Privatisation Of British Rail Situation In 1979 1980s

The Privatisation of British Rail is usually taken as referring to the policy carried out by the administration of John Major between 1992 and 1997, when the operations of the British Railways Board (BRB) were broken up and sold off en-masse. However, parts of the BRB’s operations had previously been disposed of by the administration of Margaret Thatcher as soon as the early 1980s.

1 Situation in 1979

Historically, the pre- nationalisation railway companies were almost entirely self-sufficient, including, for example, the production of the steel used in the manufacturing of rolling stock and rails. As a consequence of the nationalisation of the railways in 1948 some of these activities had been hived off to other nationalised industries and institutions, e.g. Railway Air Services Limited was one of the forerunners of British Airways; the railways’ road transport services, which had carried parcels and passengers' luggage to and from railheads became British Road Services, and ultimately part of the National Freight Company; railway hospitals became part of the National Health Service, and railway orphanages became the responsibility of the local authorities.

The preferred organisational structure in the 1970s was for the BRB to form wholly-owned subsidiaries which were run at an arms’-length relationship with the BRB, .e.g. the railway engineering works became part of British Rail Engineering Limited (BREL) in 1973, the ferry operations which connected domestic rail services with Ireland, France, BelgiumFor alternate meanings, see Belgium (disambiguation). Belgian redirects here. For the horse breed commonly used as a draft horse, see Belgian. The Kingdom of Belgium ( Dutch: Belgi French: Belgique German: Belgien is a country in Western Europe, bordered and the Netherlands were run by Sealink (U.K.) Ltd , part of the Sealink consortium which also used ferries owned by the French national railway, SNCFSNCF Societe Nationale des Chemins de fer Francais is the French national railway company. It was created on January 1, 1938. It uses the IATA designator 2C in relation to journeys codeshared by airlines. Scope of business SNCF operates almost all of Fran, the Belgian Maritime Transport Authority, Regie voor maritiem transport / Regie des transports maritimes (RMT/RTM), and the Dutch Zeeland Steamship Company. However, reflecting the paternalistic history of the industry, the BRB was still also directly responsible for a multitude of other functions, such as the British Transport PoliceThe British Transport Police (BTP) is a national police service for the railway system throughout Great Britain. The service is also responsible for policing the London Underground system, the Docklands Light Railway, the Midland Metro and Croydon Tramlin, the British Rail Property Board (which was responsible not just for operational track and property, but also for thousands of miles of abandoned tracks and stations arising from the Beeching AxeThe Beeching Axe was an informal name for the British government's attempt in the 1960s to control the spiralling cost of running the British railway system by closing what it considered to be "little-used" and unprofitable railway lines. Background The B and other closure programmes), a staff savings bank, convalescent homes for rail staff, the internal railway telephone and data comms networks (the largest in the country after British TelecomBT Group plc (which trades as just BT and is commonly known by its former name, British Telecom is the privatised former British state telecommunications operator. It is still the dominant telecommunications provider in the United Kingdom. History of BT As'), etc.

In 1979 the organisational structure of the BRB's railway operations still largely reflected that of the "Big Four" private railway companies which had been merged to create British Rail over thirty years previously. There were five Regions (Scotland being a separate region), each region being formed of several Divisions, and each division of several Areas. There was wasteful duplication of resources in this structure, and in the early 1980s the divisional layer of management was abolished with its work being redistributed either upwards to the regions or downwards to the areas.

2 1980s developments

The Thatcher administration quickly developed a policy of selling off the nationalised industries into private ownership, or privatisation as it came to be termed. As far as the BRB's activities were concerned, however, the government's policy had little effect during the whole period of the Thatcher administration except in relatively small areas, as it was considered that privatising the core railway operations would be too difficult.

