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ON THE RECORD
JOHN MACGREGOR INTERVIEW
RECORDED FROM TRANSMISSION BBC-1 DATE: 31.10.93
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JOHN HUMPHRYS: Mr MacGregor have you or have you not
please, accepted the Peyton Amendment?
JOHN MACGREGOR: Well firstly the Bill didn't have that
rough a passage in the House of Lords because there were only two basic
amendments that we're dealing with in the House of Commons that matter and one
of them is the one you've just mentioned. The answer to it is this. I've had
a lot of criticisms of giving BR the untrammelled right to bid right from the
outset. There are criticisms to do with the danger that that would mean,
you wouldn't get competition for the franchises, the private sector would be
afraid and incidentally this is not a sell off, it's a way of getting the
private into British Rail with all the advantages that brings. They would be
afraid they would face subsidised and unfair competition. Above all perhaps
British Rail management would feel really that if they were bidding against
their employer that would be a real discouragement to bring and we've a lot of
evidence now that they feel that and there are many who do wish to bid in
management employee buy-outs.
So what we've done in the amendment is
we've perserved the right for British Rail to bid but we've dealt with those
criticisms and worries which have come from a lot of quarters not least from
within British Rail itself.
HUMPHRYS: So have you accepted the Peyton
Amendment?
MACGREGOR: I have accepted part of it and I've
amended it to ensure that we can overcome the criticisms that would have been
involved if we'd left it as it was and above all, and I think is the most
important thing, we've made sure that it will work and that it will meet our
objectives of getting competition into the franchises. If we just ended up
with one great monolithic British Rail, after all, each franchise remember will
be coming gradually, we won't be doing them all at once. There'll be one next
year, several the year after and so on.
If British Rail had been able to go
around and pick them off and say well we can run this now in the future much
better than we've done it in the past, so we'll bid and we'll bid a low bid.
That really wouldn't have been getting fair and proper competition into the
system.
So what I've done is ensured as I've
done all the way through in this Bill in acceptiong amendments, that we make
sure that we achieve our objectives and that above all that it's workable. As
it was it wouldn't... as it was the Peyton Amendment wouldn't have been
workable because there would have been total chaos and confusion within British
Rail itself.
HUMPHRYS: The reality is that you've said to
British Rail, you can bid for those franchises that nobody else wants, which is
the situation anyway because if nobody had bid British Rail would have
continued to run them anyway.
MACGREGOR: Of course that is a point that we've
made all the through, it's not if nobody would bid, it's if the franchising
director was not satisfied with the quality or the low term viability of the
bids he'd received or didn't think they...
HUMPHRYS: ..comes down to the same thing in the
end..
MACGREGOR: ...or..you see the other important
point here is that British Rail will be restructuring all the twenty five
potential passenger franchises, they're starting on this now.
HUMPHRYS: They've just finished one restructuring.
MACGREGOR: They've just started actually, well the
key point is that they have to have a period during which they have a track
record of running those separate businesses so that bidders will know the basis
on which they're bidding. Now if the franchising director - it's entirely his
decision - decides that he's not getting competitive enough bids or good enough
bids, then yes, British Rail would carry on and this was clear right from the
outset, would carry on running that particular franchise. The difference now
is that they will be able in certain circumstances to come in and bid directly
at the outset.
HUMPHRYS: But only if the franchise director
decides that there is not a viable bid from the private sector or from BR
management.
MACGREGOR: Only if he feels that a private sector
or BR management would be frightened off bidding and he knew that there were
viable bids in play and if he feels that it would not lead to proper
competition. That's correct.
HUMPHRYS: So nothing in reality has changed, has
it?
MACGREGOR: Oh I'm quite sure there will be
situations in where British Rail will bid and will... well it's up to the
franchising director but it's likely to get the franchise, there will be
situations.
HUMPHRYS: But then even if they do that and even
if they get the franchise, they're not going to be able to say we can now hold
onto it for five or seven years, however long the franchise is going to be
because if another bidder comes along in the meantime and says we rather like
this ourselves, they'll be thrown off.
MACGREGOR: No if they bid for the franchise then..
and get it, obviously that franchise runs for the period and by the way, a lot
of the criticisms in the film I think were based on a misunderstanding that all
the franchises are going to be short, they're not. Those where there's a
substantial investment going in can be quite a bit longer.
HUMPHRYS: Well how long?
MACGREGOR: We haven't... it will depend on the
market place and the reaction.
HUMPHRYS: But I mean are we talking about
really...
MACGREGOR: We could be talking of ten years and
beyond, beyond ten years.
HUMPHRYS: What twenty years?
MACGREGOR: I doubt it, no we wouldn't wish to go I
don't think, to twenty years but it will depend on the level of investment that
the bidder is prepared to put in. We're being very flexible responding to the
market place.
HUMPHRYS: So that it might be then fifteen years
let's say...
MACGREGOR: Yes...
