Transport -
Virgin Trains Subsidies
By Barrie Clement
Sir Richard Branson's Virgin train companies
have, in effect, been taken over by the state and
are receiving more than £1bn in subsidies from
taxpayers. The Government's Strategic Rail
Authority (SRA) is in charge of Virgin services
on the flagship West Coast London to Glasgow
route and those operating across the Cross
Country network. The arrangement could last until
2012, ministers say. It will be seen as another
example of "creeping
re-nationalisation" and follows the decision
by the SRA to strip the French-owned train
operator Connex of its franchise and run it as
South East Trains.
The Government set up the state-backed Network
Rail to run the infrastructure after the
privately-owned Railtrack went bankrupt. At
Virgin Trains the company's managers are running
services on behalf of the authority with Sir
Richard's business receiving a set fee above
costs. The West Coast franchise began running on
a "cost-plus" basis a year ago and last
week the SRA started to operate the Cross Country
network under a similar regime. The Government
said it was in no hurry to return the franchises
to the private sector. Indicating the Virgin
companies had, in effect, been re-nationalised,
Lord Davies of Oldham told the House of Lords,
"Taxpayers' interests are protected through
control of the budgets for both franchises."
The infusion of taxpayers' money comes partly as
compensation for the delays to the modification
of the London to Glasgow line and much of the
rest is to help Virgin run the Cross Country
network. Under the plan drawn up at the time of
privatisation in 1996, Sir Richard's rail
interests should have been making contributions
to the Exchequer, rather than the other way
round. Virgin received £394m from taxpayers in
2002-3 and £514m in 2003-4 but the SRA hopes to
cut the figure in the current financial year to
£234m.
The SRA wanted to negotiate fresh long- term
franchise agreements with the West Coast company
by March 2003 and with Cross Country by the end
of March 2004. But in each case negotiations
continue. Waiting in the wings are companies such
as National Express and First Group. Bob Crow,
the leader of the RMT rail union, said the SRA
should stop throwing "huge" sums of
public money into shareholders' pockets and spend
the money on improving the railways.
Paul Marsden, a Liberal Democrat transport
spokesman, said since 1997 the number of delays
on the railways had doubled despite an increase
in public subsidies paid to train operators. A
spokesman for the SRA denied the
"cost-plus" system amounted to
re-nationalisation. A Virgin spokesman said the
SRA had not held the company to any deadlines and
that it expected negotiations on new long-term
franchises to be completed within a couple of
months.
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