Falling franchise earnings trigger emergency support

March 29, 2018

THE Department for Transport has needed an additional £60 million from the Treasury to balance its books for rail franchises in the current financial year, saying that industrial action is partly to blame.

Another £188 million has been obtained by raiding other transport budgets. The total additional support amounts to £248.7 million, which the DfT attributes to ‘the impact on the net revenues received from the train franchise portfolio, including the adverse impact on revenues from the TSGN [Govia Thameslink Railway] franchise as a result of severe disruption from sustained industrial action and performance issues’.

The revelation has come within a financial memorandum for 2017-2018 produced by the DfT, which received no publicity and is not traceable in the publications section of the DfT website.

The figures were debated in the House of Commons on 27 February, but transport secretary Chris Grayling did not attend and made no statement. Rail minister Jo Johnson did reply at the end of the debate, but without mentioning the franchise shortfall. It has also emerged that the cost of changes to the Intercity Express Programme, including contract variations for bi-mode trains, has been another £65.7 million.

Mr Johnson has told the Commons Transport Committee in a newly-published letter that the Department had been able to manage the ‘lower-than-expected income from rail franchising’ by a combination of additional income and ‘savings from other budgets’.

The size of the additional support has angered the RMT. The union’s general secretary Mick Cash said today: “The fact that the Government have been forced to admit that the taxpayer is being expected to bail-out Britain’s failing private rail operators to the tune of a quarter of a billion pounds is nothing short of a scandal.  There appear to be no depths to which the private rail franchising racket can sink that would force the Government to pull the plug and bring the services back into public ownership.  Profits are privatised and risks are carried by the taxpayer and it’s no surprise that over 70 per cent of the public now support RMT’s campaign for the railways to be renationalised.

“The allocation of expenditure is vague even by DfT standards in this Supplementary Estimate, so you can only wonder why the Department for Transport isn’t coming clean on which other franchises are failing. We can only assume it’s to try and cover up the scale of this scandal and keep the public in the dark as to the next operator to follow Virgin/Stagecoach on the East Coast into financial collapse.”

The fate of the current East Coast franchise also remains unclear. In a trading statement published today (27 March), Stagecoach said only that ‘Discussions are continuing with the Department for Transport regarding new contractual terms for the Virgin Trains East Coast business’. Transport secretary Chris Grayling warned in February that the present contract could only survive ‘for a very small number of months’.

Source: Rail News