Rail privatisation becomes unpopular in UK

Ulhas Joglekar ulhasj at SPAMbom4.vsnl.net.in
Mon Oct 30 09:03:46 MST 2000

22 October 2000

Rail privatisation becomes unpopular in UK
By L K Sharma
The Times of India News Service
LONDON: A railway accident hits Britain where it hurts most because railways
are more than an industry. It is still a way of life, suffused with romantic
memories of a glorious past and the pride of the Industrial Revolution. A
setback to the system is seen as yet another sign of industrial decline.
A comparison of accident rates with those of Italy, France and Germany
causes national unease. The series of rail disasters in the past few years
have dented public confidence in the railway system, even as the latest
fatal accident has led to an uproar about safety and to yet another public
Many more accidents may have been averted because of the forced disclosures
about large sections of the railway tracks needing repairs. Before the
tragedy, the rail companies would not have talked about the 81 identified
nationwide trouble spots. Speeds and services are being reduced and
passengers getting ready to face a disruption in services.
Three major rail accidents in the past three years, have sparked a debate on
railway privatisation which was pushed through after the Thatcher years. The
free market ideologues, fearing a backlash against privatisation, have
already launched a damage limitation exercise. They are busy selling their
vision of a time when public safety and higher profits for the shareholders
in railway companies will go together.
But the general public is not very receptive to their talk of a brighter
future. The cause of privatisation has not been helped by other developments
such as the poor performance of the privatised British Telecom on the
financial, technological and services fronts.
There are no think tanks left to counter the pro-privatisation arguments but
some odd commentators and voters have started to utter the unsayable word
"renationalisation" in the context of Railtrack. This company owns the
tracks and provides these for the wheels that now belong to more than 25
private railway operating companies. After the Paddington rail crash last
year, a poll found that 73 percent of the voters would support
renationalising Railtrack. But the Conservative government which privatised
British rail had some foresight. It figured out that a sale of Railtrack to
hundreds of thousands of private investors would make it impossible for any
future government to reverse the decision.
As relations of the killed passengers offered flowers at the scene of the
accident and government reiterated that safety was its top priority, Deputy
Prime Minister John Prescott said that the structure of the privatised
British rail was "fragmented and adversarial". The Conservatives who
privatised British rail confessed that mistakes had been made. The
Railtrack's chief executive, Gerlad Corbett, said the railway had been
"ripped apart at privatisation with the resulting structure designed to
maximise the proceeds to the treasury." However, the Labour government has
to aim at improvements within the present framework because after the
election, it had ruled out renationalisation on grounds of cost.
Comments by some experts amounted to strictures on the very concept of
privatisation. The need to show results to the shareholders and to maximise
profits has generally meant cost-cutting which in turn compromised safety.
Line inspection was outsourced and made less frequent and less stringent.
With the complex legal agreements based relationship between the Railtrack
and the numerous railway operators, any disruption of services caused by an
unusual maintenance activity meant penalties for Railtrack and a setback to
the operators' performance.
Of course, a public sector undertaking would not be under commercial
pressures to compromise safety. The present situation can be compared to the
spate of air accidents in America after the open skies policy came into
operation. There came up airlines which did not mind deploying aircraft
which could not perform properly. Such things are known to have happened
despite a battery of regulators that are put in place as part of the
privatisation process.
Margaret Thatcher is seen as the high priestess of privatisation. However,
in the case of British rail, perhaps even she considered it to be
privatisation too far. How else can one interpret her indecision and delays
when she was the prime minister and had approved the policy of rail
privatisation. The John Major government pushed through the rail
privatisation plans and ensured that these were implemented before a coming
general election. The model was suggested by the Adam Smith Institute.
The government got large sums of money by selling the franchises. As happens
in these cases, some operators bought and sold franchises at huge profits.
The railway track was separated from the operating companies to make the
franchises even more lucrative, without the burden of track renewal and
maintenance. The government did not hesitate to write off one billion pounds
of Railtrack debt to make its flotation successful.
The government, of course, found it easy to write-off debts before the
sell-off than to invest more over the years in a public service. The
experience has been the same in many countries. The preparations for
eventual privatisation begin quietly years in advance when the government
starts starving a unit of investments and delaying top appointments. Thus
the rolling stocks of railways and fleets of the airlines are depleted over
a period to reinforce the argument in favour of privatisation some years
The fragmentation resulting from privatisation does introduce competition
and attracts investments but than can have an adverse impact on safety. The
compulsion to maximise profits does not always serve the cause of public
Also, it has been seen that scores of small companies carved out of a major
telecommunications or transport company are unable to mount any research and
development effort which makes that country less competitive in the world
market. Britain sells its expertise in privatisation to eastern Europe and
developing countries. The demand for that may slump because of the current
controversy here, but the British experience will still be of great interest
to the countries engaged in selling off their public sector units.
For reprint rights:Times Syndication Service

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