Rail franchise agreements are to be suspended to avoid rail companies collapsing due to the coronavirus outbreak.
The Department for Transport (DfT) has announced today that franchise agreements to run trains in the UK will be suspended for an initial period of six months.
Operators are being offered the chance to transfer all revenue and cost risk to the Government, and be paid a small management fee to run services.
Industry body the Rail Delivery Group (RDG) said it “strongly welcomes” the proposal.
RDG chief executive Paul Plummer said: “The industry strongly welcomes the Department for Transport’s offer of temporary support and, while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.”
The DfT said they will “minimise disruption to the rail sector”.
Allowing operators to enter insolvency would cause “significantly more disruption to passengers and higher costs to the taxpayer”, the department added.
The DfT said passenger numbers have fallen by up to 70%, while ticket sales are down by two-thirds. Rail timetables have been slashed because of Covid-19.
Anyone holding an Advance ticket will be able to get a refund free of charge, while administrative fees have been waived for season ticket refunds.
The terms and conditions of employment for rail workers will not change.
Protecting key workers
Transport Secretary Grant Shapps said: “We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus, and the frontline rail staff who are keeping the country moving.
“People deserve certainty that the services they need will run or that their job is not at risk in these unprecedented times.
“We are also helping passengers get refunds on Advance tickets to ensure no-one is unfairly out of pocket for doing the right thing.
“These offers will give operators the confidence and certainty so they can play their part in the national interest.”
The department said the maximum fee given by the Government to train operators would be 2% of the value of a franchise before the Covid-19 pandemic began.
It is intended to incentivise companies to meet performance targets, and will be “far less than recent profits earned by train operators”.
The DfT added that the Government-controlled Operator of Last Resort (OLR) “stands ready to step in” for operators which do not accept the emergency measures.
Shadow transport secretary Andy McDonald said: “Labour backs measures that will keep key workers and freight moving on our railway during this crisis.
“There are very few emergency options available in these most difficult of circumstances.”
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