Friday, 5 October 2012

Cap and Collar costs revealed

This from the RMT... 

Evidence unearthed by rail union RMT has revealed that all of the rail franchises currently eligible for receiving taxpayer financial support under loaded contract rules are now claiming it with the exception of Northern Rail and London Midland who could move onto the same special measures shortly.

RMT research also reveals today that the total level of revenue support paid back to the train companies has shot up to £451 million, meaning that nearly half the £1 billion paid to the government in premiums is returned to the operators in a revolving door of corporate welfare. The revenue support payments have gone up from £290 million in a year and are still rising.

The so-called system of “revenue support” – better known as “corporate welfare - is where under the franchising “cap and collar” procedures, private train operators can get more subsidy or pay less premium if their revenue undershoots original inflated projections.

The Parliamentary information shows that the following TOC’s are now being bailed out by the taxpayer because they and DFT have got their sums wrong,

  • FGW
  • Virgin West Coast
  • FCC
  • South Eastern
  • South West trains
  • East Midland
  • Cross Country
  • Southern (from 20/9/13)

That means that eight out of the current 19 rail franchises are on taxpayer bailouts and, whilst Northern Rail and London Midland are in revenue share at the moment (paying more premium or getting less subsidy) this is only by a marginal sum and they could also apply for a bailout at any time.

Yet another reason for Richard Brown's remit to be extended. 

Rather than reviewing 'the franchising programme', now is the time to look into whether franchising is working and if there are better ways to provide passenger services. Through 'concessions' for instance...

UPDATE This blatant piece of puffery from a Mr Chris Jackson...

Interested to see that RMT has now 'discovered' how many TOCs are getting revenue support. 

Subscribers to Rail Business Intelligence would already be well aware, as we published the full list in issue 422 a fortnight ago.

(Can I have a discount on my subscription now? Ed)