HUMPHRYS: Where we've been talking until now about
seven years, we might be talking about fifteen years.
MACGREGOR: Well some people have been talking about
five to seven years and I've been saying all the way through that we're very
flexible on this and clearly if a bidder whether it's a management buy-out with
other people in the bid, others in the consortium or an outright bid from a
private sector consortium. If they get the franchise and make clear that
that's on the basis they're going to put a lot of money in the capital
investment, then clearly they will want a longer period and we've made that
clear.
HUMPHRYS: Well I may have missed something you
said but I haven't heard you say fifteen years.
MACGREGOR: I've said quite often that it could be
flexible, certainly to ten and in the right circumstances beyond that.
HUMPHRYS: So I can take it as gospel this morning
that some of these franchises will be fifteen years. How many might be fifteen
years?
MACGREGOR: If they're prepared to put sufficent
funding into the capital investment side.
HUMPHRYS: So if they all come along with lots and
lots of money, they'll all have fifteen years?
MACGREGOR: Well now you see I don't think they'll
do that because another mistake in the film was to suggest that in a short
franchise say of seven years, they would need a great deal of working capital.
They won't need a great deal of working capital or share capital. They will
actually be running a business where they get subsidy because if they're
involving socially necessary lines like commuter lines or rural lines then
we've made it very clear that the taxpayers' subsidy will continue because
these are loss making businesses. They will bid for subsidy and they will
continue to get that subsidy. So they will have the flow of whatever income
they can increase in the passenger franchise plus the subsidy plus, and this is
a very important point in what we're doing in the restructuring of British
Rail, you see nobody up to now has said that British Rail is perfect.
Everyone acknowledges that there are big improvements to be made. The way
we're structuring it will get those improvements because the smaller franchises
not the great big monolithic nationalised industry, the smaller units, will be
able to identify much more clearly where they can make the savings and where
they can increase the revenue.
HUMPHRYS: But they won't be able to deal with
their main sources of production as Professor Bradshaw said there, they've got
no control over the track on which they operate and they're going to have to
hire their carriages and rolling stock from a separate leasing company. So
their room for manoeuvre is limited to say the least.
MACGREGOR: That's in a very small, short franchise
which is very similar to operators in other transport areas.
HUMPHRYS: So if it's a fifteen year franchise,
they may actually get... I'm very puzzled by this so I ask for clarification.
If it's a long franchise then, if it's a fifteen year franchise, are you saying
that the franchisee will have control over the track .....
MACGREGOR: Let me just explain the track in those
situations they may well be investing in the depots maintenance and so on but
let me just go beyond.... not on the track as such. Can I just explain the
position on the track because no other transport business has to have a
business which owns both the track its operating on and the operating
facilities themselves. So we're not doing anything new here, what we are
actually doing and incidentally the German government and other governments
going down the same route now because it's not true to say that others aren't
privatising, what we're doing is saying that we're having a separate track
authority and there are a variety of reasons for that. But the... and that
means actually less investment by the franchisee himself but he will have
control over the track operations because he will have a contract with
Railtrack to deliver certain services and if Railtrack doesn't deliver them
then he's able to claim penalties. So he will have the same relationship as so
many other companies have in relation to other services that they need to
operate their business.
HUMPHRYS: Let's just consider the political
problem though. You have still got a problem selling it to a lot of MPs. If
they're listening to this interview and they are concluding, maybe rightly,
maybe wrongly, that actually things aren't changing very much, and they may
think they've been sold a pup with these amendments. Indeed I hear that some
of them are having to be bought off. Is it true that one of them was sent off
to Peru on an election supervision mission in order that he might not be around
when the deal came up?
MACGREGOR: He's actually going to be there to vote
for the Bill.
HUMPHRYS: But he was sent off to Peru as a
sweetener was he?
MACGREGOR: No, no, because he's got to be there to
vote. Can I deal with your main point and it's very important to understand
this. The vast majority of the Parliamentary Party supports strongly what we're
doing because they believe it will improve passenger services, it will deal
with getting more freight on to rail. Now they backed it throughout, it got a
clear majority at second reading, the Party Conference backed is almost
unanimously. What we're dealing with is a small group of MPs who thought that
there were some advantages in the Peyton amendment. I've discussed it very
thoroughly with them for some time, and they agree that there were real
difficulties about the Peyton amendment which I've now addressed.
HUMPHRYS: OK. Let me talk about money then.
MACGREGOR: There are an awful lot of people, let me
say, it is a complete falsehood to suggest that the Parliamentary Party isn't
behind the Bill. We had a meeting earlier this week where I got huge support,
and indeed some were urging me not to give way at all on the Peyton amendment.
HUMPHRYS: Money, two billion pounds it's going to
cost you, it's going to cost us, the taxpayers.
MACGREGOR: There have been endless position papers
in the department and I haven't actually seen that one.
HUMPHRYS: Well here it is, you haven't seen it?
