Chris

In the dying days of the Major government in the mid 1990s, British Rail was the last major piece of nationalised infrastructure left standing. Every other significant nationalisation post-1945 had been undone. For most of the Tory party it was almost an article of faith that Mrs Thatcher’s great project be completed, and they could see the writing on the wall - they were likely to lose th next election and quite possibly the one after it as well.

The privatisation of British Rail was therefore a political imperative, that had to be conceived, implemented and completed on a tight timetable. What we got was a mess. The single worst part of it was Railtrack, a heavy engineering company operating in a safety-critical environment, whose directors thought they were running what amounted to a retail proposition to a series of captive audiences. A significant number of people paid for its incompetence with their lives.

Stephen Byers, transport secretary under Tony Blair, has a deservedly sketchy reputation as an MP and in government, but effectively renationalising the infrastructure under Network Rail was definitely the right thing for the network, even though his methods were dubious and the government was ultimately on the hook for millions in lost investments at Railtrack.

The process of competition to run actual train services was flawed from the outset. On busy, profitable lines, there was rarely the capacity for more trains. The ability of ‘open access’ operators to run competing services outside of the franchise system was hampered by rules designed to protect operators running franchised services. And the franchise process itself was a bureaucratic muddle designed and managed by civil servants with inadequate experience. Franchise bidders regularly ran rings around them.

The Virgin/First Group case you mentioned became a scandal because in trying to improve their performance, civil servants charged with awarding the franchise had developed an inflexible model for comparing franchises that was easily abused by bidders. The standard scam was to ‘front end’ the costs of running the franchise and ‘back end’ the profits, so over - say - 10 years of a 15 year deal you wouldn’t pay anything back to the government because you were recovering your costs and therefore not making a profit. Of course you had to prove you could run the franchise profitably in order to win it, so you promised massive profits in the last 5 years or so in order to balance the whole thing out. Thing is, there was a break clause in the franchise, around the mid-point, so the franchise operator, when they inevitably reached the point where they knew they would never be able to actually pay the government what they had promised, could walk away, having coined in bucketloads of network subsidies during the ‘investment’ years and never having had to pay anything back to the government because you never got to the ‘profit’ years. In the Virgin/First case, First was awarded the contract and Virgin threatened to go to court over it because their bid was such a brazen example of this back-ending technique. El gov called it back in, then scrapped the whole franchise process and gave Virgin a temporary management contract until it could be re-run.

Overall, I think privatised services *could* have worked in principle and perhaps a model based on management contracts rather than franchises would have worked better. But the system is now badly broken, and while it seems certain its days are numbered anyway, as Labour is committed to ending it, I am intrigued by just how much of it has come back under State control under a Tory government. I wonder whether, if they had another 5 years in government, they would continue quietly nationalising it themselves.