Taxpayers take on rail risks of billions

TAXPAYERS are on the hook for billions of pounds in liabilities for the railways.

Latest Government accounts reveal some liabilities described as ‘impossible to quantify’.

The potential cost relates to rolling stock leases that the taxpayer underwrites and comes on top of billions of pounds worth of other liabilities to the industry.

In 2011-12, £27.3billion indemnities were put in place to underwrite the debt issue of track and signalling operator Network Rail, up from £25.1billion in 2010-11.

In addition, the taxpayer is providing a £4billion ‘long-term contingency buffer’ to Network Rail.

In return, Network Rail will pay £3billion over the life of its debtissuance programme.

Another major liability relates to the London East-West Crossrail project. In 2011-12, indemnities of £2.3billion were issued ‘to parties carrying risks that they would be unable to bear’, down from £2.6billion the previous year.

A £9 million guarantee was provided by the Department for Transport in 2011-12 ‘to promote investment in the rail sector, including for the Olympics’.

The liability on rolling stock arises because contracts between train leasing companies and train operators tend to run for longer than the operators’ franchises.

In such cases, the taxpayer guarantees to pay for the leases for any gap between franchises. The chance of these sorts of liabilities materialising was revealed in 2009 when GNER could not meet its commitments on the East Coast Main Line.