Government orders rail fraud inquiry

Allegations threaten privatisation plans

The Government yesterday ordered rail operators to conduct an urgent fraud inquiry after the first day of privately run passenger services was overshadowed by allegations of ticketing irregularities.

The investigation into ticket fraud allegations, which stopped the sale of one of the three first lines - London Tilbury and Southend (LTS) - threatens to disrupt the timetable for the entire privatisation programme.

The Government's celebrations at seeing private operators take over two lines, South West Trains and Great Western, were muted in the face of the delay to the sale of LTS which has led to reassessment of procedures.

Sir George Young, the Secretary of State for Transport, said that "procedures were robust" because the fraud appears to have been quickly uncovered. However, he has asked the Association of Train Operating Companies to re-examine its procedures to "see whether there are lessons to be learned".

Labour last night demanded a police inquiry. Clare Short, the shadow transport secretary, said: "You change from a public service to a profit- seeking motive and you get, not just the drive for profits, but criminal behaviour."

Any fundamental problems with the privatisation process uncovered by these inquiries are bound to lead to further hold-ups in the controversial and much-delayed franchising programme, designed to put rail services into private hands for the first time since 1948.

Investigations into the ticketing fraud are also being carried out by British Rail and the rail regulator, John Swift.

Already, Colin Andrews, the joint commercial director of LTS, the BR subsidiary, and of its successor, Enterprise Rail, which had taken over the LTS line, has resigned and industry sources suggest that other heads may fall. The alleged fraud, estimated at pounds 45,000, involved taking combined rail and Tube Travelcard tickets issued at Fenchurch Street to be sold at another station, Upminster, because LTS gets a higher proportion of the revenue from tickets at Fenchurch Street.

About half the 25 train operating companies share revenue for ticket sales with London Transport, and the investigations will consider whether other companies have failed to give London Underground its proper share of ticket revenue.

Allocation of revenue between the operating companies is carried out by Atoc and is a highly complex operation which is so far untested because all the companies were, until yesterday, owned by BR.

Brian Wilson, Labour's transport spokesman, welcomed the investigations but said the police should be called in. "There was a clear victim for this alleged fraud and it was London Underground. The police must examine the books to see whether criminal offences were involved."

Any hint of fraud at other franchises will be highly embarrassing to ministers, who only last week asked Roger Salmon, the franchising director, to speed up privatisation to have all franchises in the private sector by next spring, the likeliest time for a general election.

Sir George refused to say whether the franchising process for the LTS line would be reopened, but it is clear that there will now be serious doubts over the future of the management buy-out team.

The other two lines to be sold off operated with few hitches, although Great Western's headquarters, Swindon, was virtually cut off by engineering works for most of the day and passengers had to use buses.

Stagecoach, which took over South West Trains, promised to bring in new feeder bus services to two stations, Winchester and Liphook, and said its passengers' charter would be more onerous than that of its predecessor, by improving punctuality and reliability in February 1997. Great Western promised new services.

The sell-off, page 3