Out-Law / Your Daily Need-To-Know

Government subsidies to UK rail companies fall by almost 40% in five years

Out-Law News | 25 Aug 2014 | 3:29 pm | 1 min. read

UK rail companies are continuing to pay more to operate their franchises than they receive in state aid, with the latest figures showing that subsidies paid by the government to operators have fallen by almost 40% in the past five years.

According to figures published by the Department for Transport (DfT), the total subsidy paid to franchised train operators was 6.8 pence per passenger mile in 2013/14; down from 7.3p per passenger mile in 2012/13. The total paid to rail operators by the government was £2.3 billion; down from the £3.2bn paid out in 2009/10.

Northern Rail received the highest subsidy per passenger mile, working out as 51.5p per mile once franchise costs were taken into account. First Capital Connect, South West Trains and East Coast received a negative subsidy, meaning that the amount they paid to the government was larger than the subsidies they received.

DfT's figures include each operator's share of the network grant, paid out by publicly-funded rail infrastructure management body Network Rail, and direct payments made by the government to train operating companies. Although there is no recognised rule governing how Network Rail must allocate a share of the network grant to operators, it distributes funding between them in proportion to the fixed track charges paid by each operator.

Additional statistics published by industry regulator the Office of Rail Regulation (ORR) showed that the rail network's overall share of government support rose by £227 million this year to a total of £5.3bn. However, this increase included spending on infrastructure and major projects, such as Crossrail.

The figures emerged in the same week as it was announced that regulated fares would increase by an average of 3.5% from January.

"Phenomenal growth in rail passengers is helping train operators to pay £2bn a year back to government – five times more than 15 years ago – with government choosing to reinvest this money in further improving Europe's best network," said the Rail Delivery Group, which represents train operators and Network Rail.