THE privatisation of Britain's passenger rail network got under way yesterday, but with a few hiccups, as an investigation into fraud allegations stopped one franchise, and passengers on another started out by bus.

Three British Rail franchises were scheduled to go to the private sector but only two did, with passengers travelling on South West Trains, awarded to Stagecoach Holdings, and Great Western, taken over by Great Western Holdings Ltd.

British Transport Secretary Sir George Young suspended the third franchise London, Tilbury and Southend (LTS) Rail late on Saturday while allegations of fraud were investigated. Hours later, the British Office of Passenger Rail Franchising (OPRAF) said an unnamed director of the consortium buying the commuter line had resigned.

The Enterprise Rail consortium, 51 per cent owned by a management buyout team, won the LTS franchise in December. The OPRAF said a "serious breach" of ticketing regulations had apparently occurred.

It has been alleged that the irregularities cost London Underground, which runs the capital's subway network, about £30,000 sterling a month.

Ironically the London, Tilbury and Southend service is known to commuters as "The Misery Line" due to the regular delays and problems that travellers face.

The British government has divided the 47 year old nationalised network into about 80 companies. These include infrastructure owner Railtrack, scheduled to be floated on the stock exchange in May, 25 train operating companies and three groups to lease rolling stock.

The new companies will get, help Stagecoach will receive financial support of nearly £55 million sterling in 1996/97 for its new train operating company, declining to £40 million in the final year of the franchise.

Ministers riding the first early morning franchised trains defended the privatisation plans and said the alleged ticketing irregularities at LTS Rail, did not reflect on the planned overall.

"I hope we can sort out the matter of LTS Rail quite soon," said Sir George as he rode the first private train to come into operation South Western's 5.10 am between the London suburb of Twickenham and Waterloo station.

The British Labour Party, which has strongly opposed rail privatisation, has demanded a criminal investigation. Labour's spokesman on transport Mr Brian Wilson, said he had written to the Director of Public Prosecutions urging an immediate inquiry. "This is not an internal matter for the railways or the government," he added.