The de facto nationalisation of Britain’s railways was formally recognised on Friday when the statistical agency said that train operators’ debts would now be counted on the government balance sheet.
The Office for National Statistics said its decision, first reported by the Financial Times, was made after the government agreed a six-month rescue package for train operators hit hard by the coronavirus pandemic earlier this year. The deal effectively underwrote any losses.
“Under the EMAs [emergency measure agreements], normal franchise mechanisms have been amended, transferring almost all revenue and cost risk to the government. In addition, the [train operators] have had restrictions placed on their ability to borrow money and cannot make significant changes to fares or staffing levels without government agreement,” the ONS said.
Rail companies have already received about £3.5bn of taxpayer support and are currently in discussions with the government about a further rescue package to help them survive through to late 2021 in anticipation of a slow recovery in passenger demand.
It is only in recent weeks that the government has given the green light to train operators to change their message to customers to one of “travelling safely”, replacing a discouragement to travel that has been in place since March. Passenger numbers are currently at about a third of pre-Covid levels.
The reclassification of train operators’ debt comes eight years after Network Rail had its £40bn debt moved on to the government balance sheet, recognising that the infrastructure operator, formed in 2002, was state-run. The UK rail system, including Network Rail’s predecessor Railtrack, was privatised in the mid-1990s.
Paul Plummer, chief executive of the Rail Delivery Group, which represents the industry, insisted that the move was a technical reclassification and would not result in the permanent nationalisation of Britain’s railways.
“This is a temporary accounting change that reflects the extent of government involvement in running trains during a national emergency,” he said.
The rail industry has been pressing for an extension of state support in order to give the government and industry time to assess demand and consider proposals to overhaul the railway.
Mr Plummer added: “The Covid crisis presents a chance to move towards a new way of running the railway where contracts put customers at the centre, and the private sector’s track record of attracting people to travel by train in safety is harnessed to boost the economy, the environment and the public finances.”
The ONS said that because the rescue package was “temporary in nature”, it would review the classification status of train operators again in the future if the emergency measure agreements are amended or expire. The reclassification will be backdated to April 1.
But the move has prompted concern among some rail executives who are anxious for the government to commit to a public-private partnership over the longer term. Before the pandemic, the government had pledged to overhaul the rail franchising system, with franchises replaced by flexible longer contracts amid a crisis in the sector.
In March, the government nationalised the Northern Rail franchise, having taken over the East Coast line in 2018. This was the first time two franchises had been in government hands since privatisation more than 30 years ago.