Train net­work fran­chis­ing de­railed

Min­is­ters to put £12bn of pub­lic money into sys­tem af­ter Covid causes 1996 fund­ing model to col­lapse

The Daily Telegraph - Business - - Business - By Oliver Gill

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.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.