacGre­gor’s pa­per was short but read­ers who per­se­vered to the fi­nal page were left in no doubt what MacGre­gor wanted. That fi­nal page pledged that gov­ern­ment would “be­fore the end of this Par­lia­ment”:

Sell BR’s freight and parcels busi­nesses to the pri­vate sec­tor.

Es­tab­lish a fran­chis­ing author­ity and fran­chise a sub­stan­tial num­ber of pas­sen­ger ser­vices.

Re­struc­ture BR to own and op­er­ate track and in­fra­struc­ture sep­a­rately from the op­er­a­tion of ser­vices.

Es­tab­lish the rights of ac­cess for new op­er­a­tors to the rail net­work.

Es­tab­lish an in­de­pen­dent reg­u­la­tor to pro­tect the in­ter­ests of con­sumers and to su­per­vise ac­cess to all track and charges for its use.

Pro­vide op­por­tu­ni­ties for the sale or leas­ing of sta­tions.

The White Pa­per said BR would cre­ate Rail­track to own track and in­fra­struc­ture and that it would re­main pub­lic for the medium term but added that gov­ern­ment would take pow­ers to pri­va­tise it in the longer term. Gov­ern­ment would re­quire Rail­track to con­tract out its own sup­port func­tions, such as track main­te­nance, “where that of­fers value for money”.

The White Pa­per also said gov­ern­ment wanted to see in­vest­ment in in­fra­struc­ture con­tinue, largely fi­nanced from charges to train op­er­a­tors. It was pre­pared to pro­vide di­rect in­vest­ment sup­port for projects that might not earn an ad­e­quate fi­nan­cial re­turn but were sat­is­fac­tory when wider ben­e­fits were taken into ac­count. Rail­track would need to con­sult train op­er­a­tors and would look for pri­vate sec­tor con­tri­bu­tions, it said. “In­deed, the pri­vate sec­tor might wish to fi­nance cer­tain in­vest­ments, eg new lines and sta­tion rede­vel­op­ment with­out any re­course to pub­lic funds,” the White Pa­per added.

It’s clear from this that gov­ern­ment hoped it would no longer have to fund ex­pen­sive rail in­fra­struc­ture.

Green re­mem­bers: “We were es­pe­cially con­cerned at the pro­posed sep­a­ra­tion of track and trains to cre­ate com­pe­ti­tion on rail. We quickly dis­cov­ered that this con­cept of rail com­pe­ti­tion was based on po­lit­i­cal and eco­nomic dogma rather than re­al­ity.

“We dealt with re­al­ity and knew that the rail­way pro­duc­tion line was to­tally dif­fer­ent to the free­dom of a mo­tor­way. The rail net­work is a tightly planned timetable where trains have to be care­fully pathed across junc­tions. The team was op­posed to the cre­ation of a sep­a­rate Rail­track own­ing in­fra­struc­ture and timetabling.”

MacGre­gor’s pa­per listed what it saw as the ben­e­fits of pri­vate sec­tor in­volve­ment and lib­er­al­i­sa­tion. It fore­told of im­proved ser­vices from more con­cern for cus­tomers’ needs, com­pe­ti­tion and an end to monopoly, man­age­ment free­dom, clear and en­force­able qual­ity stan­dards, mo­ti­va­tion and ef­fi­ciency.

It saw no uni­ver­sal tem­plate for fran­chise con­tracts and no stan­dard du­ra­tion. “The aim will be to bal­ance the greater scope of­fered by a longer con­tract for pri­vate sec­tor op­er­a­tors to tai­lor their ser­vice to pas­sen­gers’ re­quire­ments and to in­vest on their own ac­count with the ben­e­fits to be gained from more fre­quent ex­po­sure of fran­chised ser­vices to com­pet­i­tive ten­der­ing,” it said.

Gov­ern­ment ac­knowl­edged In­ter­City’s suc­cess and said it would not sell it “at this stage”. It added: “The first pri­or­ity is to im­prove the ser­vice to cus­tomers by in­tro­duc­ing pri­vate sec­tor man­age­ment, cul­ture, dis­ci­plines and in­cen­tives. It is not clear that the busi­ness as a whole could im­prove its per­for­mance suf­fi­ciently to al­low

sale in this Par­lia­ment.”

