Government could steer derailing train firms with extra cash under new proposals

 
Shruti Tripathi Chopra
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Virgin Trains Run In Scotland As The Company Mounts A Legal Challenge On The West Coast Main Line Rail Contract
Government could pay train companies if they fail to meet their revenue targets (Source: Getty)

​Ministers are drafting proposals for a new subsidy regime as part of which the government will pay train companies if they do not meet their revenue targets, it emerged over the weekend.

However, train firms receiving subsidies will have their finances closely monitored by the government.

The plans are being drafted following fears that the government may struggle attracting bidders for new train franchises such as the combined West Coast and HS2 franchise, according to the Sunday Times, due to slow passenger growth.

Train companies including Stagecoach, First Group and Arriva pay the government annual fees to run rail routes. The payments are funded from profits made through ticket sales.

Read more: These are the companies shortlisted to run the first HS2 trains

Last week, rail and bus group Stagecoach admitted it overpaid for the London-to-Edinburgh East Coast franchise, a bid it won in 2014 as part of which it promised to pay the government £3.3bn over eight years.

However, Stagecoach revealed an 83 per cent drop in pre-tax profits to £17.9m in the year ending 29 April.

A Department for Transport spokesperson said: “We have a very successful franchising system of passenger railways which over the last four years has brought in more than £3.5bn of private sector investment - meaning more trains, more seats and quicker journeys right across the country, despite carrying twice the number of passengers since the 1990s.

“We continue to keep all franchise agreements under close review.”

Read more: Go-Ahead's Govia among shortlisted picks for Southeastern franchis

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