Leading Article: A concession to speed BR's sale

TWO QUESTIONS have become intertwined as the Bill to privatise British Rail reaches a crucial stage in its passage through Parliament today. One is how much the rail network should receive in subsidies - or, to put it another way, at what price the Government should issue franchises to run trains. The other is whether, once the resources devoted to rail have been decided, private or public-sector management will deliver a better service.

The second of these questions is easier to answer. Far from being the leap into the dark its critics allege, private railways have yielded impressive dividends in Japan, Sweden and elsewhere. British Rail's problems are not due only to low investment; they are also the result of bad management, backward working practices and inept marketing. Yet Britain has at least three highly competitive airlines with experienced marketing departments and well-developed computer reservation systems. Were a firm such as the Virgin Group to operate services on the London to Edinburgh run - which it would like to - there is every chance that business air travellers might at last be wooed back to rail, as in Japan.

Much is wrong with the monstrously complicated Bill now being discussed in its report stage in Parliament. The Railtrack authority, which will operate the lines and charge train operators for their use, may preserve some BR inefficiencies. The regulatory authorities may be too cumbersome. In an effort to make sure the franchises are worth something to those who win them, the Government may end up restricting competitors' access to the railways excessively.

In principle, however, private-sector involvement should deliver existing levels of service at lower cost and, with existing levels of subsidy, offer better services. That does not rule out subsidies for under-used, loss-making lines; nor does it mean the social and environmental benefits of rail over road need be disregarded. Private-sector management merely means that subsidies will become more transparent. Only those routes too grotesquely loss-making to stand public scrutiny need be at risk.

The Government has made a mess of arguing this case, because at the same time as carrying out the privatisation of the railways the Treasury appears to be trying to extract immediate savings. It is already starving rail of investment, as our transport correspondent argued yesterday, by cutting spending from pounds 1bn last year to pounds 550m next. The Treasury could be tempted to make further cuts in public borrowing by allowing franchise holders to refuse to honour the railcards that provide concessionary fares for old people, families and students.

It has taken pressure from Tory backbenchers to make John MacGregor, the Secretary of State for Transport, realise this would be a mistake. If those potential train franchise holders are strong-armed into accepting the concessionary cards, they will undoubtedly make lower bids next year (or demand higher subsidies), and thus cost the Treasury millions in lost revenue. But short-term losses to the public purse will be vastly outweighed by long-term benefits to the nation of a smooth - and less-contested - privatisation.