Spending watchdog to investigate BR sell-off

The National Audit Office is to conduct two investigations into the privatisation of British Rail. The inquiries will cover both the first wave of franchises and the controversial sale of British Rail Maintenance Ltd.

Official disclosure of the investigations came as it emerged that two more rail lines are being put up for sale this week. This means that half of the 25 rail franchises are now on offer to the private sector.

The investigations come after doubts were expressed about the processes followed over the sale of the BRML depot in Eastleigh, Hampshire, contained in internal Department of Transport documents marked "not for NAO eyes", as reported in the Independent last week. The documents suggested that much of the management buy-out of the Eastleigh works was carried out with BR's money.

While the NAO has been "monitoring" rail privatisation it will now focus inquiries on these two aspects of the sale and is virtually certain to produce full reports for consideration by the House of Commons Public Accounts Committee.

Welcoming the NAO inquiry yesterday, Brian Wilson, Labour's rail spokesman - to whom the document was originally leaked - said the BRML inquiry had been "inevitable" but added: "The decision to probe the franchises at this stage is excellent news and should force the Government to think again about their policy of pressing ahead as quickly as possible."

Mr Wilson said that he would be asking the NAO to consider "in particular" ministers' refusal to allow BR to bid for any of the first nine franchises, which he said demonstrated they had "deliberately withdrawn the value- for-money yardstick" promised to Parliament.

A written Commons answer from Sir George Young, Secretary of State for Transport, says "the emerging findings" of a study commissioned by his department from Ernst & Young, chartered accountants, indicate that the BRML sales were "competitive and fair but confirm that the BR procedures needed some improvement".

Later this week, companies will be invited to qualify to bidfor Thames trains and for Anglia. Although the Government has missed its target of having half the network in private hands by this April, the latest sale offer brings the number of lines on sale or sold to 13.

The pace at which Roger Salmon, who heads the Office of Passenger Rail Franchising, is putting up lines for sale suggests that he will meet the Government's unannounced target of having all the lines on offer by the end of the year to ensure that the process of franchising would be "irreversible" if Labour comes to power in 1997.

However, Mr Salmon faces problems with the lines which have the seven passenger transport executives in their areas because the relationship between the executives - which provide large amounts of subsidy for local rail services in main conurbations outside London - and the franchising director has not been sorted out.