From the TUC

Train operating companies must be laughing all the way to the bank

10 Mar 2016, by in Public services

A recent report by the Office for Road and Rail Regulation (ORR, 2014-15)  shows that our privatised railways are still heavily dependent on taxpayers subsidies, while private train companies continue to pay out millions in shareholder dividends.

In 2014-15, the government contributed a net £3.5bn to the rail industry, while private train companies paid out £222m in shareholder dividends – an increase of £39m on last year. When we look at direct subsidies (franchise payments from government) and indirect subsidies (Network Rail grant by train operator), figures show that 17 out of the 19 train companies listed are net recipients of government funding. In a nutshell, taxpayers are subsiding company profits and shareholder dividends.

The top four payers of dividends: Great Western, Thameslink Great Northern, Southern and ScotRail paid out £117m in shareholder dividends in 2014-15, and collectively received net government funding of £902m between them.

When we look at the top five net recipients of government funding – Great Western, Northern Rail, ScotRail, Southeastern, and Wales and Borders, figures show that they received £2.26bn, but only paid £100m in franchise payments to the government. They did, however, manage to find another £120m to pay out in shareholder dividends. East Coast trains, which was re-privatised in 2015 and is now run by Virgin Trains and Stagecoach paid out £19m in shareholder dividends in 2014-15, money that would have gone to the government if East Coast had remained in public hands.

While funding to the train operating companies from government appears to have decreased by £484m since 2013-14, in fact more funding has been channelled to Network Rail through the government grant – which has increased by £524m since 2013-14. The ORR’s report shows that instead of increased contributions, Network Rail’s income from train operators reduced by £0.8bn in 2014-15. Train operating companies aren’t paying their fair share when it comes to using our rail infrastructure, and taxpayers are footing the bill.

I’m sure train operating companies must be laughing all the way to the bank.

Top 5 net recipients of government funding

Train operator Franchise receipts from govt (direct subsidy) Net govt grant (indirect subsidy) Total subsidy Franchise payments to govt Net subsidy Dividends paid by operator
Great Western £0 £371m £371m £100m 271m 50m
Northern £249m £397m £646m £0 645m 13m
ScotRail £289m £289m £578m £0 529m 22m
Southeastern £26m £336m £362m £0 363m 20m
Wales and Borders £93m £209m £302m £0 302m 15m
Total £657m £1.6bn £2.26bn £100m £2.1bn £120m

Source: GB Rail Industry Financial Information 2014-15

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