Trains row threatens to derail office return plan

Boris Johnson is this weekend facing a commuting crisis as anger grows among train firms that their finances risk being skewered by the Government’s response to the pandemic.

With schools set to reopen and the Prime Minister urging Britons back into offices, Whitehall officials are scrambling to finalise new agreements with train firms to keep services running. Having spent £3.5bn between March and mid-June propping up rail operators’ finances, ministers are desperate to keep the future taxpayer bill to a minimum.

Current emergency agreements, which effectively nationalised the rail network in March as passenger numbers fell 95pc, are due to expire in just three weeks’ time. Talks over their replacement, new contracts called Emergency Recovery Measures Agreements (ERMAs), have dragged on throughout the summer and are delicately poised, according to industry insiders.

Eager not to be seen as “rewarding failure” and limiting the impact on the Exchequer, the Department for Transport is understood to have earmarked four networks for less favourable terms. South Western Railway and Transpennine Express, whose finances were precariously placed prior to the crisis, alongside Greater Anglia and key City of London commuter line c2c, are expected to be offered wafer-thin profit margins, industry sources said.

Operators are understood to be frustrated by officials’ focus on franchises’ financial rather than operating record.

For instance, Greater Anglia, run by Dutch state-owned firm Abellio, and c2c, operated by Italian counterpart Trenitalia, have been pushed into the red by what firms call a “flawed” mechanism, linking payments to operate the lines to London employment figures.

It is understood that Trenitalia is particularly aggrieved by officials overlooking the fact that c2c is the country’s most punctual network. Trenitalia may now follow through on a previously reported threat to withdraw from the UK, industry sources said. Such a retrenchment could have serious repercussions for the Government’s £106bn HS2 project.

The Italian firm was selected for its high-speed capabilities alongside FirstGroup to run the west coast main line – the franchise on which some HS2 services will initially operate.

The slow progress of the secret talks has also angered rail bosses, which have seen the bus industry handed a new deal worth hundreds of millions of pounds ahead of them.

Some operators fear they will be left with just days to decide whether or not to agree to the new deals before the Sept 20 deadline.

Meanwhile, residual anger remains over government guidance on public transport during the crisis.

At the start of lockdown, the public were urged to stay off buses and trains unless absolutely necessary.

Despite the guidance being dropped, experts say widespread fear persists over the safety of public transport.

Grant Shapps, the Transport Secretary, further frustrated the industry on Friday. In response to whether Britain’s transport network was secure and capable, Mr Shapps said it was “obviously not without its challenges”.

One industry source said: “People just need a really clear message that it is safe to get back on a train; and the answer is yes.”

The ERMAs will vary in length between six months and two years under proposals being considered, sources said. They will be followed by a series of new contracts called “direct awards”.

Once these expire, a staggered tendering will begin for long-term concession agreements – where operators are paid a fixed fee for delivering services rather than collecting fares.

Some of the replacement agreements are believed to guarantee an operating profit margin of as little as 0.5pc. While this could be appetising for the likes of South Western, which has sustained significant losses, it would be less appealing to others by pushing them into the red once other overheads are accounted for.

A spokesman for the Government said: “The Emergency Measures Agreements are subject to confidential commercial discussions with train operators, so it would be inappropriate to comment at this stage.”