Se­nior rail­way­men con­tin­ued to ar­gue against MacGre­gor’s plans. They told him that they pre­ferred ver­ti­cal in­te­gra­tion – track and train to­gether – but MacGre­gor wouldn’t budge. His model al­lowed on-track com­pe­ti­tion, and com­pe­ti­tion is some­thing Con­ser­va­tive gov­ern­ments tra­di­tion­ally sup­port.

Fran­chis­ing was com­ing for Re­gional Rail­ways and Net­work South­East de­spite their heavy de­pen­dence on sub­sidy. Gov­ern­ment grants ac­counted for 28% of NSE’s turnover and 70% of Re­gional Rail­ways’ in 1991/92.

The White Pa­per noted: “It is clear from these fig­ures that there is no prospect what­so­ever of fi­nan­cial vi­a­bil­ity for Re­gional Rail­ways, and none in the fore­see­able fu­ture for NSE. Im­proved per­for­mance is, how­ever, es­sen­tial. The ser­vices of both busi­ness will there­fore be fran­chised, with fran­chises de­signed to re­flect re­gional and lo­cal iden­ti­ties.”

There came a clear ac­knowl­edge­ment that open­ing ac­cess to pri­vate op­er­a­tors would be dif­fi­cult. It said there would be a for­mal frame­work for reg­u­lat­ing ac­cess to the net­work and that the timetabling process would be im­por­tant in de­cid­ing which ser­vices should have pri­or­ity in al­lo­cat­ing paths. There were also dif­fi­cult prob­lems to solve about charg­ing dif­fer­ent types of ser­vice for ac­cess to Rail­track’s lines.

The pa­per con­tin­ued: “For pas­sen­ger ser­vices, pro­vi­sion will need to be made to rec­on­cile the re­quire­ments for fran­chised ser­vices with the op­por­tu­ni­ties to be pro­vided for lib­er­alised com­mer­cial ser­vices.”

An in­de­pen­dent reg­u­la­tor would over­see track ac­cess and charg­ing, pro­mote com­pe­ti­tion and prevent abuse of monopoly power and anti-com­pet­i­tive prac­tices, main­tain the in­ter­ests of pas­sen­gers and en­sure that net­work ben­e­fits (such as through tick­et­ing and a na­tional timetable) were main­tained. There was a hint that fran­chis­ing might not al­ways be gov­ern­ment’s pre­ferred op­tion when the White Pa­per said: “As long as Lon­don com­muter ser­vices are fran­chised, any abuse of monopoly power will be con­trolled through the con­tracts be­tween the fran­chis­ing author­ity and fran­chisees. How­ever, if in time the Gov­ern­ment were to sell to the pri­vate sec­tor any pas­sen­gers ser­vices which en­joyed monopoly power the Reg­u­la­tor would be given the task of con­trol­ling fares and qual­ity of ser­vice through li­cence con­di­tions, us­ing pow­ers sim­i­lar to those en­joyed by other reg­u­la­tors.”

Safety was of paramount im­por­tance, ac­cord­ing to MacGre­gor’s pa­per. The Health and Safety Ex­ec­u­tive would be the in­de­pen­dent safety author­ity (it in­cor­po­rated the Rail­way In­spec­torate). Rail­track and the

train op­er­a­tors would be re­spon­si­ble for safe op­er­a­tions and for any in­vest­ment needed to en­sure safety.

Rail­track was to prove a thorny prob­lem be­tween the Depart­ment of Trans­port and the Bri­tish Rail Board. With the prospect of los­ing its train and freight op­er­at­ing arm, Rail­track was to be the board’s only part.

BRB Chair­man Sir Bob Reid saw Rail­track as a sub­sidiary of his board. The Depart­ment saw it more as an in­de­pen­dent com­pany, with the BRB a handy host for it. The way that MacGre­gor di­rectly ap­pointed board mem­bers and shadow Rail­track di­rec­tors made clear that it was no sub­sidiary. In ap­point­ing the blunt and tough Robert Horton as Rail­track chair­man des­ig­nate, MacGre­gor was clearly sig­nalling that Rail­track was to be its own body. He was also mak­ing clear that re­sis­tance was fu­tile and that pri­vati­sa­tion was com­ing, what­ever the BRB and se­nior rail­way­men thought.

