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How the Government’s train subsidy scheme creates
a ‘benefit trap’ for Southeastern Railways
...and how the trap has so far torpedoed our HS service
...what the rail minister says she could do to put it right
...if only Southeastern asked...
The financial penalty Southeastern has to pay to the Government as its revenues go up is having a disastrous impact on the company’s profitability.
It explains why Southeastern says it can’t make any money running a High Speed service from Deal and Sandwich.
At the last Rail Stakeholders meeting Vince Lucas, Southeastern service delivery director, presented figures which confirmed that the current structure of the franchise acts as a positive disincentive to the company to be entrepreneurial or attempt to increase its revenues.
Southeastern is frustrated by this - and we certainly are as well.
80 per cent income guarantee
In a nutshell, in an attempt to encourage train operating companies (tocs) to put in competitive franchise bids the Department for Transport (DfT) guarantees their incomes if passenger numbers and hence revenues fall below the levels the tocs predict in the bids.
The support is on a sliding scale so if a toc over-estimates revenues by six per cent or more, it receives support at the level of 80 pence for each pound its revenues fall short of the predicted level. This is the position that Southeastern Railways is in at the moment.
Below 98 per cent of forecast revenue the tocs get half of the shortfall back from the Government.
Below 94 per cent and they get 80 per cent back from the Government.
The mechanism applies to revenues and does not include any assessment of costs.
The Government knows there is a problem. Theresa Villiers, the junior minister in charge of railways admitted it in a letter prompted by lobbying from Tranis4Deal.
She said: “The Government has recognised that a number of problems have emerged as a result of the share and support mechanism. Of particular concern is the fact that when an operator is in the 80 per cent support band, there is only a limited incentive to grow revenue since the operator funds the full cost of any initiatives but receives only 20 per cent of the revenue, the other 80 per cent being used to reduce the burden to the taxpayer.”
“Carve-outs ring fence costs and revenues.
Ask and we’ll consider it”
Transport minister Theresa Villiers.
The letter goes on to propose a solution that nobody has ever mentioned before. Apparently the DfT is now prepared to see revenues ring fenced.
Theresa Villiers says, “The department is always happy to consider proposals from train operators that provide them with greater revenue benefits from new service proposals. These so called ‘carve outs’ ring fence the costs and revenues from a particular activity or new service ensuring that the operator can get an appropriate return. Southeastern are able to make such proposals to the Department if they wish, which we would very carefully consider”
Only 31 per cent of the Southeastern fleet is fitted with regenerative braking, a new technology which acts as an energy recovery mechanism which slows the vehicles by converting kinetic energy into another form which can be harnessed immediately or stored in batteries until needed.
This figure compares to 60 per cent on the Southern franchise, also a Go Ahead company. The Soutrhern MD says this saves "15 per cent of energy costs and goes straight to the bottom line" - date July 2010: source Go Ahead Group reports.
And Southeastern has done very little to develop off-peak traffic with incentives, special fares and promotions - UK and overseas tourism for example. Consequently 70 per cent of its passengers are commuters, compared to 50 per cent for Southern (July 2010: source Go Ahead Group reports).
Southeastern's rail operating profit in the year end July 2010 was £13.0m, yet it has drawn £4.7m revenue support since April 2010 (source: Go-Ahead annual report).
Have you seen our report from Deal station?
Click the arrow to view...
If you want a fast ride on a javelin from Deal or Sandwich, right now this is the only sort you are going to get.
Tell Southeastern Railways to chuck its timetable and to provide us with the fast trains.
At the moment they run through empty.
New ‘Javelin’ trains from Dover to London offer a much faster service.
Deal and Sandwich have been shamefully neglected.
Trains4Deal is a volunteer organisation that receives no funding but is now recognised as the Deal and Sandwich rail users group and is a stakeholder at the Kent rail forum.
‘Deal is so Bracing’ poster now available.
Price £.4.99p.
from
Greencades,
142 High Street, Deal
Profits to Trains4Deal campaign funds
KCC’s new rail consultation document flawed
* Deal/Sandwich High Speed still prioritised.
* Wasteful new Maidstone service at Deal’s expense.
* Rip-off fares so London can be feather-bedded.
Jobs disaster:
Does stopping High Speed trains in Sandwich and Deal make up for the loss of 2,500 jobs, plus another 2,500 contractors?
No - but it helps - and costs almost nothing.
Meanwhile, Kent county council’s Pfizer task force explores new ‘Thanet Parkway’ HS station option. Whacky idea - do it if you must - but at least get trains to stop at the stations in Deal and Sandwich. They are already built.
Trains4Deal says use the DfT ‘Carve Out’ mechanism to improve all the HS Services all around the coast from Folkestone to Dover, Deal, Sandwich and Ramsgate.
Don’t standby and let KCC just spend any available money on a new Thanet Parkway station that nobody has asked for.
