The British government has suspended the rail franchise system in a move that effectively nationalises any losses by railway companies for the next six months — in the latest sign of how the coronavirus pandemic is blighting the economy.
The Department for Transport announced on Monday morning that it would temporarily end normal franchise agreements and transfer all revenue and cost risk to the government for at least half a year. Operators will continue to run services day-to-day for a small management fee under an “emergency measures agreement”, it said.
Ministers said that the alternative — allowing railways to enter insolvency — would have led to even more disruption and a greater cost to taxpayers.
The government had already agreed with train operators that services would be reduced by half from Monday because of the collapse in passenger numbers due to coronavirus. The number of people using the railways has plunged 70 per cent since the pandemic began.
In its new announcement on Monday, the DfT said that only key workers should be using the trains during the crisis. “No other passengers should travel,” it said. All season ticket holders will be able to claim a refund for time unused on their tickets, free of administrative charges.
The government said it took the decision to intervene because of the damaging impact of the drop in rail fare revenue on the train companies.
Under the new agreement, fees will be set at a maximum of 2 per cent of the cost base of each franchise before the onset of Covid-19. The government said the fees were needed to “incentivise operators” to meet reliability, punctuality and other targets.
The government said the fee would be far less than recent profits earned by train operators. Companies that refused to take on the emergency measures agreements would be nationalised.
Grant Shapps, transport secretary, said the government was acting to protect key workers and frontline rail staff.
“People deserve certainty that the services they need will run or that their job is not at risk in these unprecedented times,” he added. “We are also helping passengers get refunds on advance tickets to ensure no one is unfairly out of pocket for doing the right thing.”
Paul Plummer, chief executive of the Rail Delivery Group, which represents the industry, welcomed the offer of temporary support.
“While we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need,” he said.
Andy McDonald, shadow transport secretary, backed the measures, which could keep key workers and freight moving during the crisis. “The imperative is to maintain a functioning rail network throughout this emergency,” he said.
But he said the Labour party — which believes that the railways should be entirely state-run — would welcome an “honest debate” on the future of the transport system after the crisis to address fundamental issues.