They were not the only ones re­sist­ing MacGre­gor’s head­long charge. Even Con­ser­va­tive back­benchers were con­cerned, not least Trans­port Com­mit­tee Chair­man Robert Ad­ley. That trade unions, some lobby groups and the Labour Party were op­posed goes with­out say­ing but they were in no po­si­tion to de­rail the gov­ern­ment’s plans.

Ad­ley’s crit­i­cism that the Gov­ern­ment had failed to set pri­vati­sa­tion any tar­gets in re­la­tion to wider trans­port pol­icy echoes to­day with suc­ces­sive gov­ern­ments un­will­ing or un­able to set trans­port pol­icy. Nev­er­the­less, the Rail­ways Bill pub­lished in Jan­uary 1993 was passed to be­come the Rail­ways Act on Novem­ber 5. From then, just four years elapsed be­fore BR’s fi­nal train. In that time, Rail­track was floated, the freight com­pa­nies and other sub­sidiary parts of BR were sold and all train op­er­a­tors fran­chised.

BR’s OfQ re­forms had, per­haps un­wit­tingly, made fran­chis­ing eas­ier by split­ting pas­sen­ger op­er­a­tions in handy chunks. These chunks al­le­vi­ated gov­ern­ment fears that In­ter­City or NSE were too big to at­tract pri­vate in­ter­est, given all the un­cer­tain­ties swirling around pri­vati­sa­tion. Hind­sight sug­gests their fears were false but, at the time, gov­ern­ment strug­gled to cre­ate in­ter­est in its train op­er­a­tors.

BR’s train op­er­at­ing units had to es­tab­lish con­trac­tual re­la­tion­ships with Rail­track, not least how much they would pay for track ac­cess. These charges had to in­clude a com­mer­cial re­turn for Rail­track and the way they treated cap­i­tal costs left some train op­er­a­tors fac­ing much higher costs than they had un­der OfQ. Sec­ondary users faced steep in­creases now they were be­ing asked to pay for what they’d pre­vi­ously had on the coat-tails of pri­mary users.

It was clear the Depart­ment of Trans­port faced a tricky prob­lem. If ac­cess charges were high enough to make Rail­track a sell­able prospect, they would be too high to at­tract in­ter­est in fran­chises. And the op­po­site was equally true. There was ten­sion be­tween com­plex and clever charg­ing mod­els de­vised by the Trea­sury and the prac­ti­cal­i­ties of run­ning a rail­way.

The Trea­sury would have op­er­a­tors bid­ding by auc­tion for train paths that would be pack­aged into a timetable with a price at­tached. How­ever, Rail­track would face costs whether or not trains ran and so there was a bal­ance to be found. BR pro­posed a charge to cover Rail­track’s fixed costs. Rail­track de­vel­oped a model that iden­ti­fied short-run costs such as wear-and-tear and long-run elec­tric­ity sup­ply and track main­te­nance and then di­vided what re­mained be­tween a line’s users.

Of­fice of the Rail Reg­u­la­tor (ORR) Chief Econ­o­mist Chris Bolt re­called in 2018 that ORR had to as­sume what the costs might be of op­er­at­ing, main­tain­ing and re­new­ing rail lines, not­ing that Rail­track man­age­ment “had very lit­tle idea of what those costs would be”.

Op­er­a­tors were charged wear-and-tear costs as a vari­able charge, which Bolt re­calls gave them an in­cen­tive to in­crease ser­vices but with lit­tle re­gard for the im­pact on per­for­mance. These low charges gave Rail­track lit­tle fund­ing to ex­pand the net­work to cope with op­er­a­tors’ ex­tra trains. With gov­ern­ment in a hurry, there was never go­ing to be time to de­velop a per­fect charg­ing model and no sur­prise that there were quickly calls for a re­view.

Trans­form­ing the 25 train op­er­at­ing units (TOU), now grouped un­der geo­graphic head­ings rather than the busi­ness units of OfQ, was chal­leng­ing. To have any chance of at­tract­ing pri­vate in­ter­est, BR needed to be able to ex­plain each unit’s costs and rev­enues. And while BR could not bid to run fran­chises, its man­agers could and were en­cour­aged to form man­age­ment buy­outs. These man­agers would at least know some of the his­tory which per­haps helped cover any cracks of in­com­plete in­for­ma­tion.