The chain of British Transport Hotels was sold off, mainly one hotel at a time, in 1982Events January January 6 William Bonin is convicted of being the "freeway killer". January 8 AT&T agrees to divest itself of twenty-two subdivisions January 11 Mark Thatcher, son of the British Prime Minister Margaret Thatcher, disappears in the Sahara du; Sealink (U.K.) Limited was sold in 1984This page is about the year 1984. For other uses of 1984, see 1984 (disambiguation). 1984 is a leap year starting on Sunday (link shows calendar). Events January January 1 Brunei becomes a fully independent state January 1 AT&T is broken up into 22 indepe to Sea Containers Limited, who ultimately sold the routes on to their current owner, Stena Line. In 1988 British Rail Engineering Limited was split between the major engineering works which became BREL (1988) Ltd, and the mostly smaller works which were used for day-to-day maintenance of rolling stock, which became British Rail Maintenance Limited (BRML). BREL (1988) Limited was soon sold to the Swiss-Swedish conglomerate, ASEA Brown-Boveri , who renamed the company ABB Transportation. A merger between ABB Transportation and Daimler Benz created ADtranz on 1 January 1996; ADtranz was subsequently taken over by the Canadian conglomerate, Bombardier.

For reasons of its own efficiency, and to reduce the amount of subsidy required from the government, British Rail undertook a comprehensive organisational restructuring in the late 1980s. The new management structure was based on business sectors rather than on geographical regions, and first manifested itself in 1985 with the creation of Railfreight, which was the BRB's freight operation, and the creation of Network South East in 1986, which covered all local passenger services in the London commuter area, a vast swathe of south-east England. Sectorisation was completed in 1987 with the creation of the Inter City , Provincial Railways (later renamed Regional Railways), Parcels, Departmental (civil engineering), and Freightliner sectors. The regional management structure continued in parallel for a few years before it was abolished. Sectorisation was to have a great effect on the way in which privatisation would eventually be carried out.

In 1986 what may in retrospect be viewed as the harbinger of private rail operation occurred when the quarry company Foster Yeoman bought a small number of extremely powerful 3600 hp locomotives from General Motors' Electromotive Division (GM-EMD), designated British Rail Class 59 , to operate their mineral trains between their quarry in Wiltshire and their customers. Although owned and maintained by Foster Yeoman, the Class 59's were manned by British Rail staff. During acceptance trials on 16 February 1986, locomotive 59001 hauled a train weighing 4639 tonnes – the heaviest load ever hauled by a single non-articulated traction unit. Foster Yeoman's class 59's proved extremely reliable, and it was not long before quarry company ARC and privatised power generator National Power also bought small numbers of Class 59's to haul their own trains.

Also in 1986, the possibility of breaking up British Rail was explored when discussions were held with Sea Containers Ltd, later the franchise operators of GNER, concerning the possible takeover of the railway on the Isle of Wight. However the discussions proved abortive.

In Sweden in 1988 the State Railways, Statens Järnvägar, was split into two – Banverket to control the track network, and SJ to operate the trains. This was the first time a national railway had been split in this manner, and it allowed the local county authorities to tender for local passenger services to be provided by a number of new train operators who appeared. The Swedish system appeared to be very successful initially, although some train operators have subsequently gone bankrupt, and the Swedish experiment was watched with great interest in other countries.

3 The move to privatisation

In 1991, following on from the apparently successful Swedish example and wishing to create an environment where new rail operators could enter the market, the European Union issued EU Directive 91/440 . This mandated all European Union member states to split their national railways between a track operator, and a train operator, the idea being that the track operator would charge the train operator a transparent fee to run its trains over the network, and anyone else could also run trains under the same conditions (open access). Directive 91/440 did not, of itself, require that the railways be privatised; it was principally an accounting means of ensuring a level playing-field between the incumbent train operators and new companies entering the rail transport market. However, Directive 91/440 provided the British Conservatives with an effective smokescreen behind which they would carry out a far more dramatic reorganisation of the railway industry, while at the same time passing on some of the opprobrium to "Europe". As of 2004, the Ireland and Greece have yet to comply with directive 91/440 and its successor.

