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1992-07-14 DoT-001
Department of Transport


British Rail (Privatisation)

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Department of Transport

British Rail (Privatisation)

14 July 1992
source Department of Transport
type Statement

note HoC Hansard 14 July 1992: Columns 971-972: 3.30 pm. John MacGregor MP

The Secretary of State for Transport (Mr. John MacGregor) With permission, I should like to make a statement about the Government's proposals for the privatisation of British Rail, which are set out in a White Paper published today.

Under Conservative Governments, there have been many examples of the benefits which privatisation has brought to former nationalised industries. It has taken different forms in different industries, but common objectives have been the harnessing of the management flair and enterprise of the private sector, the application of the disciplines and incentives of the marketplace, the opportunities for private finance and for greater competition and choice which privatisation brings, all to provide better services for the public.

The Government believe that it is now time to extend those benefits to the railways. British Rail is dependent on substantial subsidy from Government and makes large losses so it is not possible to sell all of BR, either as a single entity, or as separate businesses. But our objectives, of improved efficiency, of new incentives for operators to provide the services which the customer wants, and of new opportunities for the railways can all be achieved in other ways than a single outright sale, and that is the purpose of our proposals. Altogether, they comprise the most radical changes to Britain's railways since 1948, but our flexible and practical approach to change will ensure that they are workable and realistic.

First, our proposals provide a variety of opportunities for the private sector. For passenger services, the Government have decided that the most effective way is through franchising, enabling private sector companies to bid for the management and operation of passenger services, in return for grants where necessary. Franchisees will be required to meet specific standards of service, which will be set out in their contracts.

Franchising will be carried out progressively and flexibly. The Government intend that in due course all BR's existing passenger services should be franchised to private operators. The establishment of local or regionally based franchises will help to revive local pride and identity.

Secondly, BR's existing freight and parcels business will be sold to the private sector. Thirdly, we will additionally provide a new right of access to the rail network for private operators of both freight and passenger services. We want as much freight as possible to be carried by rail rather than road; these new opportunities should help to bring this about.

Fourthly, to facilitate those new arrangements there will be a new structure for the railways. BR will be divided into two separate parts. One will become a track authority—Railtrack—with responsibility for all track and infrastructure. The other will become a residual operating company responsible for operating the passenger services which are not yet franchised. When franchising is complete, BR's sole function will be as Railtrack.

Fifthly, we will set up two separate independent authorities responsible to Government: one, a new franchising authority responsible for negotiating, awarding and monitoring franchises; and the other, a new rail regulator to oversee the application of arrangements for 972 track access and charging, to promote competition, prevent abuse of monopoly power and promote the interests of customers.

Sixthly, we will provide opportunities for the private sector to purchase or lease stations, which will bring benefits to passengers, operators as well as to others. Finally, we will substantially alter and improve grant arrangements. At present, a single grant is paid to BR to provide supported passenger services. Under the new franchising regime, by contrast, grants will be made for individual services or groups of services. This will be more transparent and will enable the taxpayer to know precisely what services his grant is buying.

The Government will introduce legislation to implement the proposals later in the year. In the longer term, the Government would like to see the private sector owning as much as possible of the railway. We therefore propose to take powers in the legislation to allow the future privatisation of all BR's track and operations.

There are a number of other vital points I should stress. In developing the proposals, safety has been of paramount concern. The Government are committed to ensuring that their proposals will not lead to any weakening of the high standards of safety on our railways. Operators will have to meet strict safety requirements overseen by the Health and Safety Executive. I have been advised in the framing of the proposals by the Health and Safety Commission, and it will be making detailed recommendations for the appropriate safety arrangements.

We fully recognise the importance of regional and commuter services to the people who depend on them. The Government have throughout made it clear that we are committed to continuing support for socially necessary passenger services. The statutory procedures for any closure proposals will be retained.

British Rail has made significant improvements in recent years. Investment in the railways has greatly increased. The productivity of the British Rail work force is among the highest of any European railways. I pay tribute to the considerable efforts of everyone in British Rail in bringing that about. Private sector involvement will help develop the quality and quantity of rail services even further. There will now be new opportunities for those who work in the railways and I want to ensure that they are able to benefit from them. The existing work force will be able to transfer to new companies when they are established, and there will be opportunities for employees to take a stake in their industry when they are in the private sector. Management-employee bids for franchises will be encouraged and assistance will be given to staff seeking to make such bids. Pension rights and entitlements to concessionary travel for present employees will be safeguarded.

The detailed proposals I am now putting forward are based on our election manifesto commitments. I look forward to working with the chairman of British Rail, with whom I have agreed new objectives for him to implement; and all those in the industry to bring about the changes I have outlined. Our aim is simple: to improve the quality of railway services for the travelling public and the freight customer. Improved quality of service will make the railways more attractive, improve their competitiveness, and enable them to take full advantage of the new opportunities open to them. I commend the proposals to the House.

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