FIGHTING PRIVATISATION AT EUROSTAR

The UK government is planning to sell off the three constituent parts of the London and Continental Railways (LCR) organisation which part owns Eurostar along with the Belgian and French states. The privatisation would include the high speed rail link between Ashford and St Pancras International used by Eurostar and domestic high speed services, the stations and property portfolio as well as Eurostar UK Ltd (EUKL) - the international train operating company that operates between London, Paris and Brussels. However, this sell-off is hindered not only by current global financial conditions but also by massive debts that the government has loaded onto the LCR and EUKL accounts during the construction of the high- speed link(HSI). LCR was initially meant to be an entirely privately-financed company that would raise cash from the city to build and operate the high speed line and train services. Yet the cash-raising exercise was a complete failure and the only way the link could be built was for the government to directly guarantee bonds of up to £7.5 billion. This money has now been added to the Public Sector Borrowing Requirement after a decision by the National Audit Office. The repayment for these bonds was meant to come from track access charges levied against EUKL and the future domestic operator. But, for the government, this equation breaks down as the passenger fares generated by EUKL can never be expected to repay the bonds and cover its own running costs. DEBT BURDEN The result of this, after nearly 14 years of operation, is that Eurostar UK Ltd is hopelessly crippled by debt on its balance sheet. This debt is made up mostly of massive track access charges from Railtrack/Network Rail for the old Southern region services from Waterloo International, Channel Tunnel tolls to Eurotunnel and now astronomical fees to LCR for using the new HS1 link. Access charges alone put a burden of over £200 million onto EUKL in 2007. Nobody in their right mind would buy such a company. As a result, de facto, EUKL is a government company, with accumulated debt of £1.7 billion to £2.4 billion depending on the reading of the accounts, with losses transferred to the LCR balance sheet, which is backed by government guarantee. THE PATH TO PRIVATISATION The EUKL board has a strategy that has three key elements: • The offloading of the accumulated debt • Re-negotiation of track access and toll charges to make EUKL a profitable company • Privatisation in the UK and the creation of a trans- national autonomous train operator independent of other companies in the UK, France and Belgium OFFLOADING DEBT The government strategy is part and parcel of the on-going EU privatisation agenda. The 2006 third EU rail package envisages complete ‘liberalisation’ of international passenger services by 2010. London has applied to the European Commission to allow it to write off the debt on EUKL’s books to allow the privatisation to go ahead. This would leave EUKL as a “clean skin” financially and ripe for the sell off. The application is unlikely to meet any opposition from a Commission which has produced three rail packages to promote its rail privatisation agenda. EUKL has stated that offloading the debt from its books is a pre-requisite for its strategy. In a scandalous use of public money, yet again, the tax payer picks up the losses but none of the strategic gains of the high speed services, which would be in private hands despite the fact that they refused to finance the project. UNVIABLE Even with a debt write-off, EUKL would not be viable. The track access charges are due to be ratcheted up again from £200 million in 2007 on a turnover of only £267 million. Without re-negotiating the charges, Eurostar will never be a sound economic entity and would not be allowed to trade independently with its balance sheet in such disarray. It is likely that its negotiating stance will be that without more realistic charges it will not be able to trade, so the infrastructure owners should change their charges accordingly. The strategy also implies that the need to repay LCR’s debts of in excess of £7.5 billion will be removed and that this debt too will be absorbed by the government. The ongoing access charge is likely to be based on infrastructure maintenance and renewal costs and a fair return for the new owner – possibly Network Rail or a subsidiary – with the obligation to pay the historic construction costs removed. TRANSNATIONAL PRIVATISATION Currently the Eurostar service operates as a partnership between EUKL, French railways SNCF and Belgium railways SNCB. In France and Belgium the infrastructure, rolling stock, stations and staff are inherent parts of the national railway corporations and indeed the staff, such as train crew and engineers, work on other FIGHTING PRIVATISATION AT EUROSTAR RMT helpline 0800 3763706 :: november/december 2008 :: RMTnews 18 In the first ever privatisation of an international passenger train operator, the high-speed rail link to Europe Eurostar is to be sold off by offloading its huge debts onto the taxpayer