Dutch taxpayers subsidise Greater Anglia rail services
PUBLISHED: 11:45 17 October 2018 | UPDATED: 17:02 17 October 2018
Rail services on Greater Anglia have effectively received an £80m subsidy over the last year - from Dutch taxpayers.
Now one of the owners of the rail franchise, which was awarded two years ago, are holding urgent talks with the government in a bid to change the funding formula that has forced this subsidy.
They say that a complicated way of trying to reduce the peaks and troughs of revenue – the “Central London Employment” (CLE) mechanism – no longer works because the pattern of commuting has changed.
Greater Anglia is jointly owned by Abellio – part of Dutch State Railways – and Japanese investment company Mitsui.
The revelation that Abellio has had to pour £80m into the franchise has led to reports that British and Dutch transport ministers are heading for a showdown meeting to try to change the funding formula.
A spokesman for Abellio said the situation was totally different to the funding crisis that prompted Virgin Rail and Stagecoach to hand back the East Coast Main Line to government control during the summer.
In that case the companies overbid for the right to run trains between London and Scotland, the North East and Yorkshire. They were unable to operate profitably and handed back the franchise.
Abellio says that in Greater Anglia’s case, the funding formula has fallen out of sync with commuting patterns causing the financial hole to open up.
The spokesman said the financial discussions should not affect passengers at all and would have no effect on the roll-out of new trains, which are due to start arriving in the region by the end of the year.
He said: “The agreement for the East Anglia franchise includes a risk sharing measure known as the CLE mechanism. This was intended to provide protection for the operator and the Department for Transport against revenue fluctuations as a result of dramatic changes in the London economy.
“However, it is now widely accepted that CLE is a flawed mechanism that does not deliver on the intended aims. We are therefore working with the DfT to develop and implement more effective risk sharing models.”
The CLE formula has already been changed for rail franchises awarded since 2016 – and Abellio hopes the government will change it retrospectively for its franchise which is due to run until 2025.
Rail users hope financial hit will not affect train service improvements
Priti Patel MP, Chair of the Great Eastern Main Line Taskforce said: “The GEML Taskforce has worked closely with Greater Anglia on key investment projects, including the development of new state-of-the-art trains due to be introduced on the line from summer 2019.
“Rail users along the GEML will understandably be concerned about this news and whether the current state of Greater Anglia’s finances will delay the roll out of the new trains and compromise the operator’s ability to deliver on other franchise commitments.
“The Government should monitor the ability of train operators to stick to their franchise commitments more closely before significant financial challenges occur.
“I have written to the Secretary of State for Transport, urging him to intervene personally and reassure the Taskforce and rail users that Greater Anglia’s current financial issues will not impact upon the key investment projects to improve the quality and reliability of services as agreed in the franchise agreement.”
Ipswich Labour MP Sandy Martin brought up the question of rail fares in the House of Commons earlier this week – and said he hoped bosses were right when they said the financial talks would not affect rail services.
He said: “The 8% that Abellio has agreed to pay to the Government is in effect a tax on train travel in the Greater Anglia Region.
“I am not at all surprised that Abellio – and it’s Dutch Government owners – are now questioning the wisdom of getting involved in the British rail-franchising fiasco.
“I very much hope that all the improvements promised by Abellio in our region will still be delivered. But when the franchise is over it will surely make sense to take the operation back into UK public ownership.
“There is no reason to change any of the Greater Anglia personnel, who do a very good job, but why can’t the service be owned by the British taxpayers rather than the Dutch taxpayers?
Derek Monnery from the Federation of Essex Rail Users Groups said: “I don’t think services will change because they are a franchise commitment – but there has clearly been a fall in the number of passengers. The car park at Manningtree used to be full every day – now there are often spaces.”