Rail: the minister's answer

The flotation of Railtrack marked a milestone in the transfer of Britain's railways to the private sector, a transfer that is at the heart of the Government's strategy for revitalising the railways after decades of decline. More than 65 per cent of the railway industry by turnover is now in private hands and the sales process has acquired an irresistible momentum. This is a good moment to highlight some of the benefits flowing from this process.

Over the past few years we have witnessed a real change in public attitudes to transport. People want to see a higher priority given to public transport, and they believe rail should be an integral part of our transport strategy. If we are to promote more use of public transport, then we must improve services and change attitudes. I firmly believe that privatising the railways will bring about that change.

For many decades, the story of our railways has been a story of decline, with more and more passengers turning to the car. The old railway was a monolithic, monopolistic nationalised industry which never had the opportunity or incentive to focus on the needs of its customers. It was insulated from the commercial pressures of private ownership, and its command structure was not geared to the needs of customers. Large amounts of taxpayers' money were pumped in through the years, but the decline in rail use continued unabated. It is against this background - a railway beset by structural rather than financial problems - that the Government's privatisation policy was conceived.

It rests on three propositions. The first is that, while the industry possesses a talented and enthusiastic workforce, it has never allowed them the flexibility and freedom they need and deserve. Thus the first phase of the privatisation programme was a radical restructuring of the industry to free it from the shackles of centralised bureaucracy. New, smaller companies were created, with a much greater focus on customers. Power has been devolved to local managers who understand local markets, their challenges and opportunities.

The positive results are already emerging. There are numerous examples of new ideas designed to produce a more customer-friendly service. One example is on the Great Western line, where the management buy-out team has launched a new Family Carriage, available on all Saturday services. One carriage is set aside for family groups; children receive complimentary activity packs and there is an at-seat refreshment service with special food appealing to children.

Similar initiatives are being introduced on other franchised lines around the country, such as the new check-in facilities on Gatwick Express, all geared to improving the lot of the passenger and getting travellers out of their cars and on to the train.

The second main plank of rail privatisation is the idea that, given the right commercial incentives, the railways can compete for a greater share of the transport market. Franchising takes the engine of the profit motive - suitably regulated to ensure reasonable fares, minimum service levels and so on - and uses it to bolster the competitive performance of the railways. A commercially vigorous railway is much better placed than old-style BR to induce customers to leave their cars. And far from cutting services, several of the new franchisees are offering to run extra trains. On Midland Main Line, for instance, National Express is planning an extra half-hourly weekday service between St Pancras and Loughborough. Leicester will get an extra 22 trains a day into London. This approach is helping to expand, not diminish, rail usage.

The third argument for privatisation is financial. Railway funding has been maintained at remarkably high levels in recent years, despite an extremely tough public expenditure climate. Yet it remains the case that, in bidding to the Treasury for extra investment funding, the railway has always had to take its place in the queue behind other popular programmes such as health and education. Privatisation allows the railways access to private resources not available in the public sector, clearing the way for major investments like Thameslink 2000 and the modernisation of the West Coast Main Line. This can only be good news for the travelling public.

I believe that new commercial ownership and management of Railtrack will lead to increases in efficiency in managing, maintaining and investing in the network, with benefits for passengers.

Since its inception, rail privatisation has been dogged by scare stories and misrepresentation. During the past three years, the media have told you that your fares will rocket, your stations will be shut, trains and travelcards will disappear, subsidy will go up, investment will go down - and so on.

Now the truth is beginning to find its way into the public consciousness. For the first time ever, rises in key fares have been capped and in two years' time they will begin to fall in real terms. Franchisees are maintaining the levels of service run by BR, and adding some new ones. New stations will be opened: the incoming franchisee on LTS is already committed to providing one at West Ham. Through-ticketing and discount cards have been safeguarded. New rolling stock will bring much-needed improvements on lines like LTS and Kent Coast, and millions of pounds of private sector money is to be ploughed into security improvements and better disabled acccess.

Remarkably, all these improvements will cost the taxpayer less. In seven years' time, the subsidy needed to support the first seven franchises will be less than a third of what BR needed to run the same services last year.

These are the facts of privatisation - facts you may not have read in the Independent on Sunday. British Rail was not much-loved, despite the dewy-eyed reminiscences of our critics. This Government has had the courage and conviction to seek radical solutions to the industry's problems. As a result, Britain's railways are on the threshold of a renaissance, achieved through a combination of new private sector ideas and established railway industry expertise. The railway fightback starts here.