Magazine article Public Finance

The 2009 Funding from Whitehall Is Delayed

Magazine article Public Finance

The 2009 Funding from Whitehall Is Delayed

Article excerpt

Every January, the New Year opens with bad news about the railways. The rise in fares that is imposed in time to greet people renewing their season tickets at the start of the year is usually compounded by tales of rail chaos, induced either by the weather or by management incompetence.

Last year it was certainly the latter, when engineering work overran, but this year it was mostly the result of incredible bad luck: the West Coast Main Line shut no fewer than four times because of, first, a plane crash and then three failures of the overhead electrification equipment for unrelated reasons on successive days.

The criticism given to the industry in the press was, therefore, partly unfair because it can hardly be blamed for errant light aircraft. But the unpopularity of the aboveinflation fare increases has left the railways vulnerable to attack on the slightest pretext.

This bad start is the prelude to what promises to be the most tumultuous year in the industry's history since the mid-1990s privatisation.

On the negative side, railways always fare badly in a recession. They have high fixed costs and are particularly vulnerable to even small losses of income. Their situation has been made even more precarious by the government's attempt to rein back on the ?5bn annual subsidy as it plans to cut the taxpayers' contribution to the railways from a half to a third within five years.

The recession could not have come at a worse time for the train operators and the fare rises might not help them. Several franchise contracts signed over the past two years involve rapidly increasing premium payments from the operators and a loss of revenue at this stage could quickly plunge them into the red.

There have been fare increases across the board, with unregulated fares soaring by 7%, and some, particularly those on busy routes, rising by up to 11%, causing outrage among passenger groups. This might even prove to be a deterrent to many passengers, reducing the revenue expected.

As for good news, the massive West Coast Main Line refurbishment project, costing a staggering ?9bn, is at last complete and Virgin has been able to increase the speed and frequency of its trains from Euston to Birmingham, Manchester, Liverpool and Glasgow. The government has announced it will accelerate the acquisition of 200 of the promised 1,300 extra rail vehicles it plans to introduce by 2014. It has reiterated its commitment to Crossrail, although, as reported in Public Finance last September, there are still doubts about the precise funding. …

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