Private rail operators using public subsidies to fund pay-outs to shareholders

The taxpayer is footing the bill for private train companies who then pay out millions of pounds to shareholders, says the TUC in response to today’s (Monday) report by the Office of Rail Regulation (ORR).

The ORR report shows that the government / taxpayer continues to be a net funder of train operating companies to the tune of £3.8bn. Despite receiving billions of pounds in funding, train operating companies paid out £183m in dividends to shareholders.

There are only two companies who give back more to the public coffers than they take in subsidies. One of those is East Coast, which actually made a net contribution of £23m to the UK government in 2013/14 – clearly demonstrating the success of the publicly-owned model for East Coast.

TUC General Secretary Frances O’Grady said: “The ORR has once again shown that a public service railway will always been dependent on taxpayer support. But the private train operators treat it as a cash cow, gobbling up almost £4bn in public subsidy yet charging the highest rail fares in Europe while paying almost £200m out in dividends to their shareholders.

“The financial performance of East Coast proves to be another embarrassment for the government. This is an operator that takes a fraction of the subsidy of other inter-city operators like First and Virgin, while paying back more to the government than it receives. It makes a mockery of the government’s hasty privatisation, demonstrating their contempt for the interests of the taxpayer and fixation with an out-dated free market ideology that is failing the rest of the rail industry.”

NOTES TO EDITORS:
– The TUC calculates that £3.8bn in public subsidy to Train Operating Companies (TOCs) is made up for net franchise payments plus grant provided to Network Grant, as allocated to TOCs by the ORR figures. Government subsidy for Network Rail is treated as an indirect subsidy to TOCs due to subsidising reduced track access charges paid by TOCs that have fallen to around 25 per cent of total Network Rail income as a result of direct government grant.

Net government funding for 3 largest inter-city operators for 2013/14

  East Coast First Great Western Virgin West Coast
Total payments to government £217m £296m £97m
Total payments from government (franchise receipts + revenue support + NR grant) £194m £514m £322m
Total net payments to government £23m -£218m -£225m
Total net payments by passenger journey £1.15 -£2.19 -£7.03
Total share of govt funding -0.6% 5.8% 5.9%

– Net government funding and dividend payments of 12 TOCs paying dividends in 2013/14

TOC Net funding Dividend payment
c2c Rail -£41m £8m
Northern Rail -£669m £27m
Southeastern -£324m £5m
Southern -£90m £23m
South West Trains £51m £16m
First Capital Connect -£25m £5m
First Trans Pennine Express -£209m £30m
Arriva Trains Wales -£331m £16m
Virgin Trains (West Coast) -£225m £10m
LOROL (London Overground) -£127m £5m
Merseyrail -£125m £16m
First Scotrail -£544m £21m
Total £2.66bn £183

– All TUC press releases can be found at www.tuc.org.uk

Contacts:

Media enquiries:
Clare Santry  T: 020 7467 1372  M: 07717 531150  E: csantry@tuc.org.uk
Alex Rossiter  T: 020 7467 1285  M: 07887 572130  E: arossiter@tuc.org.uk
Tim Nichols  T: 020 7467 1337  M: 07876 452902  E: tnichols@tuc.org.uk