De­spite min­is­ters’ im­pa­tience, it took BR un­til Oc­to­ber 1993 be­fore it had the first TOU in shadow form, Gatwick Ex­press. The rest would fol­low in 1994 and fran­chises for three – South West Trains, Great Western and Lon­don, Til­bury and Southend – were signed be­fore 1995 closed. SWT and GW started pri­vate run­ning on Feb­ru­ary 4 1996.

Freight should have proved sim­ple to sell but there were ar­gu­ments be­tween BR and the Depart­ment of Trans­port about how to re­struc­ture BR Rail­freight into com­pa­nies that could be sold. Even­tu­ally BR formed three geo­graphic com­pa­nies, Load­haul in the North East, Main­line in the South East and Tran­srail in the West. There was no per­fect an­swer; Load­haul faced com­pe­ti­tion from Na­tional Power run­ning un­der open ac­cess, Main­line de­pended heav­ily on the con­struc­tion mar­ket that in turn de­pended on the econ­omy and Tran­srail was rather small and vul­ner­a­ble to takeover by ei­ther of the oth­ers.

Af­ter all the angst, all three went to Wis­con­sin Cen­tral which formed them into EWS. Wis­con­sin was also to buy Rail Ex­press Sys­tems and the Chan­nel Tun­nel part of Rail­freight Dis­tri­bu­tion that was left once Freight­liner had been sep­a­rated and pri­va­tised with a man­age­ment buy­out.

With the freight com­pa­nies came their rolling stock but TOUs saw what had been their stock shift to three rolling stock com­pa­nies for even­tual sale. There was some logic in this be­cause the pas­sen­gers fran­chises were let on deals typ­i­cally of seven years and rolling stock lasted much longer. Leas­ing trains re­flected air­line prac­tice but, un­like air­lin­ers, many trains were fixed to their routes and so fran­chises had lit­tle choice in what they leased.

Although the 11,000 ve­hi­cles went to the rolling stock com­pa­nies (ROSCOs) with a value of £ 2 bil­lion, they were later val­ued at £4.3bn, which meant a sharp in­crease in lease costs. Gov­ern­ment sold the ROSCOs for £1.8bn in 1996 (Porter­brook for £ 527m, Ever­sholt for £ 580m and An­gel Trains for £ 672m). The fol­low­ing year all three had been sold on for £ 2.7bn. Labour politi­cians claimed the stock was sold too cheaply but its threats to over­turn pri­vati­sa­tion helped re­duce in­ter­est and so re­duce the sale price.

The charges ROSCOs could levy were set to earn a 10% re­turn over the life of a new ve­hi­cle. Older stock was dis­counted so that op­er­a­tors were left un­af­fected by the higher op­er­at­ing costs of old trains. This in­dif­fer­ent pric­ing was aimed at en­cour­ag­ing op­er­a­tors to re­place old trains with new.

In de­cid­ing Rail­track’s shape, there was prece­dent in OfQ’s route group­ings but also in BR’s ear­lier re­gional struc­ture. With con­sul­tant’s ad­vice, Rail­track took shape as a plan­ning board with 10 re­gions, called zones to dif­fer­en­ti­ate them from what had gone be­fore.

Chair­man Bob Horton de­cided to cre­ate a com­pany that had lit­tle en­gi­neer­ing ex­per­tise. It would own the track, sig­nalling and struc­tures but rely on con­trac­tors to main­tain and re­new it. In­stead, Rail­track would con­cen­trate on sell­ing track ac­cess. It would lease all but 13 ma­jor sta­tions to train op­er­a­tors. In this, Horton sowed the seeds of Rail­track’s col­lapse just a few years later.

In step­ping aside from di­rect en­gi­neer­ing work, Rail­track left a large chunk of Bri­tish Rail’s civil en­gi­neer­ing depart­ment with­out a home. BR cre­ated an In­fra­struc­ture Ser­vices divi­sion in 1993 with 14 units based on OfQ struc­tures and seven de­sign of­fices. Re­or­gan­i­sa­tion fol­lowed to form seven main­te­nance and seven track re­newals units which could be sold once they had con­tracts ce­mented with Rail­track’s zones.

