Thursday 18 June 2020 4:58 pm

Railway bailout has cost £3.5bn so far, government reveals

The UK government has thus far spent £3.5bn keeping its railways running during the coronavirus pandemic, it has been revealed.

Responding to a parliamentary written question, rail minister Chris Heaton-Harris said: ‘Since the outbreak of Covid-19 the government has approved £3.5bn of additional expenditure to ensure that vital rail services continue to operate. 

“Of this additional expenditure, £2.9bn relates to the 2020/21 financial year. It is not yet possible to provide an estimate of the total cost incurred to date”.

In total, the Department for Transport has drawn £7bn worth of cash from the government’s contingencies fund to cover the coronavirus epidemic, transport secretary Grant Shapps announced today.

On 23 March the government took the country’s rail franchises under emergency measures for six months in order to keep services running as passenger numbers plummeted 96 per cent.

Under the measures, the operators are receiving a management fee worth up to two per cent of their franchise’s cost base, which will be paid after the initial six months has elapsed.

Heaton-Harris added that the government had not yet made a decision about what will happen when the initial six month period elapses in September.

He said: ‘Work is underway within the government to determine the most effective approach at the end of the initial six months period of the Emergency Measures Agreements. 

“This work will take account of the impact of Covid-19 on demand for passenger rail travel in both the short and long term, and the associated economic and financial impacts on the railway”.

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It has been suggested that the government will have to keep propping up the UK’s rail firms beyond the initial six month period as passenger numbers are likely to remain low for some time to come.

Under the current social distancing guidelines of two metres, trains can only carry 15 per cent of their normal passenger capacity.

Should it be eased to one metre, as many across the economy have urged, passenger numbers will be able to rise to about 45 per cent of their normal amount, it is estimated. 

The government’s decision to take the UK’s railways into – albeit temporary – public control has raised questions about the future of the franchising system.

Before the coronavirus struck, former chairman of British Airways Keith Williams was conducting a “root and branch” review of the current system ahead of long-expected overhaul.

The review’s finding had been expected to be published before parliament’s summer recess, but it remains unclear whether this will be the case due to the coronavirus.

Industry sources have said that the decision to have the government pay private firms a fee in exchange for running the services was in line with their expectations for the review’s findings.