Friday 16 October 2020 6:41 am

Railway bailout could cost taxpayer nearly £10bn this year

It could cost the taxpayer almost £10bn to keep the railways running this year, Department for Transport (DfT) officials revealed today.

Speaking to the Public Accounts Committee this morning, permanent secretary Bernadette Kelly said that thus far, the government had spent £4.3bn.

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For the rest of the financial year, she forecast that an additional £3bn – £5bn would be needed under the new Emergency Recovery Measures Agreements (Ermas).

Back in March, the government took the decision to effectively nationalise the railways in order to ensure that services continued to run for essential workers.

Plummeting passenger demand exposed the existing cracks in the rail franchise system, which ministers have confirmed will now be replaced with a new ownership model.

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The current arrangements, which came into effect in September, will run for 18 months.

As of Monday this week, rail usage remained at just 33 per cent of pre-pandemic levels as people continue to work from home amid increased restrictions on travel. 

Officials also revealed that they could end up in a High Court battle with rail franchises over penalty charges worth up to £500m.

Last week the Telegraph reported that the DfT had angered companies by slapping them with termination payments in order to remain on the tracks.

If they do not pay up, their contracts will revert to pre-Covid models by the middle of the month, leaving the firms on the edge of collapse.

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Rail director general Ruth Hannant said that the termination payment would have to be concluded by 13 December.

“They could decide that they want to pursue litigation against us at that point, but we would hope that they wouldn’t do so.”