Transport minister Theresa Villiers: offer to ring fence Deal HS service
...if only Southeastern asked...
The financial penalty Southeastern has to pay to the Government as its revenues go up is having a disastrous impact on the company’s profitability.
It explains why Southeastern says it can’t make any money running a High Speed service from Deal and Sandwich.
At the last Rail Stakeholders meeting Vince Lucas, Southeastern service delivery director, presented figures which confirmed that the current structure of the franchise acts as a positive disincentive to the company to be entrepreneurial or attempt to increase its revenues.
Southeastern is frustrated by this - and we certainly are as well.
80 per cent income guarantee
In a nutshell, in an attempt to encourage train operating companies (tocs) to put in competitive franchise bids the Department for Transport (DfT) guarantees their incomes if passenger numbers and hence revenues fall below the levels the tocs predict in the bids.
The support is on a sliding scale so if a toc over-estimates revenues by six per cent or more, it receives support at the level of 80 pence for each pound its revenues fall short of the predicted level. This is the position that Southeastern Railways is in at the moment.
Below 98 per cent of forecast revenue the tocs get half of the shortfall back from the Government.
Below 94 per cent and they get 80 per cent back from the Government.
The mechanism applies to revenues and does not include any assessment of costs.
The Government knows there is a problem. Theresa Villiers, the junior minister in charge of railways admitted it in a letter prompted by lobbying from Tranis4Deal.
She said: “The Government has recognised that a number of problems have emerged as a result of the share and support mechanism. Of particular concern is the fact that when an operator is in the 80 per cent support band, there is only a limited incentive to grow revenue since the operator funds the full cost of any initiatives but receives only 20 per cent of the revenue, the other 80 per cent being used to reduce the burden to the taxpayer.”
“Carve-outs ring fence costs and revenues.
Ask and we’ll consider it”
Transport minister Theresa Villiers.
The letter goes on to propose a solution that nobody has ever mentioned before. Apparently the DfT is now prepared to see revenues ring fenced.
Theresa Villiers says, “The department is always happy to consider proposals from train operators that provide them with greater revenue benefits from new service proposals. These so called ‘carve outs’ ring fence the costs and revenues from a particular activity or new service ensuring that the operator can get an appropriate return. Southeastern are able to make such proposals to the Department if they wish, which we would very carefully consider”
Only 31 per cent of the Southeastern fleet is fitted with regenerative braking, a new technology which acts as an energy recovery mechanism which slows the vehicles by converting kinetic energy into another form which can be harnessed immediately or stored in batteries until needed.
This figure compares to 60 per cent on the Southern franchise, also a Go Ahead company. The Soutrhern MD says this saves "15 per cent of energy costs and goes straight to the bottom line" - date July 2010: source Go Ahead Group reports.
And Southeastern has done very little to develop off-peak traffic with incentives, special fares and promotions - UK and overseas tourism for example. Consequently 70 per cent of its passengers are commuters, compared to 50 per cent for Southern (July 2010: source Go Ahead Group reports).
Southeastern's rail operating profit in the year end July 2010 was £13.0m, yet it has drawn £4.7m revenue support since April 2010 (source: Go-Ahead annual report).
Have you seen our report from Deal station?
Click the arrow to view...
If you want a fast ride on a javelin from Deal or Sandwich, right now this is the only sort you are going to get.
Tell Southeastern Railways to chuck its timetable and to provide us with the fast trains.
At the moment they run through empty.
New ‘Javelin’ trains from Dover to London offer a much faster service.
Deal and Sandwich have been shamefully neglected.
Trains4Deal is a volunteer organisation that receives no funding but is now recognised as the Deal and Sandwich rail users group and is a stakeholder at the Kent rail forum.
‘Deal is so Bracing’ poster now available.
Price £.4.99p.
from
Greencades,
142 High Street, Deal
Profits to Trains4Deal campaign funds
KCC’s new rail consultation document flawed
* Deal/Sandwich High Speed still prioritised.
* Wasteful new Maidstone service at Deal’s expense.
* Rip-off fares so London can be feather-bedded.
Jobs disaster:
Does stopping High Speed trains in Sandwich and Deal make up for the loss of 2,500 jobs, plus another 2,500 contractors?
No - but it helps - and costs almost nothing.
Meanwhile, Kent county council’s Pfizer task force explores new ‘Thanet Parkway’ HS station option. Whacky idea - do it if you must - but at least get trains to stop at the stations in Deal and Sandwich. They are already built.
Trains4Deal says use the DfT ‘Carve Out’ mechanism to improve all the HS Services all around the coast from Folkestone to Dover, Deal, Sandwich and Ramsgate.
Don’t standby and let KCC just spend any available money on a new Thanet Parkway station that nobody has asked for.
Transport minister Theresa Villiers: offer to ring fence Deal HS service