Chris Bolt re­mem­bers that the con­tracts with these main­te­nance and re­newals com­pa­nies in­cluded pro­vi­sions to deal with changes in ser­vice lev­els. How­ever, he adds that Rail­track didn’t have enough con­tract man­age­ment ex­per­tise to use these pro­vi­sions and so the bal­ance be­tween main­te­nance and re­newals be­came in­ef­fi­cient.

Rail­track es­tab­lished it­self on April 1 1994 with a hold­ing com­pany and an op­er­at­ing com­pany and took on 11,000 staff. From that date on­wards, BR was no longer an in­te­grated na­tion­alised rail­way op­er­a­tor. Its board now con­cen­trated on sell­ing its sub­sidiaries although fran­chis­ing it­self sat un­der the Of­fice of Pas­sen­ger Rail Fran­chis­ing (OPRAF) and its di­rec­tor, Roger Sal­mon.

There were prob­lems along the way. Sales took longer than first thought. Gov­ern­ment told OPRAF in April 1994 to have 51% of fran­chises let by April 1996 and this looked like a tall or­der. In the event, it man­aged two of 25 fran­chises by this date, South West Trains and Great Western Trains

The time it took to thrash out ac­cess con­tracts be­tween Rail­track and op­er­a­tors proved a ma­jor prob­lem. There was also the

im­por­tant ques­tion of gov­ern­ment sub­sidy. Every main­land op­er­a­tor started its pri­vate life with sub­sidy ex­cept Gatwick Ex­press (£ 6m premium in 1997/98) and these sub­si­dies ranged from Thames­link’s £ 2.5m in 1997/98 to ScotRail’s £ 280m. The ver­ti­cally in­te­grated Is­land Line on the Isle of Wight started with a sub­sidy of £ 2.3m in 1996/97.

The sale of LTS Rail to a man­age­ment buy­out was can­celled when al­le­ga­tions of tick­et­ing ir­reg­u­lar­i­ties by the MBO sur­faced. In Scot­land, Strath­clyde Coun­cil raised sev­eral com­plaints which led ScotRail to be the fi­nal fran­chise rather than one of the first. OPRAF also cur­tailed open ac­cess op­por­tu­ni­ties, fear­ing that the prospect would harm its chances of sell­ing fran­chises.

Iryna Ter­lecky had been a Depart­ment of Trans­port civil ser­vant be­fore mov­ing to BR and then be­ing sec­onded to John Swift’s Of­fice of the Rail Reg­u­la­tor (ORR). She told RAIL of the pace and vol­ume of work in­volved: “I re­mem­ber meet­ings with 30-40 peo­ple in the room: OPRAF lawyers and of­fi­cials, ORR lawyers and of­fi­cials, DfT of­fi­cials, lawyers and economists, rep­re­sen­ta­tives from big con­sult­ing firms work­ing on the fran­chis­ing propo­si­tion – you name it, they were there. Money ap­peared to be no ob­ject. It just had to get done – how­ever many peo­ple it needed and how­ever many very late nights.”

Mean­while, prepa­ra­tions to float Rail­track were un­der way, not least with the pro­duc­tion of a share prospec­tus con­tain­ing more than 250 pages of close-typed in­for­ma­tion. It re­vealed a profit of £101m on a turnover of £ 2.3bn for the year to March 1995.

Of Rail­track’s prospects, the doc­u­ment said: “The di­rec­tors see lit­tle prospect for sig­nif­i­cant rev­enue ben­e­fits ac­cru­ing to Rail­track from in­creased rail us­age in the near to medium term as spare ca­pac­ity is avail­able to the train op­er­a­tors which is likely to be ab­sorbed be­fore any such de­mand gen­er­ates a re­quire­ment for ad­di­tional train paths or for the ex­pan­sion of the rail net­work.”

The com­pany would need to cope with ac­cess charge pay­ments from op­er­a­tors that would fall 2% every year for the first five years and there was to be a per­for­mance regime that would see Rail­track mak­ing sig­nif­i­cant pay­ments to train op­er­a­tors if cur­rent per­for­mance lev­els con­tin­ued. Nev­er­the­less, the di­rec­tors said Rail­track had a promis­ing fu­ture. The shares sold to 660 in­sti­tu­tions and 645,000 in­di­vid­u­als and Rail­track be­came quoted on the Lon­don Stock Ex­change as a fully fledged plc in May 1996.

