Shock Rise in Rail Handouts Speeds Drive to Raise Fares

By Lea, Robert | The Evening Standard (London, England), June 20, 2003 | Go to article overview

Shock Rise in Rail Handouts Speeds Drive to Raise Fares


Lea, Robert, The Evening Standard (London, England)


Byline: ROBERT LEA

THE taxpayer's handout to train operating companies has risen for the first time since privatisation, it can be revealed.

News of the latest level of subsidy - equivalent to [pounds sterling]45 on the average worker's tax bill - has accelerated moves to raise train fares.

Puncturing the theory behind privatisation, that the taxpayers' subsidy to rail would fall year on year, latest industry statistics show taxpayers last year gave the commercial train operators [pounds sterling]1.32 billion to run their services.

That is [pounds sterling]400 million or 30% more than planned, and a 2.5% rise on the previous year.

Virgin Trains, run by entrepreneurs Sir Richard Branson and Stagecoach chief Brian Souter, was the biggest culprit in the overspend.

In the seven years since privatisation, the big passenger transport companies such as National Express, Virgin, Arriva, FirstGroup and Stagecoach have received [pounds sterling]10.7 billion just to run train services.

That is in addition to the tens of billions of pounds pumped into Railtrack and successor company Network Rail running the rail infrastructure.

Over the same period, the train operators have distributed hundreds of millions of pounds in shareholder dividends.

A spokesman for the Strategic Rail Authority said he could not defend the increased subsidy.

"The reason is simple: the franchise model is bust," he said.

"That is why we are fixing it.

The subsidy is what it is. It is a reflection of the difference between costs and what the train companies get from the fare box."

SRA chief Richard Bowker said: "Fares must keep pace with investment. There is universal agreement that investment is running at record levels. …

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