Updated 23 Jan. 08.40
TRANSPORT secretary Grant Shapps has admitted that the South Western Railway franchise is ‘no longer sustainable’. There has been a backlash from the rail unions, who are calling for SWR to be renationalised.
In a written statement to Parliament Mr Shapps said: ‘South Western Railway’s recent financial statements have indicated that the franchise is not sustainable in the long term. Poor operational performance, combined with slower revenue growth, has led to the financial performance of SWR to be significantly below expectation since the franchise commenced in August 2017.’
Mr Shapps appears to have two main options. He is asking SWR’s owners FirstGroup and MTR to submit their proposals for a new contract on revised terms, and he has also asked the Department for Transport’s Operator of Last Resort for its own proposals.
He continued: ‘SWR have not yet failed to meet their financial commitments and my department will ensure that SWR are held to their financial obligations under the current franchise. However, as a precautionary measure, my department must prepare suitable contingency measures under the Railways Act 1993. Such options include a new short-term contract with SWR, with tightly defined performance requirements; or transferring the operation to the Operator of Last Resort.’
SWR has been signalling that it is in trouble for some time, with the controversial Central London Employment Mechanism said to be a factor. On 23 February 2018 transport minister Jo Johnson told MPs: ‘The Central London Employment Mechanism is a risk sharing mechanism where if employment increases significantly above previous expectations DfT gets a share of the increased revenue the additional employment generates; and if it decreases to significantly below previous expectations DfT shares in the loss of revenue with the operator.’
SWR and Greater Anglia have said that the mechanism is not working as intended.
Earlier this month, the latest SWR accounts revealed a loss of almost £137 million in the year to March 2019. The directors also warned that cash support of £146 million from SWR’s owners FirstGroup and MTR would probably run out this year. A note to the accounts conceded that there is ’material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern’.
Mr Shapps promised that staff and passengers will not be affected by the problems, because the DfT has a primary duty to make sure that ‘services that passengers depend on continue in any circumstance’.
The transport secretary has also criticised the strikes which have been staged on SWR, including almost a month of daily walkouts in December. He said: ‘Passengers on SWR have already suffered significant disruption from industrial action by the National Union of Rail, Maritime and Transport Workers, and this week the RMT are balloting for further strikes.
‘These strikes are not about safety, accessibility or helping passengers. Driver controlled trains are perfectly safe, and have been operated elsewhere on the network for many years. These trains allow the guards to devote much more time to looking after passengers, which is of great benefit to those who need help with travel, like the disabled and the aged. This modernisation is essential if the future needs of this railway are to be met.’
The unions have reacted angrily. RMT general secretary Mick Cash said: ‘This government is acting like a puppet for the rail companies, throwing good public money after bad and trying to breathe life into the rotting corpse of privatised rail.
‘Instead of dreaming up new ways to subsidise private sector profits by attacking civil liberties, he should stop pushing cost-cutting driver only operation and bring SWR into public ownership, running it in the interests of passengers and workers not his mates in the City.’
His counterpart at TSSA general secretary Manuel Cortes said: ‘I am starting to lose count of how many times taxpayers have to rescue failing private rail operators, with South Western now joining the long list.
‘The game is up for the failed franchising model which time and again sees ordinary people picking up the tab when operators can no longer make a profit.
‘Just like in our NHS and utilities, the Tories manufactured an imaginary railway market which has been an abysmal failure.
‘It’s now time to rename the Operator of Last Resort to the “Operator of First Choice” and for Johnson to bite the bullet and bring our entire rail network, lock, stock and barrel back into public ownership.’