Train network franchising derailed
Ministers to put £12bn of public money into system after Covid causes 1996 funding model to collapse
MINISTERS will plough up to £12bn of taxpayers’ cash into Britain’s Covid-hit train network after franchising was scrapped in the biggest shake-up of the railways for a quarter of a century. Services
will be bankrolled with public money for another 18 months after Transport Secretary Grant Shapps extended emergency measures to stave off collapse following a plunge in passenger numbers when the pandemic struck.
Franchising – introduced by thenprime minister John Major in 1996 when British Rail was privatised – will then be replaced with an outsourced or “concession” model, where companies are paid a fee to run services with the Treasury collecting fares. The plans were first revealed by The Daily Tele- graph earlier this month.
Experts said the changes could pave the way for dozens of poorly performing services to be axed in a bid to ease pressure on the public finances, raising the prospect of a repeat of the brutal Sixties Beeching cuts.
It also raises questions over Prime Minister Boris Johnson’s decision to continue with the £106bn HS2 project.
Rail use plunged to just 5pc of normal levels when the pandemic hit, destroying the franchise model where train
firms pay the Government to run a route and make money from fares. Ministers were forced to step in and hand companies public money to operate unprofitable routes as a result.
Although rail travel has since recovered to 40pc of normal, Prof Tony Travers of the London School of Economics estimates that the state subsidy is likely to be between £7bn and £8bn for the year to March 2021 if the bailout of tube operator Transport for London is included.
If passenger numbers reach 60-80pc of pre-Covid levels in the following fiscal year, the subsidy would fall to between £3bn and £4bn – meaning the industry bailout of operators could top £12bn. Ministers acted quickly in March to introduce so-called Emergency Measures Agreements that guaranteed operators a profit in return for continuing to run services for key workers.
The measures expired on Sunday and will be replaced by Emergency Recovery Management Agreements, which also guarantee a profit but at a lower percentage.
Mr Shapps said: “The model of privatisation adopted 25 years ago has seen significant rises in passenger numbers, but this pandemic has proven that it is no longer working.”