One expert believes the eventual cost to taxpayers for protecting train operators will be £5bn-£6bn © Victoria Jones/PA

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UK taxpayers face a bill of at least £3.5bn to bail out train companies because of the coronavirus crisis, according to government estimates.

The figure is expected to rise sharply as rail industry executives press the government for a fresh round of financial support.

Train operators are in talks with the government about extending existing “emergency measures agreements”, which were introduced in March and are due to expire in September, for 12-18 months.

One rail executive told the Financial Times that the government must “provide continued stability”, warning it will take time to “get revenue levels back to where they were”. 

In March, the government suspended the rail franchise system — effectively nationalising any losses by train companies for six months — as passenger numbers plunged amid the lockdown.

The deal, which the government said at the time could be extended, transferred all revenue and cost risk to the state, with train operators running services for a small management fee.

The scale of the bill facing taxpayers as a result of the deal was disclosed in a parliamentary written answer by Chris Heaton-Harris, the rail minister.

“Since the outbreak of Covid-19, the government has approved £3.5bn of additional expenditure to ensure that vital rail services continue to operate,” he said. “Of this additional expenditure, £2.9bn relates to the 2020-21 financial year.”

The number of passengers using the railways is still more than 80 per cent below normal © Jeff J Mitchell/Getty Images

Tony Travers, a professor at the school of public policy at the London School of Economics, said the cost of protecting train operators from collapse could reach £6bn.

“I would estimate that the rail subsidies will end up costing £5bn-£6bn of taxpayer money,” he added. “And then there will be further questions about how much more support the industry needs if passenger volumes do not return to normal.”

Despite government moves to ease the lockdown, the number of people using the railways is still more than 80 per cent below levels recorded before the pandemic.

Rail executives are worried about the long-term future of their industry because of the impact of the social distancing rule and weak consumer confidence.

One industry figure said the current government measures were rushed and that the crisis had been worse than anticipated. “It will take longer for passenger numbers to go back to normal,” he added. 

A survey last month by passenger watchdog Transport Focus found 40 per cent of commuters did not feel it was safe to use public transport after the partial easing of the lockdown. 

The Rail Delivery Group, which represents train operators, said social distancing measures meant services were running at 15-20 per cent of normal capacity.

Social distancing rules and a loss of consumer confidence means a swift return to normality is unlikely © Ben Stasall/AFP

Industry estimates suggest cutting the social distancing rule from two metres to one metre would increase train capacity from about 10-25 per cent of normal numbers to up to 45 per cent. 

Rail executives want an extension of state support in order to give the government and industry time to assess passenger demand and consider proposals to overhaul the railways.

Even before the pandemic, the rail franchising system was in crisis. In March the government nationalised the Northern Rail franchise, having taken over the East Coast line in 2018.

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This was the first time two franchises had been in government hands since privatisation of the railways 30 years ago.

Alexander Jan, economist at the engineering consultancy Arup, said this “probably marks the end of the line for the franchising model as we've known it for the best part of 30 years”. 

“It could take so long for passenger revenues to recover that a model in which operators have to take revenue risk becomes more than problematic,” he added.

Ministers are meanwhile drawing up plans to provide bus companies with a second funding injection — adding to £397m provided for the first three months of the crisis — to enable them to increase capacity as the lockdown is further eased.

 

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