Question: What involvement have you had in the railway industry?

Pete Waterman: I was the first to purchase any of the franchise that the government sold, so literally I was very involved with the then Transport Minister John MacGregor, and worked with John Swift, the Rail Regulator, before he was officially the Rail Regulator, to set up scenarios to see where problems might arise. And I have to say, none of the problems that have arisen have surprised me because they were all quite obvious.

Question: Do you believe the government was right to wind up Railtrack?

Pete Waterman: No, not at all. I think that it is politicians being politicians. I feel very sorry for Railtrack and I think Stephen Byers will have a lot to answer for in the future. I think this will bite back very hard.

Question: Alastair Morton criticised the government for ministerial interference...

Pete Waterman: Yes, and I quite agree, which is quite rare for me, as I don't often agree with Alastair. I've been at odds with a lot of his stuff, but I do totally agree with him that for a government to interfere in a problem as big as the Railways which has been underfunded by every government since 1948, I find it very rich for them to come in after three or four years and blame Railtrack management.

John Prescott particularly got involved after the Hatfield disaster. You can't tell a private company how to spend its money, and then say it's bankrupt when it spends its money as directed by you. If you direct it, which is what happened - it was directed by the government how to address the problem after Hatfield, then the government has to take the responsibility - it ran the company into problems. There is no way that Railtrack or anybody could have ever done away with 50 years worth of problems in five years. It is a physical impossibility.

Question: Railtrack shareholders have been told that they're not going to receive full compensation for this collapse. Do you have any sympathy for these shareholders?

Pete Waterman: Yes I do. To be totally honest and blunt, I'm not worried about the shareholders, I'm more worried about the railway because I don't believe the government is going to sort it out. It needs £20 billion invested to bring us a system that works. This government, and no government is ever going to invest £20 billion in railways.

Now we're told our taxes are going up to pay for an ineffective National Health Service. An amazing system as it is, it's nearly as badly run as the old railways were.

Question: So if the railways need £20 billion and the government is not going to put it in, we're in trouble aren't we?

Pete Waterman: We are in trouble but we're always in trouble. We were in trouble in the very beginning when it was a half-hearted privatisation. You can't privatise something basically to get the investment you were lacking - that's why they privatised it. They wanted the investment, - and then tell people that we will tell you how to run the company. That's not right, it's not fair. If you put in, if you're an institution and you've invested, say, a billion pounds of your investment fund, you want a return for it and that's only fair. I don't believe anyone has a problem with that.

Question: But after Hatfield, surely the government has a right to say you've got to invest more in safety, that's what they did?

Pete Waterman: No, the government has no right. The government has no right and never had a right. Hatfield was a tragic disaster but the problem with governments is they do things for political reasons. They want you, a journalist, to write good copy about them because they need votes, so they never ever look at anything properly, they always knee jerk. And the reaction after Hatfield was a knee jerk reaction. And every time us poor buggers in the railway industry see it - two people fall out of trains, we have to change every door lock to secondary door locking. It cost us over £100 million but it doesn't solve the problem and it was never the answer in the first place. So Hatfield was a tragic disaster, but it was also a freak accident. Under normal circumstances, nobody would have been killed at Hatfield. A pure freak happened to make the buffet car hit a stanchion. An absolutely pure freak and tragic accident, but nobody says this is absolutely an unusual thing. They all said, you see, that's what always happens on railways. So completely, everything got thrown out with the bath water. The whole industry went into total turmoil when it didn't need to. Yes, there were safety issue related items, but people in politics do not look at the problems, they look at why they can make hay when the sun shines. And the Health and Safety people are as responsible as the government because they all want jobs. And all this was about politically, to get jobs, and who had got the power from Railtrack. Now I'm sorry, we've had rail accidents more serious than Hatfield over the last 20 years, and never once did the government interfere and say "we must change all of our system now."

Question: Well what do you think the rail industry should do now?

