Covid-19: government to take over rail franchises

The government has evoked emergency measure agreements for the UK’s train operators, effectively meaning they are being nationalised for the next six months in response to the strains imposed by the current coronavirus epidemic

These agreements will suspend the normal financial mechanisms of franchise agreements, transferring all revenue and cost risk to the government.

Operators will continue to run day-to-day services for a small, pre-determined management fee.

Companies entering into these agreements will see a temporary suspension of their existing franchise agreement’s financial mechanisms for an initial period of six months, with options for further extension or earlier cancellation as agreed.

In a written parliamentary statement on the move, transport secretary Grant Shapps said this would ensure ‘vital services continue to operate for key workers who are keeping the nation running and that we are able to reinstate a normal service quickly when the situation improves.’

‘In the longer term these agreements will also minimise disruption to the rail sector. The railways have already seen up to a 70% drop in passenger numbers, with rail fares revenue reducing as people increasingly work from home and adopt social distancing, and total ticket sales down by two-thirds from the equivalent date in 2019.

‘Suspending the usual financial mechanisms will not only guarantee that services can be sustained over this difficult period, it will also provide certainty for staff working on the railways, many of whom are working hard every day in difficult conditions to make sure we keep the railway running,’ Shapps said.

Fees will be set at a maximum of 2% of the cost base of the franchise before the covid-19 pandemic began, intended to incentivise operators to meet reliability, punctuality and other targets. The maximum fee attainable will be far less than recent profits earned by train operators.

Shapps said that in the event that an operator does not wish to accept an emergency measures agreement, the government’s operator of last resort stands ready to step in.

The transport secretary also announced that passengers will be able to get refunds for advance tickets they are not able to use while the government advises against non-essential travel.

Shapps said: ‘We have agreed with all the train operators that passengers who have already purchased an advance ticket will be eligible for a refund without any charge.

‘Those holding a season ticket that they no longer wish to use will also be eligible for a partial refund, determined by the amount of time remaining on the ticket. Ticket holders should contact their retailer for further details.’

Given the significant timetable changes that have put been in place, operators are being asked to use discretion to allow passengers with advance tickets to travel on an alternative train at a similar time or date if their ticket is technically no longer valid as a result of cancellations, but they still wish to travel.

Written statement to parliament

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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