The UK government has extended its multibillion rescue deal for train operators with “recovery contracts” that will keep the railway running while ending the franchise system, in what it called the biggest shake-up of the industry in 25 years.
Emergency funding for rail companies has been agreed for periods from six to 18 months to help them get through the Covid-19 crisis, as a first step towards an overhaul of the railway system.
The Department for Transport said the new contracts were a better deal for taxpayers, and heralded the end of franchising – but unions and Labour criticised the move as “papering over the cracks” and handing more money to private firms.
So far the government has spent up to £3.5bn covering train companies’ losses since the pandemic started. It effectively nationalised them in March when rail franchise agreements were suspended. Rail travel collapsed by 95% of pre-pandemic levels during the coronavirus lockdown in late March and April, and is still down some 60%-70% from 2019.
Under the new emergency arrangements, the DfT will continue to cover rail companies’ losses and pay them a fixed fee of up to 1.5% of the operating costs before the pandemic. This is less generous than the previous 2% and more heavily weighted to performance, such as punctuality, passenger satisfaction and financial performance.
The transport secretary, Grant 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.
“Our new deal for rail demands more for passengers. It will simplify people’s journeys, ending the uncertainty and confusion about whether you are using the right ticket or the right train company.”
Britain’s complex rail franchising system was already likely to be abolished by the government-commissioned Williams review. The government said it would publish a white paper based on Keith Williams’ recommendations when the course of the pandemic becomes clearer.
Williams said the new agreements “represent the end of the complicated franchising system, demand more from the expertise and skills of the private sector, and ensure passengers return to a more punctual and co-ordinated railway”.
Paul Plummer, the chief executive of the Rail Delivery Group, which represents train companies, said: “These transitional contracts should be a stepping stone to a better railway.”
Tan Dhesi MP, Labour’s shadow rail minister, said the announcement was a welcome admission that privatisation hadn’t worked, but warned: “Taxpayers are set to continue paying hundreds of millions of pounds in profit to private rail companies to run the network. This is completely unacceptable. These agreements paper over the cracks of a broken rail system.”
The former transport secretary Lord Adonis said the new regime was “the worst of both worlds: private monopolies with weak state regulation” and a “licence for rail companies to print money at the taxpayers’ expense”.
The RMT union said the deals were simply “reanimating the corpse” of privatisation. General secretary Mick Cash said: “Covid-19 has proved that the private rail companies are a waste of time and money and have no place in a railway that’s fit for the future. It’s time to cut out the middleman.”
FirstGroup said the new measures came into force on Sunday for its South Western Railway, TransPennine Express and West Coast Partnership, which comprises HS2 and Avanti West Coast. Both FirstGroup and Go-Ahead, which operates Govia Thameslink Railway and Southeastern, welcomed the government’s move.