Pete Waterman: Firstly why should anyone borrow you a billion pounds if you're not going to give them a return on the money? That's not common sense. Secondly we've had 50 years of state run railways and it's a bloody disaster. We didn't get the trains we deserved, we paid millions of pounds through the nose to get them, and they've never run on time, they were dirty, the unions completely dominated them, and the fares were too high.

Under privatisation you see more new trains, more trains, cheaper fares, and a far better service than you had 15 years ago. Why don't I ever hear about that? Because bloody MPs don't travel on trains - I live on trains. I travel between Warrington and London every week. I've been doing it for 25 years, where were they all in the 80s when I was commuting by train 300 miles a day? I didn't see them. They don't see because they don't understand.

If you look at my yard in Crewe, for instance, we have in that yard, 66 brand new American freight locomotives. 66! British Rail in its entire history didn't buy 66 brand new locos in one year. If you take the freight market, it has completely, in one year, replaced the whole of its loco fleet with modern, safe, and more efficient diesel, and economically friendly stock. That's something British Rail never did in 10 years. It only ever built more locos when it wanted more money to keep the system going.

And they were brilliant. British Rail managers, I tell you now, they were better than any politicians. They were brilliant at it. They should run the country because the way they ripped money out of the government was a pleasure to watch, but it was absolutely a complete and utter farce. The money that the coal industry got charged for moving coal by rail was immoral.

Question: Do we need a whole new structure for the whole railway system, or is it simply that you replace Railtrack?

Pete Waterman: Firstly, I don't believe that we should go back to the policies of the loco owners owning the track, or the train operators. I think that is absolutely wrong, and I know I'm a lone voice, but I don't agree that Richard Branson should own the infrastructure at all. So I think Railtrack as such is an important body. I don't believe this Camelot approach should be taken, because I don't believe it, I don't believe it. Because if you're asking somebody to give you two billion dollars to do something they want their return. Why would anybody invest two billion dollars and not want a return on it. What are we saying - the government are going to put in two billion dollars to run Railtrack and are going not going to take a profit on it? Of course they are, they take income tax, that's what it's all about. So I don't see this partnership on a non-profit basis. It's naïve. We're in a capitalist society, that's what we are, that's what makes us such a smashing little island, we're full of entrepreneurs that can actually get off their arses and do something, but they won't get off their arses for nothing. You're going to say to somebody who's just formed a giant company, oh, by the way could I have two billion of your money, and by the way, you don't make a profit on that two billion but I'll give you the pleasure of running Railtrack? Bollocks. Who are they talking about? They're talking about more politicians.

If you want kings of industry to run your infrastructure, firstly there ain't that many of them, because it's a myth that there are millions of these people that are brilliant at running companies, it's a myth - there are very few guys who can actually run major companies and make them enormously profitable and get the job done, and give company benefits back to its customers. Very few, and the bigger the companies get, the less and less you actually get hands on guys who actually went out on the shop floor and changed the product and gave a better service and a better price. The problem was when you privatised the railway, there was one simple thing that I told Michael Meacher and Brian Wilson at the time. I told them both, firstly all railways have to be subsidised. You cannot have a railway that is not subsidised. That is a fact. There ain't ever going to be a railway that isn't subsidised because it's public transport. So that's the first pill you've got to swallow. If you can't swallow the pill that you will give a subsidy to a private company to run your railway, then you have a bigger pill to swallow - that is that you will create a bureaucracy that will cost you three times as much as it did when you were running it privately. Because while you run it privately, you can control the profit. Once you put it into state ownership, you cannot control it. It goes completely out of control, which we've seen because you'll have 30 departments where there's a private individual and I'll have one. You'll have 30 of them.

Question: Do you think this is going to be remembered as the darkest days of the railway industry?

Pete Waterman: I think it will be dark days for the railway industry if people like Stephen Byers fail to understand how it works.

