Almost half of UK rail franchises receiving taxpayer bail-outs

Published on Friday, 05 October 2012 12:23
Posted by Vicki Mitchem

Evidence unearthed by rail union RMT has revealed that all of the rail franchises currently eligible for receiving taxpayer financial support under loaded contract rules are now claiming it with the exception of Northern Rail and London Midland who could move onto the same special measures shortly.

RMT research also reveals today that the total level of revenue support paid back to the train companies has shot up to £451 million, meaning that nearly half the £1 billion paid to the government in premiums is returned to the operators in a revolving door of corporate welfare. The revenue support payments have gone up from £290 million in a year and are still rising.

The so-called system of "revenue support" – better known as "corporate welfare - is where under the franchising "cap and collar" procedures, private train operators can get more subsidy or pay less premium if their revenue undershoots original inflated projections.

The Parliamentary information shows that the following TOC's are now being bailed out by the taxpayer because they and DFT have got their sums wrong,

  • FGW
  • Virgin West Coast
  • FCC
  • South Eastern
  • South West trains
  • East Midland
  • Cross Country
  • Southern (from 20/9/13)

That means that eight out of the current 19 rail franchises are on taxpayer bailouts and, whilst Northern Rail and London Midland are in revenue share at the moment (paying more premium or getting less subsidy) this is only by a marginal sum and they could also apply for a bailout at any time.

That would mean all ten of the franchises let under "cap and collar" would be soaking up corporate welfare from the tax payer – a majority of the UK rail franchises.

RMT General Secretary Bob Crow said:

"The expensive shambles of rail franchising extends well beyond the fiasco on the West Coast mainline as these figures show that a majority of the UK's rail routes will soon be on corporate welfare due to a mixture of bogus train operator projections and government and departmental incompetence.

"Hundreds of millions of pounds that could go towards improving our railways or keeping down fares is being soaked up by this racket which is lining the pockets of the private rail companies at taxpayers' expense.

"The case for renationalisation of the railways to end this state sponsored rip-off is now overwhelming."

Source: ©RMT

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