Reproduced from Observer 28 February, 1999

Pete Waterman loves trains. The walls of his office in Borough, south London, groan with Hornby models. When he's not producing candyfloss music his phrase for Steps, his current chart wonders, he is seeing to his real locomotives. He owns a charter train business that was once part of British Rail.

Waterman's one-time partners, Mike Stock and Matt Aitken, with whom he wrote and produced more than 130 hits for the likes of Kylie Minogue, Jason Donovan and Sonia, hate trains. In 1993, two years after 'creative differences' caused the trio to split, Stock and Aitken bought a building up the road from Waterman's and fitted it with a state-of-the-art studio. Two years after that, the Jubilee Line extension tunnelling passed by a few yards underneath, completely destroying the studio's soundproofing. They can now hear the trains rattling along a pre-existing track nearby. Stock and Aitken have not recorded for more than two years. They are now suing London Regional Transport for £20million in lost earnings.

Waterman, meanwhile, is having the biggest success of his career. Steps' latest single, 'Tragedy/Heartbeat', has sold 1.2 million copies since its release in November last year, outstripping anything Kylie or Jason ever managed. I suggest to Waterman that there is a cruel irony that it is trains, his most beloved hobby, that have silenced his former collaborators. 'They must think I've got a hex on them,' he says. He can only guess what they think, however: the pair have not spoken to him since 1991.

Waterman says he has no time to dwell on this kind of messy history now. He is the Hit Man again. He's coming up with melodies people can't stop humming. He's making disposable music for a new generation. 'Look,' he says, 'I'm not John Lennon and I'm not Burt Bacharach and I'm not Wagner. But what I do, I do well.' It's impossible to criticise someone for peddling trash, if they already believe the very trashiness of their product to be its virtue. 'There's no such thing as a bad No1 record,' he says. 'If it got to No1 it had to be good.' Waterman says he just wants to make great pop records; if you don't like pop you won't like his records. As with good pop, it's an argument which doesn't stand up to much examination.

That aside, talking to him about music is a revelation: he mentions Cole Porter, Ivor Novello and Louis Armstrong, Mozart, Handel and Wagner. It's a little like lifting the bonnet of a Ford Escort and finding the engine of an Aston Martin inside.

He brings his analysis to bear on Steps three girls, two boys, lots of teeth, no cellulite whom he describes as 'Abba on speed'. He started working with them in 1997. Their success, he says, is simply the result of trends in nostalgia. 'I'm a big fan of Oasis. I looked at them and I said where do you go from there, because they're doing this late-Sixties Beatles thing. Well, the next thing you had to move on to was Bjorn and Benny and 1974.' You must admit it makes sense.

So he studied Abba. 'We realised that a lot of it was very much based on classical mid-European composers, which meant we had to go back to Mozart.' The result was 'Last Thing On My Mind', which sold 520,000 copies and reached No3 in the charts last April. He isn't comparing it to Mozart, he says. It's just that there are melodic similarities. He plays me a piece of music he has just finished recording for Steps' forthcoming live show. The band announced that they wanted to kick off with a classical adaptation of all their hits, so Waterman went to work with the Halle Orchestra. Rich strings and orchestral stabs fill his small, cluttered office. 'Being let loose with classical musicians was a Wagnerian fantasy for me,' he says, beaming. I think he meant it in the sense of overpowered string sections, rather than large German ladies in horned helmets and breastplates riding giant eagles.

Waterman is also working on a medley of Disney hits for the Steps show. This will not be a Wagnerian fantasy. 'Each one will sing a different character from Disney,' he says. 'They will also dress up as different characters.' He adds that this was their own idea, but he says it without the slightest hint that he is trying to apportion blame.

It is clear that Waterman is relieved to be back on top again, even though he denies he ever really went away. 'In my worst year, '95, I still had three Top 10 hits.' But, he admits, he did spend a couple of years pulling together new writing and producing teams, and during that time he had to watch acts like Take That and Boyzone, purely manufactured bands on the Waterman model, storm the charts. 'They did it better than we did, frankly, but that was because they were backed by massive record companies,' he says. 'Actually, it was very flattering. But at the same time, it was very annoying because we weren't out there competing.' Now he's back in the game, but the competition has become more rather than less fierce. Sixteen-year-old Britney Spears, the American answer to Billie, is No1 on both sides of the Atlantic, and America is steeling itself for a mass invasion of British teenyboppers.

For Waterman, now 52 and said to be worth in excess of £80 million, the competition is all that is left to drive him. 'You set yourself a target. I want to be able to say, 'Call that a pop record? Well, this is a pop record." And he slaps the desk with one open hand. Pete Waterman is back. Stock, Aitken and the world's candyfloss music-haters will just have to lump it.

Steps' new single, 'Better Best Forgotten', is out on 8 March on Jive.