He's a public school boy to me. He wants to come and work on the shop floor if he wants to be a Labour boy. And that's not Old Labour versus New Labour. It is very easy and smug to go to university and come up with wonderful things like this, when only a year ago we saw the Deputy Prime Minister telling Railtrack to spend its money and there would be £1.5 billion of government money to do it, and suddenly they don't want to spend it. You cannot run a railway without a subsidy. It's an impossibility.

Question: Politicians get a lot of flak. Do you think politicians and celebrities deserve all the flak they get from the press, or does it make the situation worse?

Pete Waterman: Well it all depends on whether it's fair. I think if it's tittle tattle about somebody's mistress or his flat that he's hiring out via a fifth person via a private company, it doesn't interest me in the slightest. But when somebody does something as enormous as what Stephen Byers did under the cover of a world tragedy, and let's not kid ourselves about this, where this went, this was political spin of the greatest kind.I think that if you do something and you get caught out and you do it knowing that you are doing it, and you get caught out, you have to take the flak. You can't hide from it. You've got to put your hands up and say ooops, sorry about that, you're absolutely right, I did. Now I'm not the one to judge him on that. His fellow MPs have got to judge him on that, and his fellow party members, but it's cynical when you see it the way that it was done. I sat here and I thought I'm misjudging this because this is so obvious. So I've gone to bed that night thinking I can't believe that nobody has pointed this out, because this is cynical, this is absolutely cynical. Firstly I can't believe that they've done this - that's the first thing, because they've got all this property, so you go hang on a minute, there's no way Railtrack is bankrupt. It might have a cash flow problem but it ain't bankrupt. So it's not insolvent. So if you were a private company with Railtrack's assets, at that point you would not file for bankruptcy or insolvency. As an independent company, I think we've all been there at some point if you're an independent company and you're trying to do a job, I think there are points when you always sail close to the wind. That's what entrepreneurs do, that's what you do, you take chances. If he is saying that Railtrack were taking chances with safety, that is absolute nonsense. That is nonsense.

The biggest problem we faced, which we are now seeing and we were always going to face, was, the minute we denationalised, we offered people redundancies. Who took the redundancies? All the guys who'd done 30 years service, and wouldn't you blame them - it was obvious they were going to take it. So you lost, in probably a year and a half, all your highly skilled railway men. They'd all worked for the railway for 30 years. This was their golden handshake, 'thank you very much, I'm off'. They didn't want to work for a private company, they've had a very cushy job, and I don't mean that derogatively, for 30 years, they'd got a very safe environment, it was no longer going to be a safe environment. They took it.

The first thing the Rail Regulators did was slash the funding. So what do the private companies do? They take redundancies. Everybody up for redundancies, all the guys there for 30 years. So suddenly you've got a whole raft of companies where you've lost your senior people because you're trying to cut your costs. The one cost of course you can never drop down was your rail freight charge, was your track charges, because you couldn't negotiate them because they'd been set by the government. And that's the problem with railways. It's so complicated.

Question: Is there an industry or public figure who you think could pull the rail industry together, and lead it?

Pete Waterman: I honestly believe, and I know this is not a popular view, I do not disbelieve that Railtrack worked on the right track until the Hatfield disaster. I think we have seen far too much made out by legal people about safety devices. And of course nobody every tells you that all safety devices can all be switched off, and quite regularly are by the drivers. So the human factor is always the worst factor and you can't legislate for the human factor.

When I started on the railway most drivers had worked 15 years experience before they drove. We're talking 15 weeks and 15 months now. So that's where you've cut it. As I said, when you privatised you lost senior railmen, you lost that experience. I pointed out to both the government and the Opposition at that time what the problems were going to be - you can't have a railway without a subsidy, secondly you can't allow men with 30 years experience and steeped in railway history to be swept aside by young guns who see the railway industry as another big industry. It isn't. The trouble with the railway is it's a unique industry. It isn't like Marks and Spencer's, Woolworths, Our Price or Boots the Chemist. They are big corporations, yes Railtrack is a big corporation, but it's a unique industry where, without people, because you're not selling anything other than a service, so the people you work with - your signal men, your drivers, your cleaners -they are your commodity. So if you don't get your commodity right which is your service that you are selling, you ain't got a cat in hell's chance. You're not managing the infrastructure in truth, because the infrastructure don't move. It don't go anywhere.