A brave new world awaited. It was to be a fas­ci­nat­ing ride. And some of the prob­lems that the Gov­ern­ment is to­day wrestling in its Rail Re­view are the same ones MacGre­gor wres­tled with 25 years ago. It has been un­able to avoid com­mit­ting tax­payer money to in­fra­struc­ture up­grades, and any thought that it might have avoided this was surely naive.

It was all very pre­dictable. As John Welsby wrote with Bri­tish Rail­ways Board Pol­icy Di­rec­tor Alan Ni­chols in a 1998 pa­per for the

Jour­nal of Trans­port Eco­nom­ics and Pol­icy: “The most sig­nif­i­cant prob­lems may turn out to be those of suc­cess. In­creas­ing vol­ume and de­mand for in­fra­struc­ture was not ad­e­quately ad­dressed in the pri­vati­sa­tion de­sign, and the in­di­ca­tions are that the pri­vate sec­tor will be re­luc­tant to in­vest to in­crease the ca­pac­ity of the sys­tem.”

Chris Bolt told RAIL that many dif­fer­ent de­ci­sions would have been made at pri­vati­sa­tion had there been any inkling that Britain’s rail­ways were about to wit­ness a dou­bling of pas­sen­ger num­bers over the next two decades.

Gov­ern­ment did have to pay for this in­crease in rail ca­pac­ity. John Swift re­called: “ORR se­cured, for the first time, a gov­ern­ment com­mit­ment to the rail­ways over a five-year pe­riod, which in­volved the pay­ment over that pe­riod of a sub­stan­tial sum of money for Rail­track to spend on the in­fra­struc­ture.”

Af­ter decades of gov­ern­ments throt­tling BR’s spend­ing, this was noth­ing less than the rail­way de­served.


Net­work South­East 465160 calls at Bick­ley with an Or­p­ing­ton-Vic­to­ria ser­vice on Septem­ber 28 1996, dur­ing the fi­nal days of na­tion­alised run­ning – Con­nex would be­gin its op­er­a­tion of the South Eastern fran­chise just a fort­night later. Gov­ern­ment opted against pri­vatis­ing Bri­tish Rail’s in­di­vid­ual busi­ness sec­tors in­clud­ing NSE and Re­gional Rail­ways in their en­tirety be­cause of their de­pen­dence on pub­lic sub­sidy.


Ce­cil Parkin­son was Sec­re­tary of State for Trans­port from July 24 1989-Novem­ber 28 1990. With a num­ber of op­tions be­ing ex­plored by the gov­ern­ment for pri­vatis­ing Bri­tish Rail, it was Parkin­son’s wife Anne who had re­port­edly first sug­gested separat­ing track and train op­er­a­tions.


73207 pre­pares to depart Lon­don Vic­to­ria with a Gatwick Ex­press ser­vice on July 17 1993. A ded­i­cated ser­vice to the air­port com­menced in 1984, and be­came the first por­tion of BR’s In­ter­City sec­tor to be con­verted into a sep­a­rate train op­er­at­ing unit in March 1994 in the run up to pri­vati­sa­tion. Na­tional Ex­press would go on to take over the fran­chise in April 1996.


Prime Min­is­ter John Ma­jor cel­e­brates the Con­ser­va­tives’ Gen­eral Elec­tion vic­tory out­side 10 Down­ing Street on April 10 1992. Although widely ex­pected to lose the elec­tion, his over­all par­lia­men­tary ma­jor­ity of 21 would en­able his gov­ern­ment to over­see the break-up and pri­vati­sa­tion of Bri­tish Rail within the next five years.


New Great Western liv­ery is worn by an HST set pass­ing Slough on Novem­ber 9 1996, with the 0830 Paddington-We­ston-su­per-Mare. Power cars 43135 and 43185 pro­vide trac­tion. Great Western and South West Trains had be­come the first pri­vate op­er­a­tors to take over parts of BR’s pas­sen­ger op­er­a­tions eight months ear­lier.

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