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Monday essay: an open cheque book?

The government has just announced a new round of funding to support English tram, light rail and bus services outside London, but Sim Harris suggests that the final reckoning, along with the billions already allocated to National Rail, will be a high one.

FINANCIAL support is needed because of the continuing revenue shortfalls which are one result of the pandemic, although it is being widely predicted that passenger figures will rise again next month. It is also being reported that a new national lockdown is also a possibility within a few weeks, which would knock passenger traffic back again.

Whichever turns out to be the case, there is no doubt that public transport would fall apart without continuing state support. This time, Tyne & Wear Metro and four tram systems in the North and Midlands will receive funding of up to £37.4 million over the next 12 weeks, while bus operators will receive up to £218.4 million, which has been guaranteed over the next eight weeks.

(Incidentally the dear old Department for Transport, ever vague about the industry which it is supposed to supervise, refers to Tyne & Wear Metro as a ‘tram service’, which will be news to Nexus. The civil servants, more accustomed in normal times to catching a number 88 down the Horseferry Road rather than wandering around obscure corners of the provinces, may have been confused by the fact that the similar-sounding West Midlands Metro is a tram service.)

The DfT explains: ‘The latest round of funding – key to safely getting young people back in education settings and workers back to their offices – means total support during the pandemic for bus and tram services will reach at least £700 million.’

To this we must add at least another £3.5 billion which has already been allocated to National Rail services, although open access operators Grand Central and Hull Trains were not included and had to suspend operations for a while.

The money for rail operators has come via EMAs, or Emergency Measures Agreements, which replaced the conventional franchise contracts on 23 March, meaning that franchise-holders would cease to be responsible for their costs and outgoings, and also pay revenue directly to the government. Instead they are receiving a management fee worth around 2 per cent of each franchise’s ‘cost base’. The status of the franchises has changed as a result, because the Office of National Statistics has now reclassified their debts as public rather than private sector. It is pretty much as close to renationalisation as you can get without actually calling the whole network British Rail once again.

At the moment, the EMAs come to an end on 20 September, which seemed a long way ahead in March but is now only six weeks or so away. It does not appear even faintly possible that the franchises will be able to pick up the financial reins again as soon as that, and there have been reports of discussions behind the scenes concerning a possible EMA extension of anything up to two years. This implies that the final costs of the passenger rail bailout will be a lot more than £3.5 billion, while the DfT’s announcement about buses also says that once the eight weeks are up there will then be ‘rolling funding at up to £27.3 million per week afterwards, until a time when the funding is no longer needed’.

Those last ten words seem set to make Treasury officials feel a little uneasy, because the Treasury is always reluctant to make open-ended commitments, but there you are. 

Trains already seem likely to benefit from a similar commitment, because there is no realistic end in sight for the Emergency Measures Agreements either.

So we have what amounts to a blank cheque to keep the wheels going round on rail and road, which is comforting for passengers, perhaps, but surely ought to be giving the Chancellor a few sleepless nights.

The August print edition of Railnews, RN282, was published on 30 July. The new edition and some previous issues can be obtained by calling 01438 281200 from UK numbers or +44 1438 281200 internationally, and selecting Option 2.

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