People forget about all the positive stuff that was going on with the privatised system. For instance we're running services now with far less subsidy than they had under pre-privatisation. I can quote at least four railways now where the cost of running that railway is tiny in comparison with what it was under British Rail. You've got services that have come back purely because they are run on different strategy as to what they were run on before. You know, if you take say the Rhondda Valley, the subsidy was substantially cut. It's a better service - they're not brand new trains but they've all been refurbished. Four trains a day. There were only two trains a day under British Rail. And that is right across the board. In 1994 when I bought the first part of British Rail, the Special Trains Unit ran 210 trains. Last year the equivalent ran 440. That's twice the amount of business. We're bringing football traffic back. That may not be important to a lot of people. It's important, I think, to get people off the road onto the railways. If you can get four coaches of Arsenal fans on the train to Manchester United, that's a lot of traffic off the road. It's not enormous and you don't hear people shouting about it, but if you add up all the freight that now goes by rail, and you add up all the extra traffic there is by rail, I think there's something like seven per cent, it's phenomenal but I don't ever see that. I don't ever see how much people have put into refurbishing rolling stock, I see Richard Branson is having problems with his tilting trains, I see all the bad news. It's fabulous to write about all the bad news but I don't see anybody saying anything about all the good news.

Question: So do you think politicians should stay out of the rail industry?

Pete Waterman: I said it from the beginning, politicians should be politicians and they should definitely not try and run a company.

Question: In 1997 New Labour brought us Cool Britannia - did you support this initiative?

Pete Waterman: I felt sorry for Tony Blair because I think that backfired on him, which is a pity because I think he's a good Prime Minister, if that's your politics. Certainly we haven't seen any serious problems with this government, I think that we're in a world of turmoil at the moment, Brown seems to have a very steady hand on the till. I think he's going to have a problem if he puts income tax up very significantly, particularly for people who don't use the National Health. You can imagine what I pay in National Insurance contribution a year and I personally would never use the National Health. Not that I don't believe in it.

Question: Why not?

Pete Waterman: Because I don't think people should use the National Health if they can afford private medicine. I find it unbelievable that no government has ever taken that on. I don't think anybody who earns what I earn would object to paying National Insurance contribution and in addition to that to buy their own service - I do that myself. Now I can't believe that in this day and age, the Prime Minister, and in a minute, the Chancellor's wife, can have a baby on the National Health. I find that unbelievable.

Question: Why, because it should be purely for the people who really need it?

Pete Waterman: Absolutely. I think we should all pay the contribution, but only people below a certain income should be entitled to full National Health free of charge. I find it incredible my wife can still claim child benefit. I find that unbelievable and the most stupid thing. And when you hear it should be for everybody, but hang on a minute. If somebody earns more than £400,000 a year, what's the point in getting £6? For Christ's sake can we grow up? I know nobody who earns over £50,000 would even think about this. It's not even a packet of Rennies for Christ's sake, so why don't we be honest and say, right the National Health and child benefit should be for everybody who is in the lowest bracket, and that is it. We won't put up income tax. What we'll do is everybody that's on over this, you will pay for private medicine.

There is this unbelievable reluctance to admit that there is this thing called private medicine. It's unbelievable. I watched Gordon Brown last night, and he's choking on the word "private". Can't mention this word! Come on, get real! I work in London, I live just out of Cheshire. I haven't got a doctor because I don't live in one place long enough. I've got a private doctor and when I go and see him, I buy my pills. Yes it's bloody expensive, I've just got over shingles. The medicine was nearly £300 but why shouldn't I pay it? I earn enough.