Privatisation of British Rail
The privatisation of British Rail was the process by which ownership and operation of the railways of Great Britain passed from government control into private hands. Begun in 1994, the process was largely completed by 1997. The deregulation of the industry was in part motivated by the enactment of EU Directive 91/440 in 1991, which aimed to create a more efficient railway network by creating greater competition.
British Railways had been in state ownership since 1948, under the control of the British Railways Board. Under the Conservative government of Margaret Thatcher elected in 1979, various state-owned businesses were gradually sold off, including various auxiliary and supporting functions related to the railways – Sealink ferries and British Transport Hotels by 1984, Travellers Fare catering by 1988 and British Rail Engineering Limited by 1989.
It was under Thatcher's successor John Major that the railways themselves were privatised. Under the Railways Act 1993, the operations of the BRB were broken up and sold off to various parties while various regulatory functions transferred to the newly created office of the Rail Regulator. Ownership of the infrastructure, including the larger stations, passed to the new privately owned company Railtrack, while track maintenance and renewal assets were sold to 13 companies across the network. Ownership of the passenger trains themselves passed to three rolling stock companies – the stock being leased out to passenger train operating companies awarded contracts through a new system of rail franchising overseen by the Office of Passenger Rail Franchising. Ownership and operation of rail freight in Great Britain passed to two companies – English Welsh & Scottish and Freightliner, less than the originally intended six, although numerous new entrants in the sector have since appeared.
The privatisation of the railways was very controversial at the time, and still is, and the impact of this policy is hotly debated. Despite opposition from the Labour Party, who gained power in 1997 under Tony Blair, the process has never been reversed wholesale by any later government, and the system has remained largely unaltered. During the late 2010s, it was announced that a transition towards Great British Railways, a contract-based model to replace the franchise system, would be undertaken. A significant change came in 2001 with the collapse of Railtrack, which saw its assets passed to the state-owned Network Rail, while track maintenance was also brought in-house under NR in 2004. The regulatory structures have also been amended subsequently.
Background
To 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 freight, parcels and passengers' luggage to and from railheads, ultimately became part of the National Freight Corporation, but this transfer did not occur until 1969.File:1586 at London Victoria.jpg|thumb|right|A 1950s Mk1-based Class 411 "slam-door" EMU at London Victoria station, in Network SouthEast livery
The preferred organisational structure in the 1970s was for the BRB to form wholly owned subsidiaries which were run at an arm's-length relationship, e.g. the railway engineering works became British Rail Engineering Limited in 1970; the ferry operations to Ireland, France, Belgium and the Netherlands were run by Sealink, part of the Sealink consortium, which also used ferries owned by the French national railway SNCF, the Belgian Maritime Transport Authority Regie voor maritiem transport/Regie des transports maritimes, and the Dutch Zeeland Steamship Company. However, the BRB was still directly responsible for a multitude of other functions, such as the British Transport Police, the British Rail Property Board, a staff savings bank, convalescent homes for rail staff, and the internal railway telephone and data comms networks, etc.
By 1979, the organisational structure of the BRB's railway operations still largely reflected that of the Big Four British railway companies, which had been merged to create British Railways over 30 years previously. There were five Regions, each region being formed of several Divisions, and each division of several Areas. There was some 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.
1980s
The chain of British Transport Hotels was sold off, mainly one hotel at a time, during 1982. Two years later, Sealink was sold to Sea Containers, who ultimately sold the routes to their current owner, Stena Line. In 1988, catering business Travellers Fare was divested via a private equity-backed management buyout. That same year, British Rail Engineering Limited was split between the major engineering works, which became BREL Ltd and the works that were used for day-to-day maintenance of rolling stock, which became British Rail Maintenance Limited. BREL Ltd was sold to a consortium of ASEA Brown-Boveri and Trafalgar House in 1989. In 1992, ABB Transportation took full ownership before the unit was merging with Daimler-Benz's train manufacturing interests to form Adtranz in January 1996. Daimler-Benz subsequently took 100% ownership of Adtranz in 1998 before selling it to Bombardier in May 2001.For reasons of 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 geographical regions, and first manifested itself in 1982 with the creation of Railfreight, the BRB's freight operation, and InterCity, though the Inter-City branding had been carried on coaching stock since the early 1970s. Commuter services in the south-east came under the London & South East sector, which would become Network SouthEast in 1986. Services in Scotland were operated by ScotRail, while Provincial sector handled local and rural routes. The regional management structure continued in parallel for a few years before it was abolished. Sectorisation was generally regarded within the industry as a great success, and it was to have a considerable effect on the way in which privatisation would be carried out.
File:59001 'Yeoman Endeavour' at Doncaster Works.JPG|thumb|right|59001 in revised Foster Yeoman livery. Private ownership of locomotives marked the start of a new era in railfreight haulage.
During 1985, 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' Electro-Motive Diesel division, designated Class 59, to operate mineral trains from their quarry in Wiltshire. Although owned and maintained by Foster Yeoman, the Class 59s 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 59s proved to be extremely reliable, and it was not long before quarry company ARC and privatised power generator National Power also bought small numbers of Class 59s to haul their own trains.
During 1986, discussions were held with Sea Containers that touched on the business possibilities for the break up of British Rail, particularly on the possible takeover of the railway on the Isle of Wight by the company. However, the discussions proved abortive.
In Sweden, the Swedish State Railways was split into two in 1988, creating the Swedish Rail Administration to control the rail infrastructure, and SJ to operate the trains. This restructuring was the first time that a national railway had been divided up in this manner; one of the advantages of this arrangement was that it allowed for local county authorities to tender the provision of local passenger services to the new train operators that appeared. The Swedish system appeared to be very successful initially, although some train operators subsequently went bankrupt. The Swedish experiment was watched with great interest in various other countries during the 1980s and 1990s.
The narrow gauge Vale of Rheidol Railway in Aberystwyth, Mid Wales was unique in Britain, being the only steam railway to be operated by British Rail. During 1988, the Department of Transport started the process of privatising the line. Later that year, it was announced the line had been purchased by the owners of Brecon Mountain Railway, becoming the first part of British Rail to be privatised.
1990s
During 1991, following the partly-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 required of all EU member states to separate "the management of railway operation and infrastructure from the provision of railway transport services, separation of accounts being compulsory and organisational or institutional separation being optional", 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.In Britain, Margaret Thatcher was forced out as leader of the Conservative Party and succeeded by John Major at the end of 1990. The Thatcher administration had already sold off nearly all the former state-owned industries, apart from the national rail network. Although the previous Transport Secretary Cecil Parkinson had advocated some form of privately or semi-privately operated rail network, this was deemed "a privatisation too far" by Thatcher herself. In its manifesto for the 1992 general election the Conservatives included a commitment to privatise the railways, but were not specific about how this objective was to be achieved. The manifesto claimed that "The best way to produce profound and lasting improvements on the railways is to end BR's state monopoly," although according to The Independent, "many – including within the Tory party – believed that privatisation was merely a mechanism to manage the industry's gradual decline without too heavy a burden on the taxpayer."
Contrary to opinion polls, the Conservatives won the election in 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; Cabinet Minister John Redwood "argued for regional companies in charge of track and trains" but Prime Minister John Major did not back his view; the Treasury, under the influence of the Adam Smith Institute think tank advocated the creation of seven, later 25, passenger railway franchises as a way of maximising revenue. In this instance, it was the Treasury view that prevailed.