It's a Committee that you set up, the restructuring working group.
MACGREGOR: But they do loads of work way, way down
in preparing these sorts of things there are loads and loads of different views
expressed at different times. I deal with actually, the recommendations as we
get to the point of decision, but on the investment policy...
HUMPHRYS: Well, is it true or is it not true that
it is going to cost an extra two, a total I'm sorry not an extra, a total of
two billion pounds?
MACGREGOR: No. I don't recognise that figure,
although what matters is that we continue...
HUMPHRYS: Well that's not quite the same as saying
it isn't true, if I can push you on a little bit. You say you don't recognise
it, is it true? Now that I've told you where it's come from can you say that
is too much?
MACGREGOR: For '94/95...
HUMPHRYS: I've told you where it's come from, can
you say that is too much?
MACGREGOR: It is not necessary to have it on that
scale in '94/'95.
HUMPHRYS: It's not the same as saying it isn't
true is it.
MACGREGOR: It isn't necessary. Well it is the same
as saying it isn't true, it isn't necessary because this would be built up over
a period and it will be for the Government, in all the normal ways, in the
public expenditure round, to decide how much goes into the passenger franchises
and through that therefore into Railtrack investment.
HUMPHRYS: Either way it's going to be an awful lot
more than eight hundred and fifty million pounds.
MACGREGOR: Can I just make the point that we have
been investing a great deal in British Rail, and the idea that all over the
piece we're talking about non modernised railways is simply not true. Eight
hundred million East Coast main line, four hundred million for rolling stock
announced this week, four hundred million new contracts - there's a lot of
money going in right now.
HUMPHRYS: The extra cost of privatisation is going
to be one heck of a lot more than without any privatisation, in that year we're
talking about immediately, is it not?
MACGREGOR: No, it's certainly not in 1994/95.
Certainly not.
HUMPHRYS: Not going to be more than eight hundred
and fifty?
MACGREGOR: Not going to be the scale that you are
suggesting.
HUMPHRYS: Why?
MACGREGOR: For the very simple reaason that we will
at most have one franchise in 1994/95, so there will only be one franchise.
This will build up gradually.
HUMPHRYS: Well, let me quote to you what your own
document says: "On the best view we have at the moment transfer of services
from BR to franchises is likely to increase the subsidy requirement for the
service in question, a large upward leap in 1994/95". Now this is your own
document, and attending these on this restructuring group it's British Rail,
it's the Treasury, it's the Department of Transport, it's the Franchise
Director.
MACGREGOR: It is... That is a paper from someone, I
know not who, but can I just explain. If we're having one franchise passenger
service next year - which is pretty well all you can do because you do need to
have that track record of the business operating as a separate business, before
bidders can bid - if we're having one next year, to suggest, as I think the
quote was, that that would cost about one point two billion pounds, is
ridiculous.
HUMPHRYS: It's your group's quote not mine.
MACGREGOR: It's ridiculous..
HUMPHRYS: Well you must tell them then. Will you
go in tomorrow morning and say re-do this working paper.
MACGREGOR: A single passenger service costing that
amount of money, absolutely not.
HUMPHRYS: Well where did they suck it from then?
MACGREGOR: Don't ask me.
HUMPHRYS: No, it's not something that I've put
together.
MACGREGOR: It isn't actually the real point, the
real point is...
HUMPHRYS: Oh it's a very important point, if it's
going to cost a great deal more to push privatisation through when you've got a
fifty billion overspend anyway, I'd have thought people who were worried about
VAT on fuel would say that is a very significant point.
MACGREGOR: But it isn't, because I've just said to
you several times that one point two billion for a single franchise is
absolutely ridiculous.
HUMPHRYS: Give me a figure then.
MACGREGOR: It will depend on the bidding, but ...we
will continue the subsidies to the passenger service. Individual franchises
will vary depending on how successful they are and what the bids are. But it
won't be that scale.
HUMPHRYS: Final very quick question. Reports in
the paper this morning that Chunnel, the Channel Tunnel, the highspeed link
ansd the Tunnel itself, are going to be delayed because the Treasury
basically are saying we've run out of money, you can't do it. Is that true -
delayed until 2005, maybe?
MACGREGOR: The point about 2005 is complete
speculation.
HUMPHRYS: We've only got a few seconds, I'm sorry.
MACGREGOR: The Jubilee Line is going ahead, very
large sums of money in the next two years.
HUMPHRYS: I'm talking about Channel Tunnel
Highspeed Link?
MACGREGOR: The Crossrail and Channel Tunnel
Highspeed Link are nothing like the state of preparedness of Jubilee Line.
That's going ahead now, after a lot of work. It will not be the case that you
can do either of those very quickly. Crossrail's only just started
HUMPHRYS: So who's going to be in...
MACGREGOR: So we can't tell what the final
deadline date will be because there are so many processes to go through.
HUMPHRYS: John MacGregor, thank you very much
indeed.
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