................................................................................ ON THE RECORD JOHN MACGREGOR INTERVIEW RECORDED FROM TRANSMISSION BBC-1 DATE: 31.10.93
................................................................................ 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. ...oooOooo...