In Britain, following the replacement of Margaret Thatcher by John Major as leader of the Conservative Party at the end of 1990, the new administration sought to make its mark in history; unfortunately, the Thatcher administration had already sold off nearly all the former state-owned industries apart from the railways. In its manifesto for the 1992 General Election the Conservatives included a commitment to privatise the railways, but they were not specific about in what way their object would be achieved. Rather to their own surprise, the Conservatives won the election held on 9 April 1992, and consequently had to develop a plan to carry out the privatisation before the Railways Bill was published the next year. The management of British Rail strongly advocated privatisation as one entity, a British Rail plc in effect; Prime Minister John Major favoured the resurrection of something like the old "Big Four" geographical railway companies which had existed before 1948; however, the Treasury, under the influence of the Adam Smith Institute think tank advocated the creation of seven, later twenty-five, passenger railway franchises as a way of maximising revenue. As is usual in British politics, the Treasury view prevailed.

The Railways Bill which was published in 1993 and after a few amendments became the Railways Act 1993 on 5 November of that year established an incredibly complex structure for the rail industry, British Rail being broken up into over one hundred separate companies, with all relationships between the successor companies controlled by legal agreements and supervised by the Office of the Rail Regulator and in the case of the passenger railway, the Office of Passenger Rail Franchising ( OPRAF ).

Britain chose to privatise its railways under a more complex system than other EU countries. A quite large number of rail operating companies were granted franchises, while a holding company Railtrack, owned the large physical assets, including much land surplus to current needs. Three train leasing companies were established to lease the trains to the various train operating companies which operate the franchises.

The privatisation has been criticised on political grounds, in terms of service to the consumer (traveller), and also on safety grounds in the aftermath of some high-profile accidents. The railways had been systematically starved of government investment in the 1980s, as the Thatcher administration openly favoured road transport. In financial terms, the government had been subsidising the railways: but of the three passenger sectors, inter-city, the South-East commuter region, and rural services, only the first could hope to be independently commercial; and the proportion of subsidy in a rail ticket price was quite low by European standards.

The free market enthusiasts have criticised the fact that Railtrack, the company that was left with taking care of the railways, was heavily subsidised and regulated. It was hoped that the financing could have been fully organised by private parties (which could have been possible). The government also wanted to expand and renew the track even when it was not financially viable, and yet skim all the profits - effectively scaring all private investors away. The problem escalated with the environmental subsidies package that tore Railtrack in the opposite direction. The funding was lacking by then and the bureaucratic culture of the old government railway managers couldn't adapt to the free market.

The companies taking care of the actual train traffic were split into mindlessly small companies and they were regulated and prohibited from merging, even when it would have been more optimal. The privatisers tried to make the markets more perfect than they naturally were and they misjudged the ideal company size.

The prices and timetables were heavily regulated, making the companies tools of the government. The subsidisation and regulation was done in all good will. The government was afraid of windfall profits often associated with privatisation.

The privatisation also had a secondary purpose, the ecologically important increase in rail traffic. The privatisation plan thus also included a complicated and inefficient perk system that tried to get the private investors to feed money to the railway companies even though the railway business had over expanded during the government run days. The result was a price bubble, causing overpricing of the privatised routes and equipment as well as bankrupcies.

An important thing to note is that the railways weren't privatised until they were in very bad shape and already in need of renewal. The accident risks could be controlled only by prolonged government intervention. When the free markets finally forced the rail traffic companies into shape, the inefficiencies started materialising. Trains were late, and there were accidents. Today, when measured by average timetable-keeping, accidents per kilometer and the average age of train equipment, British railways are in better condition than they ever were during their low period, the 20 years before the privatisation.

The political decision makers proved their policies more short-lived than rational privatisation would have required. Privatisation requires belief in the free markets by the government, both in good times and bad, even when political popularity is at risk. The Labour government (elected shortly after privatisation), returned the railway business to semi-governmental control, just as expected, scaring private investors away. Investing in the railways wouldn't have been a long-time investment in rail traffic, it would have more resembled speculation with politics.

4 Other countries

Privatisation of railway traffic has generally been seen as very successful in Germany and Finland. New Zealand, on the other hand, is another example of misled privatisation.

5 External links

Rail transport in Great Britain

<Hide>

Home > Privatisation of British Rail