Secret talks between government and train companies have been underway for the past two weeks at the Department for Transport (DfT). There is a crisis over the future of the railway and big decisions will be taken imminently – including the question of public ownership.
The DfT had been hoping to convert the rail franchise agreements to long-term concession models; the rumoured conclusion of the Williams Rail Review. However, according to sources in the Railway Gazette, this option may now be off the table due to a potential breach of competition law. This leaves the government with an urgent dilemma – extend the ’emergency measures agreements’ (EMAs) indefinitely, or renationalise the franchises via the ‘Operator of Last Resort’ (OLR).
With some train companies reportedly asking for 18 month extensions, the government is now under huge pressure to make a decision on what will happen when the EMAs run out in September. And it’s possible that a decision could be made as soon as next month.
Panic in the corridors of Whitehall
At the beginning of 2020, the rail franchising system was already collapsing along legal and commercial lines. Several ‘zombie franchises’ were thought to be on the verge of financial failure, including West Midlands Trains, South Western Railway, TransPennine Express and Greater Anglia. And a major legal case about railway pensions had already cost tens – if not hundreds – of millions of taxpayers’ money. Details about the outcome of the Stagecoach court case remain shrouded in secrecy, but it was reported in March that the switch to EMAs means that the government may now be responsible for the entire £8 billion pension deficit.
The ’emergency measures agreements’ have led to an extremely precarious contractual situation, because any return to previous franchise agreements would see the train companies go bust within days. According to an industry source in the Railway Gazette, if only 85% of passengers returned to rail travel after the covid crisis, then most franchises would go bust on that basis alone.
The only alternative to EMAs is to bring some or all franchises into public ownership. The government has been quietly preparing for this ‘plan B’ since the beginning of April, setting up enough ‘Operators of Last Resort’ (OLRs) to take over every rail franchise in the country. At least £20 million was invested in OLRs last year, which was the solution used to renationalise Northern back in March.
Our urgent call for public scrutiny
The corona pandemic has pushed public transport into a long-term crisis in terms of patronage, with an instant drop of 95% in passenger numbers. And huge limits on capacity are now required for reasons of public health, with most of the network running at less than 20% capacity.
The railway costs about £14 billion per year, and the majority of this is paid for by passengers (£10.4 billion from ticket sales and £4.1 billion taxpayer subsidy in 2018-19). With ticket revenue now forecast to be just £2 billion per year, we are shifting rapidly to a railway where the vast majority of costs will be paid for by the taxpayer, the drop in passengers creating an £8 billion shortfall.
This completely upturns the balance of funding that had been increasingly weighted towards fare revenue for decades. In return we must see transparency and accountability from the government about transport policy, and the guarantee that we are getting the best possible value for money and social/economic benefits from the public transport system.
Help us demand transparency
In the era of corona virus and recovery, transport has become an essential public service and there is absolutely no excuse to allow decisions on transport policy to remain shrouded in this much secrecy. It is on the government to explain how their decisions are in the best interests of the public and every MP should be doing their job and demanding transparency on this issue before these decisions are made.
The Williams Review was supposed to restore ‘trust’ in the public and solve the strucural chaos that caused the 2018 timetable collapse. However, the review was never published and as a result we are two years overdue some government accountability and a solution that urgently restructures the railway. In the context of a global health pandemic these issues are now doubly important and conversations about 1) railway structure and 2) funding must be had urgently and with full public involvement and scrutiny. It is up to the government to explain and justify the policy they go forward with, and it’s every politician’s job to urgently demand this.
We’re sharing our concerns with the Transport Committee, Public Accounts Committee and National Audit Office. We’ll also be calling on MPs and opposition parties to more actively scrutinise the government’s decisions on transport.
Please help by writing to your MP and submitting your concerns to the Transport Select Committee, who are requesting submissions from the public until Monday 29th June.