The chancellor must take emergency steps to prevent rail, water and power companies going bust in the global economic storm, former cabinet minister Peter Hain has warned.
Hain, the former work and pensions secretary, urged the government to draw up reserve powers that could be used in the event of a major utility collapsing and taking vital services with it. His words follow jitters in the City about the damage a freeze in bank lending could do to some companies that have borrowed heavily to invest in infrastructure.
‘We need to have a plan B in advance rather than playing catch-up. This is such a serious situation globally that having led the way, as the Prime Minister did worldwide in the rescue package for finance, we now need to put in place measures which could rescue vital infrastructure which can’t be allowed to fail,’ Hain told The Observer
‘We may be in an area where simply for survival and resolution of this crisis there has to be much closer government intervention, way beyond the banks.’
He said it was ‘moonshine’ to think that the railways or private utilities could be re-nationalised but the government needed a contingency plan to re-capitalise critical services if necessary, just as it did last week by offering to buy shares in banks.
Currently, if a train operator goes bust, the government is required to step in and run services until a replacement can be found.
Jim Steer, a transport analyst and former director of the Strategic Rail Authority, has warned that if passenger numbers fall sharply a number of train operators are running on such tight margins that they might need to be bailed out.
Louise Ellman, chair of the Commons transport select committee, said the franchises as now worded left the government too exposed to picking up the pieces if an operator did go bust.
‘That is one of the weaknesses of the current system, that it does depend on the operator continuing. The government would have to step into the breach if [one went bust]. You couldn’t have a collapse of the public transport system.’
The Department for Transport said it had powers under the Railways Act to intervene.
Gaby Hinsliff, political editor
Sunday October 12 2008
Source: The Observer